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Required: Calculate the gain (loss) to be reported for this discontinued operation. (Negative amounts should be entered with a minus sign.) Earnings from operations for 20X4 Adjustment to carrying value of the assets (decrease) / increase Commission Income tax expense Total gain (loss) on discontinued operation

Required: Calculate the gain (loss) to be reported for this discontinued operation. (Negative amounts should be entered with a minus sign.) Earnings from operations for 20X4 Adjustment to carrying value of the assets (decrease) / increase Commission Income tax expense Total gain (loss) on discontinued operation

FINANCIAL ACCOUNTING
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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Munabhai

On 15 June 20X4, the board of directors for Klondike Inc. (Klondike), approved a plan to sell off a division of the company. The division is a cash-generating unit of Klondike. On 31 December 20X4, the following information is available: • From 1 January 20X4 through 15 August 20X4, the division earned $10.1 million before tax. • From 15 August 20X4 through 31 December 20X4, the division earned an additional $12.4 million before tax. • The divisions carrying value is $115 million. The estimated fair value less costs to sell of the division's net assets are $107 million. • The bidding process closes on 1 February 20X5. • Klondike engaged a professional service firm to appraise the fair value of the division's assets. Klondike will use the firm to assist with the bidding and selling process, and as a result, they will pay a 4% commission to the professional services firm when the division is sold. • Klondike has a tax rate of 25%. Required: Calculate the gain (loss) to be reported for this discontinued operation. (Negative amounts should be entered with a minus sign.) Earnings from operations for 20X4 Adjustment to carrying value of the assets (decrease) / increase Commission Income tax expense Total gain (loss) on discontinued operation
Transcribed Image Text:On 15 June 20X4, the board of directors for Klondike Inc. (Klondike), approved a plan to sell off a division of the company. The division is a cash-generating unit of Klondike. On 31 December 20X4, the following information is available: • From 1 January 20X4 through 15 August 20X4, the division earned $10.1 million before tax. • From 15 August 20X4 through 31 December 20X4, the division earned an additional $12.4 million before tax. • The divisions carrying value is $115 million. The estimated fair value less costs to sell of the division's net assets are $107 million. • The bidding process closes on 1 February 20X5. • Klondike engaged a professional service firm to appraise the fair value of the division's assets. Klondike will use the firm to assist with the bidding and selling process, and as a result, they will pay a 4% commission to the professional services firm when the division is sold. • Klondike has a tax rate of 25%. Required: Calculate the gain (loss) to be reported for this discontinued operation. (Negative amounts should be entered with a minus sign.) Earnings from operations for 20X4 Adjustment to carrying value of the assets (decrease) / increase Commission Income tax expense Total gain (loss) on discontinued operation
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