Discontinued Operations Problem. On September 1, 2016, the Tree Company announced its plans to sell Division...
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Discontinued Operations Problem. On September 1, 2016, the Tree Company announced its plans to sell Division X (a component of the company). By December 2016, Tree Company had not sold Division X and so it classifies the division as held for sale. During 2016, Tree Company recorded the following revenues and expenses for Division X and the remainder of the company: Sales Division X $500,000 Cost of goods sold 300,000 Operating expenses 400,000 Remainder of Comp. $20,000,000 16,000,000 799 1,500,000 On December 31, 2016, Division X had $900,000 in assets and $300,000 of liabilities. On this date, Tree Company estimates that the fair value of Division X is $150,000. The company is subject to a 30% income tax rate. The company had 200, 000 shares of common stock outstanding during all of 2016. Required: Answer the following. Please use good form, label all calculations and clearly mark the final answer. You must show work to receive full credit. (a) Total income or loss from the discontinued segment should be reported at what amount on the 2016 income statement? Be sure to clearly indicate income or (loss). (b) If Division X sold at a gain of $500,000, what amount would be reported on the 2017 income statement for the gain from the sale? Discontinued Operations Problem. On September 1, 2016, the Tree Company announced its plans to sell Division X (a component of the company). By December 2016, Tree Company had not sold Division X and so it classifies the division as held for sale. During 2016, Tree Company recorded the following revenues and expenses for Division X and the remainder of the company: Sales Division X $500,000 Cost of goods sold 300,000 Operating expenses 400,000 Remainder of Comp. $20,000,000 16,000,000 799 1,500,000 On December 31, 2016, Division X had $900,000 in assets and $300,000 of liabilities. On this date, Tree Company estimates that the fair value of Division X is $150,000. The company is subject to a 30% income tax rate. The company had 200, 000 shares of common stock outstanding during all of 2016. Required: Answer the following. Please use good form, label all calculations and clearly mark the final answer. You must show work to receive full credit. (a) Total income or loss from the discontinued segment should be reported at what amount on the 2016 income statement? Be sure to clearly indicate income or (loss). (b) If Division X sold at a gain of $500,000, what amount would be reported on the 2017 income statement for the gain from the sale?
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