ACCT 210 ASSIGNMENT 02 Question 1 Today is January 3, 2019 On December 31, 2018, the board of directors of Mellow Corporation (Mellow'), a company using IFRS, approved a plan to sell the company's clothing division. The clothing division meets the definition of a component of Mellow, and the assets and liabilities of the clothing division meet the criteria of "held for sale" The company reviewed the property, plant and equipment associated with the clothing division and determined that their fair value less costs to sell is $108 million compared to a net book value of $125 million. As well, future losses of $32 million are expected to be incurred in fulfilling the contract obligations up to November 30, 2019, after which time an actual disposal is expected to occur. The clothing division had incurred before-tax operating losses of $62 million in 2017 and $50 million in 2018 In addition, during 2018, the company's management decided to sell a parcel of land near the corporate head office. The land had a carrying value of $150 million and was sold for $160 million The tax rate on all of the above items is Mellow Corporation's average income tax rate of 30% Assume that earnings from all other sources before income taxes were $330 million in 2017 and $170 million in 2018. This does not include any amounts pertaining to the clothing division nor do por does it include the sale of land transaction. Required: (a) Does the sale of land require special presentation on the comprehensive income statement Explain (b) Prepare the comprehensive income statement for Mellow Corporation for 2018, beginning wil income from continuing operations before tax (.e. the $330 million and the $170 million above). AISO show the comparative amounts for 2017. Ignore earnings per share computations Question 2 lain if the following situations would be accounted for monectively or retrospectively. Givea brief explanation to support your response. A. A furniture maker decreases bad debts expense from 39% to 2% of credit sales. B. A manufacturer determines that credit losses are becoming material due to deteriorating economic conditions. As a result, it decides to set un allowance for doubtful accounts at 37 of amounts over 90 days. C. A parking service estimates bad debts to be 10% of the value of parking violations issued. In the current year, it changes to estimating the allowance for bad debts to be equal to 20 accounts 30 to 90 days and 50% of accounts over 90 days. D. A shipbuilder changes its revenue recognition policy from the point of receipt by the customer to when the ship leaves the factory shinyand This change results from a change in shipping policy from f.o.b. destination to fo.b, shipping point. (Recall from introductory accounting that f.o.b, means "free on board, and it refers to the point at which ownership transfers from seller to buyer.) E. An electronics retailer has never accrued for warranties or product guarantees. A new consumer protection law comes into effect, giving buyers of electronic products a guarantee against defects for 180 days after purchase and the ability to return defective products to the retailer F. A clothing company that has been operating for 20 years decides to obtain an external audit for the first time in order to meet the bank's demands. The audit firm recommends that management report inventories at the lower of cost and net realizable value, whereas the company has previously only tracked and reported inventory figures at cost. ACCT 210 ASSIGNMENT 02 Question 1 Today is January 3, 2019 On December 31, 2018, the board of directors of Mellow Corporation (Mellow'), a company using IFRS, approved a plan to sell the company's clothing division. The clothing division meets the definition of a component of Mellow, and the assets and liabilities of the clothing division meet the criteria of "held for sale" The company reviewed the property, plant and equipment associated with the clothing division and determined that their fair value less costs to sell is $108 million compared to a net book value of $125 million. As well, future losses of $32 million are expected to be incurred in fulfilling the contract obligations up to November 30, 2019, after which time an actual disposal is expected to occur. The clothing division had incurred before-tax operating losses of $62 million in 2017 and $50 million in 2018 In addition, during 2018, the company's management decided to sell a parcel of land near the corporate head office. The land had a carrying value of $150 million and was sold for $160 million The tax rate on all of the above items is Mellow Corporation's average income tax rate of 30% Assume that earnings from all other sources before income taxes were $330 million in 2017 and $170 million in 2018. This does not include any amounts pertaining to the clothing division nor do por does it include the sale of land transaction. Required: (a) Does the sale of land require special presentation on the comprehensive income statement Explain (b) Prepare the comprehensive income statement for Mellow Corporation for 2018, beginning wil income from continuing operations before tax (.e. the $330 million and the $170 million above). AISO show the comparative amounts for 2017. Ignore earnings per share computations Question 2 lain if the following situations would be accounted for monectively or retrospectively. Givea brief explanation to support your response. A. A furniture maker decreases bad debts expense from 39% to 2% of credit sales. B. A manufacturer determines that credit losses are becoming material due to deteriorating economic conditions. As a result, it decides to set un allowance for doubtful accounts at 37 of amounts over 90 days. C. A parking service estimates bad debts to be 10% of the value of parking violations issued. In the current year, it changes to estimating the allowance for bad debts to be equal to 20 accounts 30 to 90 days and 50% of accounts over 90 days. D. A shipbuilder changes its revenue recognition policy from the point of receipt by the customer to when the ship leaves the factory shinyand This change results from a change in shipping policy from f.o.b. destination to fo.b, shipping point. (Recall from introductory accounting that f.o.b, means "free on board, and it refers to the point at which ownership transfers from seller to buyer.) E. An electronics retailer has never accrued for warranties or product guarantees. A new consumer protection law comes into effect, giving buyers of electronic products a guarantee against defects for 180 days after purchase and the ability to return defective products to the retailer F. A clothing company that has been operating for 20 years decides to obtain an external audit for the first time in order to meet the bank's demands. The audit firm recommends that management report inventories at the lower of cost and net realizable value, whereas the company has previously only tracked and reported inventory figures at cost