Question
Topic: Roseburg Corporation manufactures cardboard containers. In 2017, the company purchased several large tracts of timber for $20 million with the intention of harvesting its
Topic: Roseburg Corporation manufactures cardboard containers. In 2017, the company purchased several large tracts of timber for $20 million with the intention of harvesting its own timber rather than buying timber from outside suppliers. However, in 2018, Roseburg abandoned the idea, and sold all of the timber tracts for $30 million. Net income for 2018, before considering the event, was $12 million.
Required: Write a memo to include: 1. A journal entry to show how the sale and the gain on the sale will be accounted for.
2. A discussion of the alternatives (as part of operating income, as part of "other revenues and expenses", or as discontinued operations) that might be considered in reporting the gain on the sale.
3. Which of the three alternatives would you recommend to report the gain on the income statement. Explain.
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