The following condensed statements of the Lewis Holding Company are presented fo

Question

The following condensed statements of the Lewis Holding Company are presented for the two years ended December 31,2014 and 2013: 2014 Other relevant information: On December 1,2014, Lewis entered into a tentative agreement to sell the assets of one its divisions. The division comprises a component of the business and its sale is considered a strategic shift in the company's operations. The sale is expected to be completed in early 2015. The book value of the division's assets on December 31, 2014 is S5,200,000 and the estimated fair value (net of expected costs to sell) is $5,080,000. The division's contribution to Lewis' operating income before-tax for each year was as follows: On July 1, 2014, Lewis decided to dispose of a group of assets that was not considered a component of the entity under U.S. GAAP. The sale of the asset group is also not considered a strategic shift in the company's operations. The book value of the asset group was $800,000. The assets were sold on December 1, 2014 for $900,000 (net of selling costs). Required: Prepare revised income statements for 2013 and 2014 according to U.S. GAAP, beginning with income from continuing operations. Assume a tax rate of 40%. You may ignore EPS disclosures. Use the table provided on page 3 for you answer and the extra space for calculations.

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Answer:

Income statement For the year ended dec 31 Particulars 2014 2013 Income from Continuing Operations (Before Tax) 2580000 1980000 Income tax (40%) 1032000 792000 Income from Continuing Operations 1548000 1188000 Discontinued operations (Total) -100000 120000 Income tax expense (benefit) 40000 48000 Income (Loss) on discontinued operations -60000 72000 Net income 1488000 1116000 Income From continuing operations before tax Particulars 2014 2013 Unadjusted 2500000 2100000 Add: Loss from discontinued operations 80000 -120000 Adjusted 2580000 1980000 Income from discontinued operations Particulars 2014 2013 Operating loss -80000 120000 gain on disposal 100000 Impairment loss -120000 Total -100000 120000

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