USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (8) QUESTIONS:

On August 1, 20x1, Desert, Inc. adopted a plan to discontinue its childrens clothing division, which qualifies as a component of the business according to GAAP. The disposal of the division was expected to be concluded by March 30, 20x2. On December 31, 20x1, Deserts fiscal year-end, the following information relative to the discontinued operation was accumulated:

Operating Income (pre-tax) of the Component for Jan 1 - Dec 31, 20x1	$ 658,000
Net Book Value of the Component at Dec 31, 20x1	3,575,000
Fair Value of the Component	3,600,000
Estimated Disposal Costs	120,000
Income Tax Rate	30%

1. Because the sale was not complete by December 31, 20x1, Desert had to test the component for impairment. Determine the Impairment Loss (net of tax), that Desert would report in their 20x1 footnotes (if any):

[Note: If you determine there is an impairment loss, enter your answer as a negative number using (). For example: if you determine the impairment loss is $200,000, then after tax would be $140,000. Enter your answer as (140,000).] $___________________

*Do not use commas or dollar signs in recording your answer.

Using the information presented in #1 above, determine the following:

2. In its Income Statement for the year ended December 31, 20x1, Desert would report a total Gain/Loss on Discontinued Operations (net of tax) of: $___________________

*Do not use dollar signs or commas when recording your answer. If your answer is a Loss, record your answer using () parenthesis.

USE THE INFORMATION FROM #1 & #2 ABOVE, AND THE FOLLOWING INFORMATION, TO ANSWER THE NEXT (6) QUESTIONS:

Desert finalized the sale of the component on March 30, 20x2 for net cash proceeds of $3,350,000. Actual operating income of the discontinued component from Jan 1 Mar 30, 20x2, was $240,000. (This $240,000 is NOT included in the $2,470,000 Income Before Taxes listed below.) Use this information and the Additional Data to prepare a partial Income Statement for the year ended December 31, 20x2 beginning with Income from Continuing Operations. Include Earnings Per Share disclosures.

Additional Data:

Income Before Taxes (from on-going operations) (x2) $2,470,000

Income Tax Rate (x2) 30%

5% Preferred Stock ($100 Par, 10,000 shares issued)

Common Stock ($1 par, 600,000 shares issued, 500,000 outstanding)

Partial Income Statement

Desert, Inc.

For the Year Ended December 31, 20x2

Income from Continuing Operations $ Blank 1

Gain/Loss from Discontinued Operations (net of tax) $ Blank 2

Net Income $ Blank 3

E.P.S.

Continuing Operations $ Blank 4

Discontinued Operations $ Blank 5

Net Income $ Blank 6

3. Determine Income from Continuing Operations ('x2) $ Blank 1

*Do not use $ signs or commas in recording your answer.

4. Using the information presented above, answer the following:

Determine Gain/Loss from Discontinued Operations (net of tax) for 20x2: $ Blank 2

*If your answer is a Loss, enter your answer using () parenthesis. Do not use commas or $ signs in recording your answer.

5

Using the information presented above, answer the following:

Determine Net Income for 20x2 $ Blank3

*Do not use dollar signs or commas when recording your answer.

6.

Using the information presented above, answer the following:

Determine EPS for Income from Continuing Operations ('x2) $ Blank4

(Round your answer to the nearest whole cent. Example: if you determine EPS from Cont. Operations to be $6.94724, round your answer to 6.95. If you determine EPS from Cont. Oper to be $6.94321, round your answer to 6.94. Do not use $ signs in recording your answer.)

7.

Using the information presented above, determine the following:

Determine EPS Discontinued Operations ('x2) $ Blank 5

Round your answer to the nearest whole cent. Example: if you determine EPS from Discontinued Operations to be $0.94724, round your answer to 0.95. If you determine EPS from Disc Oper to be $0.94321, round your answer to 0.94. Do not use dollar signs in recording your answer. If you determined Disc. Operations was a Loss, enter your EPS answer using ().

8.

Using the information presented above, determine the following:

Determine EPS for Net Income ('x2) $_____________________

(Round your answer to the nearest whole cent. Example: if you determine EPS from Net Income to be $6.94724, round your answer to 6.95. If you determine EPS from Net Income to be $6.94321, round your answer to 6.94. Do not use dollar signs in recording your answer.)