Results of Discontinued Operations During December 2013, Smythe Company decides
ID: 2455556 • Letter: R
Question
Results of Discontinued Operations
During December 2013, Smythe Company decides to sell Division F (a component of the company). On December 31, 2013, the company classifies Division F as held for sale. On that date, the book values of Division F's assets and liabilities are $950,000 and $600,000, respectively. Smythe expects to sell Division F in 2014 and estimates that the fair value of Division F is $250,000. During 2013, Division F earned revenues of $1,000,000 and incurred expenses of $1,300,000. Smythe is subject to a 30% income tax rate.
Required:
1. Compute the following for Division F of Smythe Company:
2. Prepare the results from discontinued operations section of Smythe income statement for 2013.
from operations of discontinued Division F
on write-down of held-for-sale Division F
a) Pretax income or loss from discontinued operations $Explanation / Answer
1 a) Pre-tax loss of discontinued operations = $ 300,000
b) Income tax credit for discontinued operations = $ 90,000
c) After tax loss from discontinued operations = $ 210,000
d) Pretax loss on write down of Division F held for sale = $ 250,000-350000 = $ 100,000 (loss)
e) Income tax credit for write down of Division F = 0.3 * 100000 =30,000 $
f) After tax loss on Division F = $ 70,000
2) Results from discontinued Operations:
from operations of discontinued division F = 210,000
from write off 70,000
Total =$ 280,000
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