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27 Nov 2019

Explain why, under GAAP, companies are required to provideclassified income statements.

Why does Proctor and Gamble make a distinction between operatingand non-operating revenue?

Consider income statement items (net earnings from discontinuedoperations). These operations were discontinued in 2008, yet thefinancial statement shows net earnings from discontinued operationsof $277million in 2007 and 2008 and $2,143 million in 2009. Brieflyexplain why?

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25 Oct 2019
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Assume that Blue Spruce Inc. decided to sell DemandTV Ltd., asubsidiary, on September 30, 2017. There is a formal plan todispose of the business component, and the sale qualifies fordiscontinued operations treatment. Pertinent data on the operationsof the TV subsidiary are as follows: loss from operations frombeginning of year to September 30, $2.1 million (net of tax); lossfrom operations from September 30 to end of 2017, $800,000 (net oftax); estimated loss on sale of net assets to December 31, 2017(net of tax), $160,000. The year end is December 31. Blue Spruceprepares financial statements in accordance with IFRS.

REQUIRED:

1. What is the net income/loss from discontinued operationsreported in 2017?

2. Prepare the discontinued operations section of the incomestatement for the year ended 2017?

On October 1, 2017 LeBron Co. agreed to sell the assets of its Heat Division to Cavalier Inc. for $80 million. The sale was completed on December 31, 2017. The following additional facts pertain to the transaction:

The Heat Division qualifies as a component of the entity according to GAAP regarding discontinued operations.

The book value of Heat's assets totaled $74 million on the date of the sale.

Heat's operating income was a pre-tax loss of $3.5 million in 2017.

LeBron's income tax rate is 30%.

17. In the 2017 income statement for LeBron Co., it would report income (loss) from discontinued operations of:

For its fiscal year ending October 31, 2017, Haas Corporationreports the following partial data shown below.

Income before income taxes $540,000

Income tax expense (20% × $420,000) 84,000

Income from continuing operations 456,000

Loss on discontinued operations 120,000

Net income $336,000

The loss on discontinued operations was comprised of a $50,000loss from operations and a $70,000 loss from disposal. The incometax rate is 20% on all items.

Explain in memo form why the income statement data aremisleading.

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