5 value: 0.50 points M9-8 Understanding the Significance of Asset Impairment Los

Question

5 value: 0.50 points M9-8 Understanding the Significance of Asset Impairment Losses and Gains on Disposal [LO 9-4, LO 9-5] Mary Jones Inc. reported $159 million of Income from Operations for its year ended December 31, 2011. This income included a gain on sale of the Mary Jones family of brand names to A.R. Samuels, for total proceeds of $275 million. At the time of disposal, the brand names had a book value of zero because they had been developed internally by Mary Jones. Soon after the disposal, in January 2012, the company changed its name to Evergreen & Florence Companies to reflect the sale of its Mary Jones brand names. For its year ended December 28, 2013, Evergreen & Florence reported Income from Operations of $80.9 million, after deducting the following asset impairment losses: Juicy Couture brand impairment loss TRIFARI brand impairment loss Mexx impairment loss $ 1.6 million 4.0 million 6.5 million Total impairment losses $12.1 million a. Determine the gain on sale that Mary Jones reported in 2011 when it disposed of its brand names. (Enter your answer in millions.) Gain on Sale million

Explanation / Answer

a Gain on sale Total proceeds from sale $275 Million Less: Book Value 0 Gain on sale $275 Million b Income from operations $159 Milion Less: Gain on sale $275 Milion Loss From operations ($116) Milion c Income from operations $80.90 Million Add: Loss on impairment $12.10 Million Income from operations $93.00 Million Before Impairment d Percentage of operating income Loss on impairment / Income from operations before impairment 12.10/93 = 13%

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