Management for Marlowe Manufacturing Company decided in 2012 to discontinue one of its unsuccessful product lines. (The

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Management for Marlowe Manufacturing Company decided in 2012 to discontinue one of its unsuccessful product lines. (The product line does not meet the definition of a business component.) The planned discontinuance involved obsolete inventory, assembly lines, and packaging and advertising supplies. It was estimated that a loss of $250,000 would result from the decision, and this estimate was recorded as a restructuring charge in the 2012 income statement. In 2013, new management was appointed, and it was decided that the unsuccessful product line could be turned around with a more aggressive marketing policy. The change was made, and indeed the product began to make money. The new management wants to reverse the adjustment made the previous year and remove the liability for the estimated loss.

How should the 2012 estimated loss be reported in the 2013 income statement?

How should the 2013 reversal of the 2012 action be reported in the 2013 financial statements?

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Intermediate Accounting

ISBN: 978-0538479738

18th edition

Authors: Earl K. Stice, James D. Stice

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