Reporting Discontinued Operations On October 31, 2020, Leigh Corp. approved a formal plan to dispose of its Knit Products Division. On December 31, 2020, the Knit Products Division was held for sale but had not been sold. The Knit Products Division (considered a separate business component) reported a net loss from operations of $1,515,000 before tax for the year ended December 31, 2020. The Knit Products Division has a book value and fair value (after selling expenses) of $10,800,000 and $9,900,000, respectively. Leigh Corp. reported income from continuing operations of $2,700,000 before tax for 2020. a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures. Use a negative sign to indicate a loss. Leigh Corp. Income Statement Year Ended December 31, 2020 Income from continuing operations Discontinued operations Loss from discontinued operations, net of tax savings Impairment loss on discontinued component, net of tax savings Net income b. Repeat the requirements of part a but now assume that the book value of the Knit Products Division is $9,600,000 on December 31, 2020. Use a negative sign to indicate a loss. Leigh Corp. Income Statement Year Ended December 31, 2020 Income from continuing operations Discontinued operations Loss from discontinued operations, net of tax savings Gain on discontinued operations, net of tax Net income

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Reporting Discontinued Operations

On October 31, 2020, Leigh Corp. approved a formal plan to dispose of its Knit Products Division. On December 31, 2020, the Knit Products Division was held for sale but had not been sold. The Knit Products Division (considered a separate business component) reported a net loss from operations of $1,515,000 before tax for the year ended December 31, 2020. The Knit Products Division has a book value and fair value (after selling expenses) of $10,800,000 and $9,900,000, respectively. Leigh Corp. reported income from continuing operations of $2,700,000 before tax for 2020.

a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures.

Use a negative sign to indicate a loss.

Leigh Corp.
Income Statement
Year Ended December 31, 2020
Income from continuing operations
Discontinued operations
Loss from discontinued operations, net of tax savings
Impairment loss on discontinued component, net of tax savings
Net income

b. Repeat the requirements of part a but now assume that the book value of the Knit Products Division is $9,600,000 on December 31, 2020.

Use a negative sign to indicate a loss.

Leigh Corp.
Income Statement
Year Ended December 31, 2020
Income from continuing operations
Discontinued operations
Loss from discontinued operations, net of tax savings
Gain on discontinued operations, net of tax
Net income

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