Question
Reporting Discontinued Operations On October 31, Leigh Corp. approved a formal plan to dispose of its Knit Products Division. On December 31, the Knit Products
Reporting Discontinued Operations
On October 31, Leigh Corp. approved a formal plan to dispose of its Knit Products Division. On December 31, the Knit Products Division was held for sale but had not been sold. The Knit Products Division (considered a separate business component) reported a net loss from operations of $1,010,000 before tax for the year ended December 31. The Knit Products Division has a book value and fair value (after selling expenses) of $7,200,000 and $6,600,000, respectively. Leigh Corp. reported income from continuing operations of $1,800,000 before tax for the year.
a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures.
- Use a negative sign to indicate a loss.
Leigh Corp. | ||
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Income Statement | ||
Year Ended December 31 | ||
Income from continuing operations | Answer
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Discontinued operations | ||
Loss from discontinued operations, net of tax savings | Answer
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Impairment loss on discontinued component, net of tax savings | Answer
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Net income | Answer
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b. Repeat the requirements of part a but now assume that the book value of the Knit Products Division is $6,400,000 on December 31.
- Use a negative sign to indicate a loss.
Leigh Corp. | ||
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Income Statement | ||
Year Ended December 31 | ||
Income from continuing operations | Answer
| |
Discontinued operations | ||
Loss from discontinued operations, net of tax savings | Answer
| |
Gain on discontinued component, net of tax | Answer
| |
Net income | Answer
|
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