It is January, 2017 and you have just been hired as the financial reporting guru for TECHNOGYM, a diversified exercise/fitness corporation that has just finished a very fast-paced, dynamic year. TECHNOGYM began as the sole distributor of TechTone, a full-body fitness machine sold to fitness centers and hospitals. This remains the main operation of TECHNOGYMs business.

Your predecessor left the firm in a hurry. Your primary responsibility is to finish the 2016 year-end financial statements. Luckily, there is still time to make any necessary correcting and/or adjusting journal entries for the 2016 fiscal year. To give you a better understanding of the decisions made by your predecessor, at time you will be asked to reproduce results from 2015.

Throughout the semester you will work on different aspects of the companys financial records. This exercise relates to discontinued operations. Future exercises will relate to: revenue recognition, accounts receivable, and inventory. Near the end of the semester, you will combine these exercises in a comprehensive financial reporting and analysis exercise.

General Information

TECHNOGYM uses a Jan. 1 Dec. 31 financial year

TECHNOGYMs effective income tax rate and the number of shares of common stock outstanding are shown below each trial balance

You should assume that Revenue From Other Products and Cost of Other Products should be included with TechTone as primary operations

You should assume that all Depreciation Expense and General and Admin Expenses are considered operating expenses

Exercise for a Discontinued Operation - the West Coast Division:

A spreadsheet has been prepared (3401 FinSt DiscOps.xlsx) that contains information you will need for this exercise related to a discontinued operation. A copy of the adjusted trial balances for 2016, 2015, and 2014 is also attached to this document. You have gathered the following information that will be helpful in completing this part of your responsibilities. You (of course) will include supporting documentation (including calculations) for verifiability of your answers. Good luck!

2015 Activities:

On October 1, 2015, TECHNOGYM made and announced a decision to sell its West Coast operations (considered a component according to the GAAP definition) to an unaffiliated company and the sale was expected to close on November 30, 2016. TECHNOGYM management estimated at the end of 2015 that the division would sell for $1,400,000, and that legal fees for the sale would be $200,000. The notes left behind by your predecessor include a breakout of the financial records for the West Coast division compared to the rest of the company for 2016, 2015, and 2014.

Journal entries to record the West Coast divisions normal operating revenues and expenses for 2015 were completed properly during the year, and normal adjusting entries were also recorded. As indicated in the documentation, the net carrying value of the division (assets minus liabilities) at the end of 2015 was $1,109,200.

Requirement (a) Complete the following tasks related to 2015 results:

Prepare the complete multi-step income statement that would have been prepared at the end of 2015, showing only 2015 and 2014 (note: a normal income statement shows 3 years of results, but we are omitting the 2013 results from this requirement).

2016 Activities:

On December 31, 2016, the West Coast division was sold, but actual result of the sale was a $125,200 loss (instead of the gain that had been estimated in 2015). The journal entries related to the sale were recorded already, along with all other normal 2016 adjusting entries.

Requirement (b) - Complete the following tasks for 2016:

Prepare the complete 2016 multi-step income statement (containing a column of results for all 3 years).

2016 TECHNOGYM Discontinued Oper Continuing oper. Adjusted Trial Balance December 31, 2016 December 31, 2016 December 31, 2016 Debit Credit Debit Credit Debit credit Cash 4.746.908 4,746,908 l 18,187,500 18,187,500 Accounts Receivable I Income Tax Refund Receivable Inventory 19.085,000 19,085,000 Property, Plant & Equipment 52,800,000 52,800,000 Accumulated Depreciation 43,680,000 43,680,000 17,640,000 Accounts Payable 17,640,000 Other Liabilities 27,659,914 27,659,914 Oncome Tax Payable 311.707 311,707 Common stock 1.500.000 1.500.000 16632 3,422,708 Retained Earnings 3,439,340 Revenue from Tech Tone Sales 132,482,500 19,870,000 112,612,500 Revenue from other Products 21,365,934 21365,934 Loss on Sale of Discontinued Operation 125,200 125,200 Cost of TechTone Equipment sold 68,447,500 58,177,500 10,270,000 Cost of Other Products 18,651,648 18,651,648 12,000,000 1.440,000 10,560,000 Depreciation Expense 8060,000 I 45,672,500 General and Admin Expenses 53,732,500 303,139 8,568 Income Tax Expense/(Benefit) 311,707 248,079,395 248,079,395 19,895,200 19,895,200 228, 192,763 228,192,763 Income Tax Rate 34% 150,000 Common Shares of Stock Outstanding