Problem
On July 1, Year 1, the board of directors of All Seasons Sports, Inc. voted to dispose of the Ski & Snowboard operating segment of the company. On that date, the carrying value of the segment was $3,000,000, but the Board believed that it could sell the segment for no more than $2,500,000. The company was committed to its plan to sell the segment and was actively looking for a buyer until April 1, Year 2, when the division was sold to We Love Winter, Inc. for a sales price of $3,200,000. All Seasons Sports paid a brokers fee of 10% of the sales price when the transaction was closed.
Ski & Snowboard's operating results were as follows:
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1/1/Year 1 - 6/30/Year 1
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($300,000)
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7/1/Year 1 - 12/31/Year 1
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($400,000)
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1/1/Year 2 - 3/31/Year 2
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($200,000)
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All Seasons Sports has a tax rate of 30%.
1. Calculate the Gain/(Loss) from Discontinued Operations for Year 1 and Year 2.
2. Impairment Gain/(Loss) 3 Operating Gain/(Loss) 4 Gain/(Loss) on Disposal 5 Income Tax Benefit/(Expense) 6 Total Gain/(Loss) from Discontinued Operations Year 1 Year 2 ($500,000) $0 $0 ($500,000).