Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 5.11BE
To determine
To identify: Whether the tools division of W Company would qualify as a discontinued operation under IFRS.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Dupont Corp. recently discontinued operations on one of its four branches, the branch is nowconducting a clearance sale. The fixed assets in the discontinued branch are now being offered forsale and a buyer has been identified. The sale can take place within a year.Despite all this, the management is insisting on presenting all the fixed assets, including those thatbelong to the disposal group as PPE as it would give an impression of large manufacturingcapacity. They are not in favour of presenting any amount of revenues from discontinuedoperations as well.
Explain to them why these assets are no longer PPE and should be separated as assets-held-for-sale and why income on discontinued operation should be separated from continuing operation.
Problem 3: Impairment
The Rolling Cones operates a fleet of ice cream trucks and three ice cream cafes.
In late 2024, a significant adverse change in the business climate indicated to
management that the assets of the café division may be impaired. The following
information was identified:
.
.
.
Cost of division assets: $32.5 Million
Book value of division assets: $18.3 Million
Fair value of division assets: $11 Million
Sum of estimated future cash flows generated from division assets: $15
Million
What amount of impairment loss should The Rolling Cones report in its income
statement? And what journal entry should be posted?
Recoverability test:
Measurement:
Journal Entry
XYZ Co. has an intention to restructure the company. The following costs were
determined:
Salaries of employees that will be displaced in the implementation
of restructuring
Termination benefits of employees terminated as a result of the
restructuring
Expected losses for the new division to be established
P500,000
250,000
250,250
However, only the abovementioned expenditures to be undertaken is the only data that
they have. Further, the affected employees are not yet aware of the possible
implementation of restructuring. Determine the provision for the restructuring.
Chapter 5 Solutions
Intermediate Accounting
Ch. 5 - What are the three limitations of the income...Ch. 5 - In what way is the income statement useful for...Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - What management behavior does the term earnings...Ch. 5 - What is the difference between permanent and...Ch. 5 - Prob. 5.7QCh. 5 - Prob. 5.8QCh. 5 - Prob. 5.9QCh. 5 - Prob. 5.10Q
Ch. 5 - What are the six key items to be reported on the...Ch. 5 - Explain why operating income is an important...Ch. 5 - Prob. 5.13QCh. 5 - Prob. 5.14QCh. 5 - What items are included in net income?Ch. 5 - Are items of other comprehensive income included...Ch. 5 - What two choices must companies make when...Ch. 5 - Prob. 5.18QCh. 5 - Prob. 5.19QCh. 5 - Are companies reporting under U.S. GAAP required...Ch. 5 - What accounts are summarized on the statement of...Ch. 5 - What is financial statement analysis?Ch. 5 - Prob. 5.23QCh. 5 - What are comparative financial statements and why...Ch. 5 - What is the difference between vertical and...Ch. 5 - Prob. 5.26QCh. 5 - Explain the difference between return on equity...Ch. 5 - How is a companys profit margin calculated?Ch. 5 - Prob. 5.1MCCh. 5 - Moore Furniture Inc., a public company, has...Ch. 5 - Beach and Poole, CPA is reviewing income statement...Ch. 5 - Prob. 5.4MCCh. 5 - Allison Corporations current year income from...Ch. 5 - Prob. 5.6MCCh. 5 - Chili Co. had the following balances at December...Ch. 5 - Szuba Corporation reported the following...Ch. 5 - Prob. 5.9MCCh. 5 - Prob. 5.1BECh. 5 - Prob. 5.2BECh. 5 - Advantages and Disadvantages of the Income...Ch. 5 - Identify each of the earnings items as primarily...Ch. 5 - Income Statement Presentation. Place the...Ch. 5 - Statement of Net Income Presentation, IFRS. Which...Ch. 5 - Single-Step Statement of Net Income. Carr...Ch. 5 - Statement of Net Income, IFRS. Using the...Ch. 5 - Multiple-Step Statement of Net Income. Using the...Ch. 5 - Condensed Statement of Net Income. Using the...Ch. 5 - Prob. 5.11BECh. 5 - Prob. 5.12BECh. 5 - Discontinued Operations. Jojo, Inc. held a...Ch. 5 - Prob. 5.14BECh. 5 - Prob. 5.15BECh. 5 - Prob. 5.16BECh. 5 - Computation of Retained Earnings. Taxi Cabs, Inc...Ch. 5 - Computation of Contributed Capital. Using the...Ch. 5 - Prob. 5.19BECh. 5 - Prob. 5.20BECh. 5 - Prob. 5.21BECh. 5 - Ratio Analyses. Green Grasshopper Incorporated is...Ch. 5 - Multiple-Step and Single-Step Statements of Net...Ch. 5 - Condensed Statement of Net Income. Using the trial...Ch. 5 - Prob. 5.3ECh. 5 - Prob. 5.4ECh. 5 - Multiple-step Statement of Net Income. The current...Ch. 5 - Condensed Statement of Net Income. Using the...Ch. 5 - Multiple-step income Statement. Ciara s Cookie...Ch. 5 - Prob. 5.8ECh. 5 - Prepare Statement of Stockholders' Equity. Dane...Ch. 5 - Prepare Statement of Stockholders Equity. Ciaras...Ch. 5 - Prepare a Statement of Stockholders' Equity....Ch. 5 - Profitability Analyses. Use the following excerpt...Ch. 5 - Multiple-Step and Single-Step income Statement,...Ch. 5 - Condensed Income Statement. Using the information...Ch. 5 - Multiple-step, Single-step, and Condensed...Ch. 5 - Statement of Net Income Presentation. IFRS....Ch. 5 - Income Statement Presentation, Classification, and...Ch. 5 - Prob. 5.6PCh. 5 - Multiple-step, Single-step, and Condensed...Ch. 5 - Statement of Comprehensive Income Single-and...Ch. 5 - Prepare Statement of Stockholders Equity. Use the...Ch. 5 - Prob. 5.10PCh. 5 - Prob. 1JCCh. 5 - Prob. 1FSCCh. 5 - Prob. 2FSCCh. 5 - Prob. 1SSCCh. 5 - Surfing the Standards Case 2: Amounts Paid by...Ch. 5 - Prob. 1BCCCh. 5 - Prob. 2BCC
Knowledge Booster
Similar questions
- Vegetarian Delights has been experiencing declining market conditions for its specialty foods division. Management decided to test the operational assets of the division for possible impairment. The test revealed the following: book value of the division’s assets, $33.5 million; fair value of the division’s assets, $30 million; sum of estimated future cash flows generated from the division’s assets, $38 million. What amount of impairment loss, if any, should Vegetarian Delights record?arrow_forwardCHALLENGE PROBLEM This problem challenges you to apply your cumulative accounting knowledge to move a step beyond the material in the chapter. The results of the operating activities of Kobe Company for the current year are as follows: Based on these results, Kobe is considering discontinuing department C and establishing a new department D. The estimated revenues and expenses of the new department are as follows: In addition, the proposed change will cause total indirect operating expenses to increase by 22,000. REQUIRED Determine whether Kobe should discontinue department C and establish department D.arrow_forwardEthics and Sale of Operating Component It is the end of 2019, and, as an accountant for Newell Company, you are preparing its 2019 financial statements. On December 29, 2019, Newells management decided to sell one of its major divisions, subject to some legal work that is expected to be completed during the first week in April 2020 after the 2019 financial statements have been issued). During 2019, the division earned a small operating income that is just enough for the company to report record earnings for the year. However, the estimated fair value of the division at the end of 2019 is less than its net book value, so that management anticipates the component will be sold at a loss. Newells president stops by your office and says, You have been doing a fine job. Keep up the good work because you are heading for a promotion in early 2021. Once we report the record earnings for 2019, our shareholders and creditors will be happy. Then I think our earnings for 2020 will be high enough so that the loss we expect to report in 2020 on the sale of the division will not look so bad. After the president leaves your office, you continue preparing the 2019 financial statements. Required: From financial reporting and ethical perspectives, what information, if any, will you include about the upcoming sale of the division in the 2019 financial statements?arrow_forward
- Bisbee Health Products invests heavily in research and development (R&D), although it must currently treat its R&D expenditures as expenses for financial accounting purposes. To encourage investment in R&D, Bisbee evaluates its division managers using EVA. The company adjusts accounting income for R&D expenditures by assuming these expenditures create assets with a two-year life. That is, the R&D expenditures are capitalized and then amortized over two years. Western Division of Bisbee shows after-tax income of $8.4 million for year 2. R&D expenditures in year 1 amounted to $3.8 million and in year 2, R&D expenditures were $4.9 million. For purposes of computing EVA, Bisbee assumes all R&D expenditures are made at the beginning of the year. Before adjusting for R&D, Western Division shows assets of $30.6 million at the beginning of year 2 and current liabilities of $680,000. Bisbee computes EVA using divisional investment at the beginning of the year and a 14 percent cost of capital.…arrow_forwardEmpire Records divides its operations into three divisions. The company CEO noticed that its North American division is under performing and is trying to decide if this division should be eliminated. A recent income statement for its North American division is as follows: Empire Records North American Division Income Statement Revenue Divisions sales commissions Salary of the division president Lease cost for division retail stores Allocation of company-wide legal cost* Net loss *This cost relates to a legal settlement paid by Empire Records during the year. Required: a. Prepare an income statement containing only the relevant information to the segment elimination decision. b. Based on the income statement you prepared in Requirement a, should this division be eliminated? Complete this question by entering your answers in the tabs below. Required A Required B $570,000 (353,000) (25,700) (119,000) (77,000) (4,700) Prepare an income statement containing only the relevant information to…arrow_forwardes Exercise 4-8 (Algo) Discontinued operations; disposal in subsequent year [LO4-4] Kandon Enterprises, Incorporated, has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and, on November 15, 2024, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2025. At December 31, 2024, the component was considered held for sale. Consider the following: • On December 31, 2024, the company's fiscal year-end, the book value of the assets of the horse division was $460,000. On that date, the fair value of the assets, less costs to sell, was $400,000. The before-tax loss from operations of the division for the year was $340,000. • The after-tax income from continuing operations for 2024 was $600,000. The company's effective tax rate is 25% . Required: 1. Prepare a partial income…arrow_forward
- 1. Biological assets, bearer plants, and agricultural produce are the three focal points of the scope ofIAS 41. Briefly discuss and compare each. 2. Dupont Corp. recently discontinued operations on one of its four branches. The branch is nowconducting a clearance sale. The fixed assets in the discontinued branch are now being offered forsale, and a buyer has been identified. The sale can take place within a year.Despite all this, the management insists on presenting all the fixed assets, including those thatbelong to the disposal group, as PPE as it would give an impression of large manufacturingcapacity. They are not in favor of presenting any amount of revenues from discontinuedoperations. Explain to them why these assets are no longer PPE and should be separated as assets-held-for-sale and why income on discontinued operation should be separated from continuing operation. 3. Apart from the benefits required by legislation, what benefit can a company expect from offeringadditional…arrow_forwardEsme Company’s management is trying to decide whether to eliminate Department Z, which has produced low profits or losses for several years. The company’s departmental income statements show the following.arrow_forwardNormandy Instruments invests heavily in research and development (R&D), although it must currently treat its R&D expenditures as expenses for financial accounting purposes. To encourage investment in R&D, Normandy evaluates its division managers using EVA. The company adjusts accounting income for R&D expenditures by assuming these expenditures create assets with a two-year life. That is, the R&D expenditures are capitalized and then amortized over two years. Aerospace Division of Normandy shows after-tax income of $18.0 million for year 2. R&D expenditures in year 1 amounted to $7.2 million and in year 2, R&D expenditures were $12.0 million. For purposes of computing EVA, Normandy assumes all R&D expenditures are made uniformly over the year. Before adjusting for R&D, Aerospace Division shows assets of $72 million at the beginning of year 2 and current liabilities of $1,500,000. Normandy computes EVA using divisional investment at the beginning of…arrow_forward
- Normandy Instruments invests heavily in research and development (R&D), although it must currently treat its R&D expenditures as expenses for financial accounting purposes. To encourage investment in R&D, Normandy evaluates its division managers using EVA. The company adjusts accounting income for R&D expenditures by assuming these expenditures create assets with a two-year life. That is, the R&D expenditures are capitalized and then amortized over two years. Aerospace Division of Normandy shows after-tax income of $18.018 million for year 2. R&D expenditures in year 1 amounted to $7.218 million and in year 2, R&D expenditures were $12.018 million. For purposes of computing EVA, Normandy assumes all R&D expenditures are made uniformly over the year. Before adjusting for R&D, Aerospace Division shows assets of $72.018 million at the beginning of year 2 and current liabilities of $1,518,000. Normandy computes EVA using divisional investment at the beginning of the year and a 12 percent…arrow_forwardTrump Forest Corporation operates two divisions, the Timber Division and the Consumer Division. The Timber Division manufactures and sells logs to paper manufacturers. The Consumer Division operates retail lumber mills which sell a variety of products in the do-it-yourself homeowner market. The company is considering disposing of the Consumer Division since it has been consistently unprofitable for a number of years. The income statements for the two divisions for the year ended December 31, 2019 are presented below: Timber Division Consumer Division Total Sales $1,500,000 $500,000 $2,000,000 Cost of goods sold 900,000 350,000…arrow_forwardExercise 4-8 (Algo) Discontinued operations; disposal in subsequent year [LO4-4] Kandon Enterprises, Incorporated, has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and, on November 15, 2024, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2025. At December 31, 2024, the component was considered held for sale. Consider the following: On December 31, 2024, the company’s fiscal year-end, the book value of the assets of the horse division was $438,000. On that date, the fair value of the assets, less costs to sell, was $380,000. The before-tax loss from operations of the division for the year was $320,000. The after-tax income from continuing operations for 2024 was $580,000. The company’s effective tax rate is 25% . Required: Prepare a partial income…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College PubIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning