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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:

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Reid Wolff
Reid WolffLv2
28 Sep 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?

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2. $400,000 loss.

3. $400,000 impairment loss included in continuing operationsand a $1,000,000 loss from discontinued operations.

4. None

The Ottoboni Corporation had two operating divisions, onemanufacturing division and a finance division. Both divisions areconsidered separate components. The finance division has beenunprofitable, and on October 3, 2014, Ottoboni adopted a formalplan to sell the division, which subsequently was considered ‘heldfor sale’. The before-tax operating loss of the division for theyear was $270,000. The company’s effective tax rate is 40%. Theafter-tax income from continuing operations for 2014 is $600,000.On December 31, 2014, the company’s fiscal year-end, the book valueof the assets of the finance division was $2,100,000.

What will the firm report for discontinued operations for 2014,if anything, under each of the following scenarios?

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C. The sale was completed on March 15, 2015. Fair market valueon December 31, 2014 was $2,000,000.

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