1. On November 30, 2017, Rocky Co. decided to dispose of a component A. The sale was not complete

at the end of 2017. During 2017, this component generated operating income of $200,000. The

historical cost of component A is $1,200,000 and the Accumulated Depreciation for component A on

December 31, 2017 was $500,000. At December 31, 2017, the fair value of component A was

estimated at $710,000 and the cost to sell component A was estimated to be $50,000. Rocky has a

30% tax rate in all years.

a) Provide the journal entry to record any impairment of Component A in 2017.

b) Provide the Discontinued Operations Section of the 2017 Multistep Income Statement.

Rocky Co. sold component A on May 17, 2018 for a sales price of $735,000 with sales commissions

of $45,000. During 2018, component A generated operating income of $100,000. Rockys common

shares outstanding at the end of 2017 and 2018 were 500,000 and 700,000 shares, respectively. In

2018, Rocky declared a preferred stock dividend of $30,000, but only paid $24,000 of the dividend in

2018. In 2018, Rocky declared a common stock dividend of $60,000 and only paid $40,000.

c) Provide the 2018 Partial Income Statement, starting with Income from Continuing Operations

Before Taxes of $900,000. Include the first four lines and EPS information. Good format is

required.

d) Provide the journal entry to record the disposal of Component A. GJEF is required.