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    INTERMEDIATE ACCOUNTING - MIDTERM - 2019-2020 - 2nd Semester - PART5

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    Renalyn Paras
    The document contains an intermediate accounting midterm exam with multiple problems regarding reporting discontinued operations. Problem 21 asks about reporting a loss from discontinued operation in 2017 for a company that disposed of part of one of its two divisions. Problem 22 asks about reporting a loss from discontinued operation in 2017 for a company that committed to sell one of its divisions. Problem 23 asks about reporting income or loss from discontinued operation in 2017 for a company that disposed of a component of its business.

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    INTERMEDIATE ACCOUNTING - MIDTERM - 2019-2020 - 2nd Semester - PART5

    Uploaded by

    Renalyn Paras
    74 views3 pages
    The document contains an intermediate accounting midterm exam with multiple problems regarding reporting discontinued operations. Problem 21 asks about reporting a loss from discontinued operation in 2017 for a company that disposed of part of one of its two divisions. Problem 22 asks about reporting a loss from discontinued operation in 2017 for a company that committed to sell one of its divisions. Problem 23 asks about reporting income or loss from discontinued operation in 2017 for a company that disposed of a component of its business.

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    INTERMEDIATE ACCOUNTING_MIDTERM_2019-2020_2nd semester_PART5

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    The document contains an intermediate accounting midterm exam with multiple problems regarding reporting discontinued operations. Problem 21 asks about reporting a loss from discontinued operation in 2017 for a company that disposed of part of one of its two divisions. Problem 22 asks about reporting a loss from discontinued operation in 2017 for a company that committed to sell one of its divisions. Problem 23 asks about reporting income or loss from discontinued operation in 2017 for a company that disposed of a component of its business.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    74 views3 pages

    INTERMEDIATE ACCOUNTING - MIDTERM - 2019-2020 - 2nd Semester - PART5

    Uploaded by

    Renalyn Paras
    The document contains an intermediate accounting midterm exam with multiple problems regarding reporting discontinued operations. Problem 21 asks about reporting a loss from discontinued operation in 2017 for a company that disposed of part of one of its two divisions. Problem 22 asks about reporting a loss from discontinued operation in 2017 for a company that committed to sell one of its divisions. Problem 23 asks about reporting income or loss from discontinued operation in 2017 for a company that disposed of a component of its business.

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    INTERMEDIATE ACCOUNTING

    MIDTERM EXAMINATION

    ANSWER THE FOLLOWING QUESTIONS. SHOW YOUR SOLUTIONS.

    PART 5

    PROBLEM 21

    Flavier Company has two divisions, North and South. Both qualify as
    business components.

    In 2017, the entity decided to dispose of the assets and liabilities of division
    South and it is probable that the disposal will be completed early next year.

    The revenue and expenses of Flavier Company are as follows:

    2017 2016
    Sales –North 5,000,000 4,600,000
    Total nontax expenses – North 4,400,000 4,100,000
    Sales – South 3,500,000 5,100,000
    Total nontax expenses – South 3,900,000 4,500,000

    During the later part of 2017, the entity disposed of a portion of division
    South and recognized a pretax loss of 2,000,000 on the disposal.

    The income tax rate is 30%.

    What amount should be reported as loss from discontinued operation in


    2017? ________________

    PROBLEM 22

    Wisdom Company committed to sell the comic book division, a component of


    the business, on September 1, 2017.

    The carrying amount of the division ws 4,000,000 and the fair value was
    3,500,000.

    The disposal date is expected on June 1, 2018. The division reported an


    operating loss of 200,000 for the year ended December 31, 2017.
    Before income tax, what amount should be reported as loss from
    discontinued operation in 2017? _______________

    PROBLEM 23

    Aron Company decided on August 1, 2017 to dispose of a component of


    business. The component was sold on November 30, 2017.

    The net income for the current year included income of 5,000,000 form
    operating the discontinued segment from January 1 to the date of disposal.
    The entity incurred a loss on the November 30 sale of 4,500,000.

    What amount should be reported as pretax income or loss from


    discontinued operation for 2017?
    (State whether income or loss) ____________________

    PROBLEM 24

    On September 30, 2017, when the carrying amount of the net assets of a
    business segment was 70,000,000, Old Company signed a legally binding
    contract to sell the business segment.

    The sale is expected to be completed by January 31, 2018 at a sale price of


    60,000,000.

    In addition, prior to January 31, 2018, the sale contract obliged Old
    Company to terminate the employment of certain employees of the business
    segment incurring an expected termination cost of 2,000,000 to be paid on
    June 30, 2018.

    The segment revenue and expenses for 2017 were 40,000,000 and
    45,000,000, respectively.

    Before income tax, what amount should be reported as loss from


    discontinued operation for 2017?
    _______________

    PROBLEM 25

    On December 1, 2017, Greek Company committed to a plan to dispose of a


    business component’s assets. The disposal met the requirements to be
    classified as discontinued operation.
    On that date, the entity estimated that the loss from the dispositions of the
    assets would be 700,000 and the component’s operating loss was 200,000.

    Before income tax, what amount of loss should be reported for discontinued
    operation for 2017?

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