INTERMEDIATE ACCOUNTING (LL) W/CONNECT
9th Edition
ISBN: 9781260679694
Author: SPICELAND
Publisher: MCG
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Chapter 4, Problem 4.2P
Discontinued operations
• LO4–4
The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2018 and 2017:
| 2018 | 2017 | |
| Sales | $15,000,000 | $9,600,000 |
| Cost of goods sold | 9,200,000 | 6,000,000 |
| Gross profit | 5,800,000 | 3,600,000 |
| Operating expenses | 3,200,000 | 2,600,000 |
| Operating income | 2,600,000 | 1,000,000 |
| Gain on sale of division | 600,000 | — |
| 3,200,000 | 1,000,000 | |
| Income tax expense | 1,280,000 | 400,000 |
| Net income | $1,920,000 | $ 600,000 |
On October 15, 2018, Jackson entered into a tentative agreement to sell the assets of one of its divisions. The division qualifies as a component of an entity as defined by GAAP. The division was sold on December 31, 2018, for $5,000,000. Book value of the division’s assets was $4,400,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:
| 2018 | $400,000 |
| 2017 | $300,000 |
Assume an income tax rate of 40 percent.
Required:
1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
2. Assume that by December 31, 2018, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $5,000,000. What would be the amount presented for discontinued operations?
3. Assume that by December 31, 2018, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $3,900,000. What would be the amount presented for discontinued operations?
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xercise 12-80Asset Efficiency Ratios
Financial statements for Steele Inc. follow.
Steele Inc.
Consolidated Income Statements
(in thousands except per share amounts)
2019
2018
2017
Net sales
$7,245,088
$6,944,296
$6,149,218
Cost of goods sold
(5,286,253)
(4,953,556)
(4,355,675)
Gross margin
$1,958,835
$1,990,740
$1,793,543
General and administrative expenses
(1,259,896)
(1,202,042)
(1,080,843)
Special and nonrecurring items
2,617
0
0
Operating income
$701,556
$788,698
$712,700
Interest expense
(63,685)
(62,398)
(63,927)
Other income
7,308
10,080
11,529
Gain on sale of investments
0
9,117
0
Income before income taxes
$645,179
$745,497
$660,302
Provision for income taxes
(254,000)
(290,000)
(257,000)
Net income
$391,179
$455,497
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Steele Inc.
Consolidated Balance Sheets
(in thousands)
ASSETS
Dec. 31, 2019
Dec. 31, 2018
Current assets:
Cash and equivalents…
Income Statement
Balance Sheet
Balance Sheet
FY23
FY24
FY23
FY24
Current Assets
Current Liabilities
Cash
211,000,000
328,600,000
Accounts Payable
621,000,000
532,000,000
Accounts Receivable
502,000,000
619,600,000
Notes Payable
376,000,000
440,000,000
Total Current
Inventory
41,000,000
99,800,000
997,000,000
972,000,000
Liabilities
Total Current Assets
754,000,000
1,048,000,000
Long-Term Debt
16,523,000,000
17,377,000,000
Fixed Assets
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20,031,000,000
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Common Stock
2,000,000,000
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1,265,000,000
1,559,000,000
Total Equity
3,265,000,000
4,413,000,000
Exercise 5-9
During the next fiscal year ending June 30, 2020, Texas Company will make
substantial investments in new product lines and in a modernization program.
Significant changes to be made during the year are listed below:
1. Equipment with a net book value of P86,000 will be sold during the year.
2. All of the capital stock of Ohio Company will be exchanged with 5,000
shares of Texas Company at a time when the market value is P40 per share.
P250,000 cash will also be given as part payment.
3. Bonds having a face value of P1,000,000 will be issued on June 30, 2020 at
4. Trading securities carried at market value of P200,000 will be sold for
P215,000.
5. New equipment will be purchased during the year.
6. A new building will be purchased at a cost of P1,000,000, although there are
no building retirements.
7. Cash dividends will be paid to stockholders.
The financial statements forccast for the year ended June 30, 2020 are given
next page:
Chapter 4 Solutions
INTERMEDIATE ACCOUNTING (LL) W/CONNECT
Ch. 4 - The income statement is a change statement....Ch. 4 - What transactions are included in income from...Ch. 4 - Prob. 4.3QCh. 4 - Prob. 4.4QCh. 4 - Prob. 4.5QCh. 4 - What are restructuring costs and where are they...Ch. 4 - Define intraperiod tax allocation. Why is the...Ch. 4 - How are discontinued operations reported in the...Ch. 4 - What is meant by a change in accounting principle?...Ch. 4 - Prob. 4.10Q
Ch. 4 - The correction of a material error discovered in a...Ch. 4 - Define earnings per share (EPS). For which income...Ch. 4 - Prob. 4.13QCh. 4 - Describe the purpose of the statement of cash...Ch. 4 - Prob. 4.15QCh. 4 - Explain what is meant by noncash investing and...Ch. 4 - Distinguish between the direct method and the...Ch. 4 - Prob. 4.18QCh. 4 - Prob. 4.19QCh. 4 - Show the calculation of the following...Ch. 4 - Show the DuPont frameworks calculation of the...Ch. 4 - Prob. 4.22QCh. 4 - Prob. 4.23QCh. 4 - Prob. 4.1BECh. 4 - Multiple -step income statement LO41, LO43 Refer...Ch. 4 - Prob. 4.3BECh. 4 - Multiple -step income statement LO41, LO43 The...Ch. 4 - Prob. 4.5BECh. 4 - Prob. 4.6BECh. 4 - Prob. 4.7BECh. 4 - Discontinued operations LO44 Refer to the...Ch. 4 - Discontinued operations LO44 Refer to the...Ch. 4 - Prob. 4.10BECh. 4 - Prob. 4.11BECh. 4 - Prob. 4.12BECh. 4 - Statement of cash flows; indirect method LO48 Net...Ch. 4 - Prob. 4.14BECh. 4 - Prob. 4.15BECh. 4 - Profitability ratios LO410 The 2018 income...Ch. 4 - Prob. 4.17BECh. 4 - Inventory turnover ratio LO410 During 2018, Rogue...Ch. 4 - Operating versus Nonoperating Income LO41 Pandora...Ch. 4 - Income statement format; single step and multiple...Ch. 4 - Income statement format; single step and multiple...Ch. 4 - Multiple-step continuous statement of...Ch. 4 - Income statement presentation LO41, LO45 The...Ch. 4 - Prob. 4.6ECh. 4 - Income statement presentation; discontinued...Ch. 4 - Discontinued operations; disposal in subsequent...Ch. 4 - Discontinued operations; disposal in subsequent...Ch. 4 - Earnings per share LO45 The Esposito Import...Ch. 4 - Comprehensive income LO46 The Massoud Consulting...Ch. 4 - Prob. 4.12ECh. 4 - Prob. 4.13ECh. 4 - IFRS; statement of cash flows LO48, LO49 Refer to...Ch. 4 - Prob. 4.15ECh. 4 - Prob. 4.16ECh. 4 - Statement of cash flows; indirect method LO48...Ch. 4 - Prob. 4.18ECh. 4 - Prob. 4.19ECh. 4 - Statement of cash flows; indirect method LO48...Ch. 4 - Statement of cash flows; direct method LO48 Refer...Ch. 4 - Prob. 4.22ECh. 4 - Prob. 4.23ECh. 4 - Concepts; terminology LO41, LO42, LO43, LO44,...Ch. 4 - Inventory turnover; calculation and evaluation ...Ch. 4 - Evaluating efficiency of asset management LO410...Ch. 4 - Profitability ratios LO410 The following...Ch. 4 - Prob. 4.28ECh. 4 - Prob. 4.29ECh. 4 - Prob. 4.30ECh. 4 - Prob. 4.31ECh. 4 - Prob. 4.32ECh. 4 - Comparative income statements; multiple-step...Ch. 4 - Discontinued operations LO44 The following...Ch. 4 - Income statement presentation; Discontinued...Ch. 4 - Restructuring costs; Discontinued operations;...Ch. 4 - Income statement presentation; Restructuring...Ch. 4 - Income statement presentation; Discontinued...Ch. 4 - Income statement presentation; statement of...Ch. 4 - Multiple-step statement of income and...Ch. 4 - Statement of cash flows LO48 The Diversified...Ch. 4 - Integration of financial statements; Chapters 3...Ch. 4 - Statement of cash flows; indirect method LO48...Ch. 4 - Calculating activity and profitability ratios ...Ch. 4 - Use of ratios to compare two companies in the same...Ch. 4 - Creating a balance sheet from ratios; Chapters 3...Ch. 4 - Prob. 4.15PCh. 4 - Interim financial reporting Appendix 4 Branson...Ch. 4 - Prob. 4.1BYPCh. 4 - Judgment Case 42 Restructuring costs LO43 The...Ch. 4 - Prob. 4.3BYPCh. 4 - Prob. 4.4BYPCh. 4 - Prob. 4.5BYPCh. 4 - Prob. 4.6BYPCh. 4 - Prob. 4.7BYPCh. 4 - IFRS Case 48 Statement of cash flows;...Ch. 4 - Judgment Case 49 Income statement presentation;...Ch. 4 - Prob. 4.10BYPCh. 4 - Integrating Case 412 Balance sheet and income...Ch. 4 - Prob. 4.13BYPCh. 4 - Prob. 4.17BYPCh. 4 - Prob. 4.18BYPCh. 4 - Continuing Cases Target Case LO43, LO44, LO46,...
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