1.

On August 1, 20x1, Desert, Inc. adopted a plan to discontinue its childrens clothing division, which qualifies as a component of the business according to GAAP. The disposal of the division was expected to be concluded by March 30, 20x2. On December 31, 20x1, Deserts fiscal year-end, the following information relative to the discontinued operation was accumulated:

Operating Income (pre-tax) of the Component for Jan 1 - Dec 31, 20x1	$ 658,000
Net Book Value of the Component at Dec 31, 20x1	3,575,000
Fair Value of the Component (Estimated Selling Price)	3,600,000
Estimated Disposal Costs	120,000
Income Tax Rate	30%

Because the sale was not complete by December 31, 20x1, Desert had to test the component for impairment. Determine the Impairment Loss (net of tax), that Desert would report in their 20x1 footnotes (if any):$___________________

In its Income Statement for the year ended December 31, 20x1, Desert would report a total Gain/Loss on Discontinued Operations (net of tax) of: $___________________

2.USE THE INFORMATION FROM #1 & #2 ABOVE, AND THE FOLLOWING INFORMATION, TO ANSWER THE NEXT (6) QUESTIONS:

Desert finalized the sale of the component on March 30, 20x2 for net cash proceeds of $3,350,000. Operating income of the discontinued component from Jan 1 Mar 30, 20x2, was $240,000. (This $240,000 is NOT included in the $2,470,000 Income Before Taxes listed below.) Use this information and the Additional Data to prepare a partial Income Statement for the year ended December 31, 20x2 beginning with Income from Continuing Operations. Include Earnings Per Share disclosures.

Additional Data:

Income Before Taxes (from on-going operations) (x2) $2,470,000

Income Tax Rate (x2) 30%

5% Preferred Stock ($100 Par, 10,000 shares issued)

Common Stock ($1 par, 600,000 shares issued, 500,000 outstanding)

Partial Income Statement

Desert, Inc.

For the Year Ended December 31, 20x2

Income from Continuing Operations $ Blank 1

Gain/Loss from Discontinued Operations (net of tax) $ Blank 2

Net Income $ Blank 3

E.P.S.

Continuing Operations $ Blank 4

Discontinued Operations $ Blank 5

Net Income $ Blank 6

Determine

Income from Continuing Operations ('x2)

Gain/Loss from Discontinued Operations (net of tax) for 20x2:

Net Income for 20x2

EPS for Income from Continuing Operations ('x2)

EPS Discontinued Operations ('x2

EPS for Net Income ('x2)