On January 2, 2020, JC Pooley Department Stores (a US GAAP reporter) announced a commitment to discontinue its sporting goods departments and disposed of its sporting goods division on May 3rd of the same year. The sporting goods division is a component of the entity and the sale of this division represents a strategic shift in business operations for the company. The division reported income from operating this division at $110,000 before taxes and there was a loss of $20,000 before taxes on the disposal of the division. Assume that income before taxes, including both the pre-tax income from the sporting goods division and the pre-tax loss on disposal was $1,690,000 for the year ended December 31, 2020. In 2020, JC Pooley discovered an error in measuring operating expenses that was made in 2022. The error resulted in understating total expenses by $125,000. At January 1, 2020, JC Pooley’s retained earnings balance was $200,000 and declared $10,000 in dividends during the year. The company is subject to a 40% tax rate.

Required: Prepare a partial income statement for the year ended December 31, 2020. Prepare the retained earnings section of the balance sheet for the year ended December 31, 2020. How would your answer to Part a change if JC Pooley was an IFRS reporter? Provide briefly explain why you answer is different from Part a and how the disposal would be reported on the income statement. (A Partial Income Statement is NOT required).

Answer rating: 100% (QA)

a Income statement JC Pooley Department Stores Income Statement For the Year Ended December 31 2020 ... View the full answer