Results of Discontinued Operations
Response to the following problem:
On November 1, 2010, Woods Company announced its plans to sell Division J (a component of the company). By December 31, 2010, Woods Company had not sold Division J and so it classifies the division as held for sale.
During 2010, Woods Company recorded the following revenues and expenses for Division J and the remainder of the company.
|
Division J
|
Remainder of Company |
|
Sales revenues
|
$170,000
|
$950,000
|
|
Cost of goods sold
|
119,000
|
560,000
|
|
Operating expenses
|
42,000
|
190,000
|
The company is subject to a 30% income tax rate
On December 31, 2010, the net book value of Division J is $500,000, consisting of assets of $910,000 and liabilities of $410,000. On this date, Woods Company estimates that the fair value of Division J is $420,000. The company had 50,000 shares of common stock outstanding during all of 2010.
Required
1. Prepare the journal entry on December 31, 2010, to record the pretax loss on held-for-sale Division J. Show supporting calculations.
2. Prepare a 2010 multiple-step income statement for Woods Company.
3. Show how Division J would be reported on Woods Company's December 31, 2010 balance sheet.