Kandon Enterprises. Inc., has two operating divisions; one manufactures machiner

Question

Kandon Enterprises. Inc., has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and on November 15, 2010. Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2017 At December 31, 2016, the component was considered held for sale. On December 31, 2018, the companys fiscal year-end, the book value of the assets of the horse division was $338,000. On that date, the fair value of the assets, less costs to sell, was $280.000 The before-tax loss from operations of the division for the year was $220.000. The companys effective tax rate is 40%. The after-tax income from continuing operations for 2016 was $480.000. Required. Prepare a partial income statement for 2016 beginning with income from continuing operations. Ignore EPS disclosures.

Explanation / Answer

KANDON ENTERPRISES,INC

PARTIAL INCOME STATEMENT

FOR THE YEAR ENDED DEC 31,2016

PARTICULARS AMOUNT ($) INCOME FROM CONTINUING OPERATIONS 4,80,000 DISCONTINUED OPERATION GAIN(LOSS) BOOK VALUE=$3,38,000 BEFORE TAX LOSS=$2,20,000 TAX BENEFIT @ 40%=$88,000 NET LOSS=$1,32,000 NET BOOK VALUE=$3,38,000-$1,32,000=$2,06,000 LESS:FAIR VALUE OF ASSET LESS COST TO SELL=$2,80,000 74,000 TOTAL INCOME 5,54,000

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