Problem 3: Impairment The Rolling Cones operates a fleet of ice cream trucks and three ice cream cafes. In late 2024, a significant adverse change in the business climate indicated to management that the assets of the café division may be impaired. The following information was identified: . . . Cost of division assets: $32.5 Million Book value of division assets: $18.3 Million Fair value of division assets: $11 Million Sum of estimated future cash flows generated from division assets: $15 Million What amount of impairment loss should The Rolling Cones report in its income statement? And what journal entry should be posted? Recoverability test: Measurement: Journal Entry

Problem 3: Impairment The Rolling Cones operates a fleet of ice cream trucks and three ice cream cafes. In late 2024, a significant adverse change in the business climate indicated to management that the assets of the café division may be impaired. The following information was identified: . . . Cost of division assets: $32.5 Million Book value of division assets: $18.3 Million Fair value of division assets: $11 Million Sum of estimated future cash flows generated from division assets: $15 Million What amount of impairment loss should The Rolling Cones report in its income statement? And what journal entry should be posted? Recoverability test: Measurement: Journal Entry

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 4-6 (Algo) Discontinued operations [LO4-4, 4-5] Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2021, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2021, at a price of $740,000. The book value of the division's assets was $1,290,000, resulting in a before-tax loss of $550,000 on the sale. The division incurred a before-tax operating loss from operations of $160,000 from the beginning of the year through December 15. The income tax rate is 25%. Chance's after-tax income from its continuing operations is $690,000. Required: Prepare an income statement for 2021 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common…
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Problem 16-11 (Static) Net operating loss carryback and carryforward; multiple differences; financial statement effects [LO16-3, 16-5, 16-7] Fore Farms reported a pretax operating loss of $137 million for financial reporting purposes in 2024. Contributing to the loss were (a) a penalty of $5 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2024 and (b) an estimated loss of $12 million from accruing a loss contingency. The loss will be tax deductible when paid in 2025. The enacted tax rate is 25%. There were no temporary differences at the beginning of the year and none originating in 2024 other than those described above. Taxable income in Fores's two previous years of operation was as follows: 2022 $ 80 million 2023 Required: $ 32 million 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2024. Assume Fore will carry back its NOL to prior years. 2. What is the net operating loss reported in…
Exercise 4-7 (Algo) Income statement presentation; discontinued operations; restructuring costs [LO4-1, 4-3, 4-4] Esquire Comic Book Company had income before tax of $1,900,000 in 2021 before considering the following material items: 1. Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $430,000. The division generated before-tax income from operations from the beginning of the year through disposal of $680,000. 2. The company incurred restructuring costs of $95,000 during the year. Required: Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.) ESQUIRE COMIC BOOK COMPANY Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations Discontinued operations: Answer is not…
Exercise 4-7 (Algo) Income statement presentation; discontinued operations; restructuring costs [LO4-1, 4-3, 4-4] Esquire Comic Book Company had income before tax of $1,900,000 in 2021 before considering the following material items: 1. Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $430,000. The division generated before-tax income from operations from the beginning of the year through disposal of $680,000. 2. The company incurred restructuring costs of $95,000 during the year. Required: Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.) ESQUIRE COMIC BOOK COMPANY Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations Discontinued operations: Income from…
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