Problem#1

Kandon Enterprise, Inc.,has two operating division; one manufactures machinery and the other breeds andsells horses. Both divisions areconsidered separate components as defined by generally accepted accountingprinciples. The horse division has beenunprofitable, and on Nov 15, 2016, Kandon adopted a formal plan to sell thedivision. The sale was completed onApril 30, 2017. At December 31, 2016,the component was considered held for sale.

On December 31, 2016, the companys fiscal year-end, thebook value of the assets of the horse division was $250,000. On that date, the fair value of the assets,less cost to sell, was $200,000. The before-taxloss from operations of the division for the year was $140,000. The compnays effective tax rate is 40%. The after-tax income from continuingoperation for 2016 was $400,000.

Required:

1.Prepare apartial income statement for 2016 beginning with income from continuingoperation. Ignore EPS disclosures.

2.Repeat requirement 1 assuring that the estimatednet fair value of the horse divisions assets was $400,000, instead of$200,000.

Problem#2

Determine the bookvalue of the divisions assets on December 31, 2016.

The Esposito Import Companyhad 1 million shares of common stock outstand during 2016. Its income statement reported the following items: income from continuing operation, $5 million;loss from discontinued operation, $1.6 million.All of these amounts are net of tax.

Required:

1.Prepare the 2016 EPS presentation for theEsposito Import Company.