Kandon Enterprises, Inc., has two operating divisions; onemanufactures machinery and the other breeds and sells horses. Bothdivisions are considered separate components as defined bygenerally accepted accounting principles. The horse division hasbeen unprofitable, and on November 15, 2016, Kandon adopted aformal plan to sell the division. The sale was completed on April30, 2017. At December 31, 2016, the component was considered heldfor sale.
On December 31, 2016, thecompanyâs fiscal year-end, the book value of the assets of thehorse division was $415,000. On that date, the fair value of theassets, less costs to sell, was $350,000. The before-tax loss fromoperations of the division for the year was $290,000. The companyâseffective tax rate is 40%. The after-tax income from continuingoperations for 2016 was $550,000.
Required: 1. Prepare a partial income statement for 2016 beginning withincome from continuing operations. Ignore EPS disclosures.(Amounts to be deducted should be indicated with a minussign.)
2. Prepare a partial income statement for 2016beginning with income from continuing operations. Assuming that theestimated net fair value of the horse divisionâs assets was$700,000, instead of $350,000. Ignore EPS disclosures.(Amounts to be deducted should be indicated with a minussign.)
Kandon Enterprises, Inc., has two operating divisions; onemanufactures machinery and the other breeds and sells horses. Bothdivisions are considered separate components as defined bygenerally accepted accounting principles. The horse division hasbeen unprofitable, and on November 15, 2016, Kandon adopted aformal plan to sell the division. The sale was completed on April30, 2017. At December 31, 2016, the component was considered heldfor sale. |
On December 31, 2016, thecompanyâs fiscal year-end, the book value of the assets of thehorse division was $415,000. On that date, the fair value of theassets, less costs to sell, was $350,000. The before-tax loss fromoperations of the division for the year was $290,000. The companyâseffective tax rate is 40%. The after-tax income from continuingoperations for 2016 was $550,000. |
| Required: | |
| 1. | Prepare a partial income statement for 2016 beginning withincome from continuing operations. Ignore EPS disclosures.(Amounts to be deducted should be indicated with a minussign.) 2. Prepare a partial income statement for 2016beginning with income from continuing operations. Assuming that theestimated net fair value of the horse divisionâs assets was$700,000, instead of $350,000. Ignore EPS disclosures.(Amounts to be deducted should be indicated with a minussign.) |
