Case 7. On January 1, 2020, Power Corporation approved a plan to dispose of a business segment. It is expected that the sale will occur on April 30, 2021. On December 31, 2020, the carrying value of the net assets of the segments was P4,000,000 and the net recoverable amount was P3,600,000. During 2016, the company paid employees severance and relocation costs of P200,000 as a direct result of the discontinued operations. The revenues and expenses of the discontinued segment during 2020 were as follows: (Income tax rate is 35%) 4,400,000 5,800,000 Revenue Еxpense

Case 7. On January 1, 2020, Power Corporation approved a plan to dispose of a business segment. It is expected that the sale will occur on April 30, 2021. On December 31, 2020, the carrying value of the net assets of the segments was P4,000,000 and the net recoverable amount was P3,600,000. During 2016, the company paid employees severance and relocation costs of P200,000 as a direct result of the discontinued operations. The revenues and expenses of the discontinued segment during 2020 were as follows: (Income tax rate is 35%) 4,400,000 5,800,000 Revenue Еxpense

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 29CE

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Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
On January 1, 2020, Power Corporation approved a plan to dispose of a business segment. It is expected that the sale will occur on April 30, 2021. On December 31, 2020, the carrying value of the net assets of the segments was P4,000,000 and the net recoverable amount was P3,600,000. During 2016, the company paid employees severance and relocation costs of P200,000 as a direct result of the discontinued operations. The revenues and expenses of the discontinued segment during 2020 were as follows: (Income tax rate is 35%)Revenue 4,400,000Expense 5,800,000 How much will be reported as income from ordinary activities of the discontinued operations, net of tax in 2021?a.260,000b.455,000c.520,000d.845,000
On June 1, 2021, Startlet Company approved a plan to dispose of a business segment. It is expected that the sale will occur on April 30, 2022. On December 31, 2021, the carrying value of net assets of the segment was P4,000,000 and the net recoverable amount was P3,600,000. During 2021, the company paid employees severance and relocation costs of P200,000 as a direct result of the discontinuing operation. The revenues and expenses of the discontinuing segment during 2021 were: Period covered Revenue January 1 to May 31 June 1 to December 31 P3,000,000 1,400,000 Expenses P4,000,000 1,800,000 Income tax rate is 35%. What amount should be reported as loss from discontinued operation for 2021? Your answer
On January 1, 2021, Concretti Inc. had a division that met the criteria for discontinuance of a business component. For the period January 1 through October 15, 2021, the component had revenue of P500,000 and expenses of P800,000. The assets of the component were sold on October 15, 2021 at a loss of P100,000. How should Concretti report the component's operation for 2021? A. 500,000 and 800,000 should be included in continuing operationsB. 400,000 should be reported as loss on discontinued operationsC. 400,000 should be reported as an extraordinary lossD. 300,000 should be reported as loss on discontinued operations
On October 1, 2021, Loving Company approved a formal plan to sell a businesssegment. The sale will occur on April 1, 2022. The segment’s revenue andexpenses for 2021 were P30,000,000 and P32,000,000, respectively. OnDecember 31, 2021, the carrying amount of the assets of the segment wasP10,000,000 and the fair value less costs of disposal was P9,600,000. Theincome tax rate is 25%. What amount should be reported as income/(loss) fromdiscontinued operation for 2021?
Booker Company committed to sell the comic book division, a component of the business, on September 1, 2020. The carrying amount of the division was P4,000,000 and the fair value was P3,500,000. The disposal date is expected on June 1, 2021, The division reported an operating loss of P200,000 for the year ended December 31, 2020. What amount should be reported as pretax loss from discontinued operation in 2020? a.500,000b.200,000c.700,000d.0
On December 31, 2021, the end of the fiscal year, Revolutionary Industries completed the sale of its robotics business for $10.0 million. The robotics business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $7.5 million. The income from operations of the segment during 2021 was $4.5 million. Pretax income from continuing operations for the year totaled $12.5 million. The income tax rate is 25%. Prepare the lower portion of the 2021 income statement beginning with income from continuing operations before income taxes. Ignore EPS disclosures. (Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars and not in millions. For example, $4,000,000 rather than $4.)
On November 1, 2021, Jamison Inc. adopted a plan to discontinue its barge division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by April 30, 2022. On December 31, 2021, the company's year-end, the following information relative to the discontinued division was accumulated: Operating loss Jan. 1–Dec. 31, 2021 $ 65 million Estimated operating losses, Jan. 1 to April 30, 2022 80 million Excess of fair value, less costs to sell, over book value at Dec. 31, 2021 15 million In its income statement for the year ended December 31, 2021, Jamison would report a before-tax loss on discontinued operations of: Multiple Choice $65 million. $50 million. $130 million. $145 million.
8. On October 1, 2021, Loving Company approved a formal plan to sell a business segment. The sale will occur on April 1, 2022. The segment's revenue and expenses for 2021 were P30,000,000 and P32,000,000, respectively. On December 31, 2021, the carrying amount of the assets of the segment was P10,000,000 and the fair value less costs of disposal was P9,600,000. The income tax rate is 25%. What amount should be reported as income/(loss) from discontinued operation for 2021? * A. (2,400,000) B. (2,000,000) C. (1,800,000) D. 0 E. None of them
on december 31, 2020, villa company classified as held for sale an equipment with carrying amount of 5,000,000. on this date, the equipment is expected to be sold for 4,600,000. disposal cost is expected at 200,000. on december 31, 2021, the equipment had not been sold and management after considering its options decided to place back the equipment into operations. on december 31, 2021, the entity estimated that the equipment is expected to be sold at 4,300,000 with the disposal cost at 50,000. the carrying amoount of the equipment was 4,000,000 on december 31, 2021 if the noncurrent asset was not classified as held for sale. what is the impairment loss for 2020? what is the measurement of the equipment on december 31, 2021? what is the loss on reclassification in 2021?
On December 1, 2021, Violet Company committed to a plan to dispose of the assets of a business component. The disposal meets the requirements to be classified as discontinued operation. On that date, the entity estimated that the loss from the disposition of the assets would be P700,000 and the component’s operating income was P200,000. What amount of pretax loss should be reported for discontinued operation for 2021? A. 900,000 B. 700,000 C. 200,000 D. 500,000 E. None of them
On December 31,2021 the end of the fiscal year, Califonia Mircotech Corporation completed the sale of its semiconductor business for $10 million. The semiconductor business segment qualifies as a component of the entity according to GAAP. The book value of the assests of the segment was $8 million. The loss from operations of the segment during 2021 was $3.6 million. Pretax income from continuing operation for the year totaled $5.8 million. The income tax rate is 25%. Prepare the lower portion of the 2021 income statement. Assume instead that the estimated fair value of the segments assets, less costs to sell, on December 31 was $7 million rather than $10 million. Prepare the lower portion of the 2021 income statement beginning with income from continuing operations before income taxes.