Chance Company had two operating divisions, one manufacturing farm equipment and
ID: 2449262 • Letter: C
Question
Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2016, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2016, at a price of $620,000. The book value of the division s assets was $1,050,000, resulting in a before-tax loss of $430,000 on the sale. The division incurred a before-tax operating loss from operations of $150,000 from the beginning of the year through December 15. The income tax rate is 40% Chances after-tax income from its continuing operations is $390,000. Required: Prepare an income statement for 2016 beginning with income from continuing operations Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year.Explanation / Answer
Particulars
Amount
Amount
Income from continuing operations
390,000
390,000
Discontinued Operation Gain/(Loss)
Sale Price of division
620,000
Less : Book value of division
1,050,000
Loss on sale of division
(430,000)
Operating loss from the division
(150,000)
(580,000)
Income/(Loss) from operations
(190,000)
No. of Shares
100,000
EPS
(1.90)
Particulars
Amount
Amount
Income from continuing operations
390,000
390,000
Discontinued Operation Gain/(Loss)
Sale Price of division
620,000
Less : Book value of division
1,050,000
Loss on sale of division
(430,000)
Operating loss from the division
(150,000)
(580,000)
Income/(Loss) from operations
(190,000)
No. of Shares
100,000
EPS
(1.90)
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