In 2020, Liyue Corp. operate business in the motor industry and has 3 main divisions, Engine, Motor accessory and Motor Dealership. Because of the overwhelming business activities booming in the engine and motor dealership divisions Liyue decided to sell its lowest earning division, the Accessories division. In a sales commitment to be executed on March 1, 2021, the provisions made it so that the division qualified under the classification “Discontinued operations” as of the end of year 2020. The following information pertains to the two cash generating units of Liyue Corp. on December 31, 2020: Engine segment Accessories segment Motor Dealership Total assets 8,000,000 4,500,000 18,500,000 Total liabilities 3,000,000 2,200,000 9,600,000 Fair value less cost to dispose 1,800,000 Sales 8,000,000 3,200,000 11,000,000 Cost of sales 3,500,000 1,200,000 7,250,000 Expenses 1,000,000 700,000 3,000,000 Income tax 500,000 220,000 500,000 Requirements: 1. Present the computation for “gain or loss on discontinued operations” related to the accessories segment to be presented in the notes to financial statements. 2. Prepare the 2020 income statement of Liyue Corp.
In 2020, Liyue Corp. operate business in the motor industry and has 3 main divisions, Engine, Motor
accessory and Motor Dealership.
Because of the overwhelming business activities booming in the engine and motor dealership
divisions Liyue decided to sell its lowest earning division, the Accessories division. In a sales
commitment to be executed on March 1, 2021, the provisions made it so that the division qualified
under the classification “Discontinued operations” as of the end of year 2020.
The following information pertains to the two cash generating units of Liyue Corp. on December 31,
2020:
Engine
segment
Accessories
segment
Motor
Dealership
Total assets 8,000,000 4,500,000 18,500,000
Total liabilities 3,000,000 2,200,000 9,600,000
Fair value less cost to dispose 1,800,000
Sales 8,000,000 3,200,000 11,000,000
Cost of sales 3,500,000 1,200,000 7,250,000
Expenses 1,000,000 700,000 3,000,000
Income tax 500,000 220,000 500,000
Requirements:
1. Present the computation for “gain or loss on discontinued operations” related to the accessories
segment to be presented in the notes to financial statements.
2. Prepare the 2020 income statement of Liyue Corp.
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