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Why is the impairment loss calculated like this? Example 1 Discontinued Operations Calculations and Income Statement Presentation L Facts: The trial balance below presents the
Why is the impairment loss calculated like this?
Example 1 Discontinued Operations Calculations and Income Statement Presentation L Facts: The trial balance below presents the income statement accounts for Year 1 from All Sports Company's trial balance. The golf division of All Sports has been losing money CV e on a monthly basis. The golf division's income statement accounts are also presented 4,0 below. The board of directors decides on April 30, Year 1, to dispose of the golf division. The carrying value of the golf division on April 30, Year 1, is $4,000,000, and its fair value less costs to sell is $2,200,000. After months of negotiations, the division's net assets are sold on June 30, Year 2 for $2,000,000. The golf division has continuing losses in Year 2 of $200,000 per month. All Sports' income tax rate is 40 percent for Years 1 and 2. Assume that All Sports' income from continuing operations is $4,875,000 in Year 1 and $5,200,000 in Year 2. (continued) Date of sale (continued) All Sports Company Trial Balance Year 1/1 - 12/31 Year 4000 Sales revenue 5000 Cost of goods sold 5300 Freight out 5400 Commissions 5500 Advertising 5600 Insurance expense 5700 Salaries expense 5800 Depreciation expense 6000 Interest revenue 6200 Other revenue 6500 Gain on sale of assets 7000 Interest expense 7500 Impairment loss All Components $21,000,000 $9,500,000 155,000 900,000 1,200,000 1,400,000 2,500,000 950,000 750,000 300,000 400,000 120,000 1,800,000 Golf Division $2,500,000 1/1 - 12/31 1,850,000 135,000 220,000 600,000 750,000 850,000 1/1 - 12/31 495.000Step by Step Solution
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