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please help solve this case. Surfing the Standards Cases Surfing the Standards Case 1: Interest Allocation to Discontinued Operations Kansas Car Companies is disposing of
please help solve this case.
Surfing the Standards Cases Surfing the Standards Case 1: Interest Allocation to Discontinued Operations Kansas Car Companies is disposing of its SUV segment this year and is reporting it as a discontinued operation on the statement of net income in the current year. The ratio of consolidated debt to equity is uniform for all operations of the company. What is the minimum amount of interest that Kansas Car can allocate to its discontinued operations? What is the maximum amount of interest that it can allocate to discontinued operations? Provide explanations of your calculations, including references to the codification. The following information is available related to the net assets and debt of Kansas Car. Interest expense for all debt is 7% of the principal balance. Net Assets of Kansas Car $10,500,000 Net Assets of SUV Segment $ 1,200,000 Debt of Kansas Car: Principal Interest Directly attributable to continuing operations $ 500,000 $35,000 7,000 Required to be repaid upon disposal of the SUV 100,000 segment Debt that will be assumed by the buyer of the 150,000 SUV segment All other debt 1,250,000 10,500 87,500 TOTAL $ 2,000,000 $140,000 Step by Step Solution
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