On November 1, 2019, 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 $225.00 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 $63.00 million on November 1, 2019. Campbell's management has entered into negotiations for a cash sale of the division for $54.00 million (net of costs to sell). The sale date and final disposal date of the division is expected to be July 1, 2020. Campbell Corporation has a fiscal year ending May 31. The results of operations for the Rocketeer Division for the 2019-20 fiscal year and the estimated results for June 2020 are presented below. The before-tax losses after October 31, 2019, are calculated without depreciation on the building and equipment. Period June 1, 2019, to October 31, 2019 November 1, 2019, to May 31, 2020 June 1 to 30, 2020 (estimated) Before-Tax Loss $(3,750,000 ) (2,400,000) (450,000) The Rocketeer Division will be accounted for as a discontinued operation on Campbell's financial statements for the year ended May 31, 2020. Campbell's tax rate is 25% on operating income and all gains and losses. Campbell prepares financial statements in accordance with IFRS. (b) Your Answer Correct Answer 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, 2020. $XXX Income from Continuing Operations Loss from Operation of the Rocketeer Division Less Applicable Income Tax Recovery $ 4612500 i Loss on Impairment of Rocketeer Division Assets Less Applicable Income Tax Recovery 6750000 11362500 Net Income /(Loss) $XXX e Textbook and Media Assistance Used Attempts: 3 of 4 used Using multiple attempts has impacted your score. 15% score reduction after attempt 2 On July 5, 2020, Campbell Corporation disposes of the division's assets at an adjusted price of $60.00 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, 2021. Assume the June 2020 operating loss is the same as estimated. Income from Continuing Operations $XXX Net Income /(Loss) $XXX e Textbook and Media Save for Later Attempts: 0 of 4 used Submit Answer Using multiple attempts will impact your score. 15% score reduction after attempt 2
