1. The following is a condensed Income Statement for Fossil Inc. for the three years ending December 31 , 201,202, and 20X3. The statement was prepared by Fossil's CFO, but it incorrectly reports discontinued operations. Additional information: - On November 1, 20X2, Fossil entered into a plan to sell one of its separate operating divisions. The book value of the net assets of the division on December 31,202 was $1,500,000. Assume that that management estimates the fair value of the division to be $1,800,000 on December 31,202. The sale was completed on December 31,203 for $1,850,000 (selling costs were immaterial). The book value of the net assets of the division on December 31,203 was $1,600,000. The disposal of the operating division represents a strategic shift that will have a major effect. - The division's contribution to Fossil's income before taxes for each year is as follows: - Fossil has a 20% income tax rate in all years. a) Please prepare corrected comparative Income Statements for Fossil for the three years presented above. Begin the income statement with "Income from Continuing Operations (before taxes)" and follow the format outlined in the Course Notes. ( 3 points) Partial 2010 Comparative Income Statement for Fossil For the years ended December 31 203 202 201 Income from Continuing Operations (before taxes) Net Income b) Assume that that management estimates the fair value of the division to be $1,400,000 on December 31, 20X2. All other facts remain the same. What is the revised income from discontinued operations (net of tax) for 202 ? ( 1 point) c) What is the journal entry that Fossil should record on December 31,203 (i.e., when the disposal of the component is completed)? (1 point) 2. Craft Corporation's retained earnings decreased by $20,000 during the year ended December 31,201. The company also reports the following information for the year ended December 31,201 : - Total Assets =$1,000,000 - Total Liabilities =$400,000 - Common Stock =$500,000 - Retained Earnings = ? - Dividends =$15,000 Assuming all the relevant facts are provided, compute net income for the year ended December 31 , 20X1. Assume the only two accounts under Shareholder's Equity are Retained Earnings and Common Stock. (1 point) Kelce Corp's 2023 income from continuing operations before income taxes was $360,000. Kelce Corp. reported before-tax income on discontinued operations of $70,000. All tax items are subject to a 30% tax rate. Calculate the line-item amounts for income tax expense and net income that will be presented for Kelce Corp's income statement for 2023 (1 point)
