Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4-2 (Part Level Submission) On November 1, 2016, Campbell Corporation management decided to discontinue operation of its Rocketeer Division and approved a formal plan to

4-2 (Part Level Submission)

On November 1, 2016, Campbell Corporation management decided to discontinue operation of its Rocketeer Division and approved a formal plan to dispose of the division. Campbell is a successful corporation with earnings of $285 million or more before tax for each of the past five years. The Rocketeer Division, a major part of Campbell's operations, is being discontinued because it has not contributed to this profitable performance.

The division's main assets are the land, building, and equipment used to manufacture engine components. The land, building, and equipment had a net book value of $80 million on November 1, 2016.

Campbell's management has entered into negotiations for a cash sale of the division for $68 million (net of costs to sell). The sale date and final disposal date of the division is expected to be July 1, 2017. Campbell Corporation has a fiscal year ending May 31. The results of operations for the Rocketeer Division for the 2016-17 fiscal year and the estimated results for June 2017 are presented below. The before-tax losses after October 31, 2016, are calculated without depreciation on the building and equipment.

PeriodBefore-Tax LossJune 1, 2016, to October 31, 2016$(4,750,000)November 1, 2016, to May 31, 2017(3,040,000)June 1 to 30, 2017 (estimated)(570,000)

The Rocketeer Division will be accounted for as a discontinued operation on Campbell's financial statements for the year ended May 31, 2017. Campbell's tax rate is 25% on operating income and all gains and losses. Campbell prepares financial statements in accordance with IFRS.

(a)

Your answer is partially correct.Try again.Indicate how the Rocketeer Division's assets would be reported on Campbell Corporation's balance sheet as at May 31, 2017.

The Rocketeer Division's assets should be identified on Campbell Corporation's balance sheet as of May 31, 2017 as

Held for sale long term assets

Property Plant and Equipment

Held for sale current assets

and carried at

fair value

net realizable value

$

.

SHOW SOLUTION

SHOW ANSWER

LINK TO TEXT

By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.Attempts: 4 of 4 usedYou have surpassed the number of attempts to earn Maximum Points for this question. For this attempt, and any subsequent attempt(s), you will earn points according to the Point Potential policy set by your instructor.

(b)

Your answer is correct.Indicate how the discontinued operations and pending sale of the Rocketeer Division would be reported on Campbell Corporation's income statement for the year ended May 31, 2017.

Income from Continuing Operations

$XXX

Loss from Disposal of the Rocketeer Division Assets Less Applicable Income Tax Recovery

Gain from Disposal of the Rocketeer Division Assets Less Applicable Income Tax

Gain On Impairment of Rocketeer Division Assets Less Applicable Income Tax

Gain From Operation of the Rocketeer Division Less Applicable Income Tax

Loss from Operation of the Rocketeer Division Less Applicable Income Tax Recovery

Loss on Impairment of Rocketeer Division Assets Less Applicable Income Tax Recovery

$

Loss on Impairment of Rocketeer Division Assets Less Applicable Income Tax Recovery

Gain from Disposal of the Rocketeer Division Assets Less Applicable Income Tax

Loss from Operation of the Rocketeer Division Less Applicable Income Tax Recovery

Gain On Impairment of Rocketeer Division Assets Less Applicable Income Tax

Loss from Disposal of the Rocketeer Division Assets Less Applicable Income Tax Recovery

Gain From Operation of the Rocketeer Division Less Applicable Income Tax

$

Net Income / (Loss)$XXX

SHOW SOLUTION

SHOW ANSWER

LINK TO TEXT

By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor.Attempts: 2 of 4 usedYou have surpassed the number of attempts to earn Maximum Points for this question. For this attempt, and any subsequent attempt(s), you will earn points according to the Point Potential policy set by your instructor.

(c)

Your answer is partially correct.Try again.On July 5, 2017, Campbell Corporation disposes of the division's assets at an adjusted price of $76 million. Explain how the discontinued operations and sale of the Rocketeer Division would be reported on Campbell Corporation's income statement for the year ended May 31, 2018. Assume the June 2017 operating loss is the same as estimated.

Income from Continuing Operations

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting Creating Value in a Dynamic Business Environment

Authors: Ronald Hilton, David Platt

12th edition

1259969517, 1260566390, 978-1260417043

More Books

Students also viewed these Accounting questions

Question

8. What are the costs of collecting the information?

Answered: 1 week ago

Question

1. Build trust and share information with others.

Answered: 1 week ago