reyking24
Oct 3, 2014, 09:09 AM
The following is the condensed comparative incomestatements of Jacob Corp. (including the retail business) for the years endedDecember 31, 2013 and 2012:
2013 2012
Sales $1,400,000 $900,000
Costof goods sold (610,000) 400,000
Grossprofit 790,000 500,000
Operating expenses (250,000) (110,000)
Operating income 540,000 390,000
Incometax expense (216,000) (156,000)
Netincome $324,000 $ 234,000
On June 1,2013, Jacob Corp. adopted a plan to discontinue the retail side of theiroperation.
The retail stores qualifies as a component of JacobCorp. as defined in SFAS No. 144. The retail stores had not yet been sold butwas considered held for sale by12/31/2013. The book value of theseretail stores was $600,000 while the net fair value of the retail stores assetswas $500,000. Before-tax data(included in the above account balances) of the discontinued operations foreach year were as follows:
Operating loss from operations of retailbusiness:
2012 (1/1-12/31) $90,000
2013 (1/1-12/31) $120,000
A 40% income tax rate applies to all tax items.
Required:
Revise the income statements of 2012 and 2013according to generally accepted accounting principles. Begin the statement witha recalculated income from continuing operations before income taxes. Ignore EPS disclosure.
2013 2012
Sales $1,400,000 $900,000
Costof goods sold (610,000) 400,000
Grossprofit 790,000 500,000
Operating expenses (250,000) (110,000)
Operating income 540,000 390,000
Incometax expense (216,000) (156,000)
Netincome $324,000 $ 234,000
On June 1,2013, Jacob Corp. adopted a plan to discontinue the retail side of theiroperation.
The retail stores qualifies as a component of JacobCorp. as defined in SFAS No. 144. The retail stores had not yet been sold butwas considered held for sale by12/31/2013. The book value of theseretail stores was $600,000 while the net fair value of the retail stores assetswas $500,000. Before-tax data(included in the above account balances) of the discontinued operations foreach year were as follows:
Operating loss from operations of retailbusiness:
2012 (1/1-12/31) $90,000
2013 (1/1-12/31) $120,000
A 40% income tax rate applies to all tax items.
Required:
Revise the income statements of 2012 and 2013according to generally accepted accounting principles. Begin the statement witha recalculated income from continuing operations before income taxes. Ignore EPS disclosure.