On November 30, Fleiner Company announced its plans to discontinue the operations of Division P (a major component of the company) by selling the division. On December 31, Division P had not yet been sold and was classified as held for sale. On this date, Division P had assets with a book value of $920,000 and liabilities with a book value of $610,000. Fleiner estimates that the fair value of Division P on this date is $190,000. During the year, Division P earned revenues of $920,000 and incurred expenses of $980,000. Fleiner is subject to a 30% income tax rate. 1. Compute the following for Division P of Fleiner Company: a) Pretax income or loss from discontinued operations $ b) Income tax expense or credit for discontinued operations $ c) After tax income or loss from discontinued operations $ d) Pretax income or loss on write-down of Division P held-for-sale $ e) Income tax expense or credit for write-down of Division P held-for-sale $ f) After tax income or loss on write-down of Division P held-for-sale $ 2. Prepare the discontinued operations section of Fleiner’s income statement. Loss from operations of discontinued Division P net of income tax credit $_____________________ Loss on write-down of held-for-sale Division P net of income tax credit $________________________ Total $________________________
On November 30, Fleiner Company announced its plans to discontinue the operations of Division P (a major component of the company) by selling the division. On December 31, Division P had not yet been sold and was classified as held for sale. On this date, Division P had assets with a book value of $920,000 and liabilities with a book value of $610,000. Fleiner estimates that the fair value of Division P on this date is $190,000. During the year, Division P earned revenues of $920,000 and incurred expenses of $980,000. Fleiner is subject to a 30% income tax rate.
1. Compute the following for Division P of Fleiner Company:
a) Pretax income or loss from discontinued operations | $ |
b) Income tax expense or credit for discontinued operations | $ |
c) After tax income or loss from discontinued operations | $ |
d) Pretax income or loss on write-down of Division P held-for-sale | $ |
e) Income tax expense or credit for write-down of Division P held-for-sale | $ |
f) After tax income or loss on write-down of Division P held-for-sale | $ |
2. Prepare the discontinued operations section of Fleiner’s income statement.
Loss from operations of discontinued Division P net of income tax credit $_____________________
Loss on write-down of held-for-sale Division P net of income tax credit $________________________
Total $________________________
Discontinued operations means stoppage in the operations of business due to sick company or insolvency of the company.
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