IC Ch 4 Solutions.pdf - Chapter 4 In-Class Exercise Acct 310 Problem 4-3 For the year-ending December 31 Micron Corporation had income from continuing

IC Ch 4 Solutions.pdf - Chapter 4 In-Class Exercise Acct...

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1 Chapter 4 In-Class Exercise Acct 310 Problem 4-3 For the year-ending December 31, Micron Corporation had income from continuing operations before taxes of $1,200,000 before considering the following transactions and events. All of the items described below are before taxes and the amounts should be considered material. 1. In November 2016, Micron sold its Waffle House restaurant chain that qualified as a component of an entity. The company had adopted a plan to sell the chain in May 2016. The income from operations of the chain from January 1, 2016, through November was $160,000 and the loss on sale of the chain’s assets was $300,000. 2. In 2016, Micron sold one of its six factories for $1,200,000. At the time of the sale, the factory had a book value of $1,100,000. The factor was not considered a component of the entity. 3. In 2014, Micron’s accountant omitted the annual adjustment for patent amortization expense of $120,000. The error was not discovered until December 2016. Required: Prepare Micron’s income statement, beginning with income from conti nuing operations before taxes, for the year ended December 31, 2016. Assume an income tax rate of 30%. Ignore EPS disclosures.
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2 MICRON CORPORATION Partial Income Statement For the Year Ended December 31, 2016 Income from continuing operations before income taxes ............................................ [1] $1,300,000 Income tax expense .................................... 390,000 Income from continuing operations ............ 910,000 Discontinued operations: Loss from operations of discontinued component (including loss on disposal of $300,000) ................................................. $(140,000) Income tax benefit ................................... 42,000 Loss on discontinued operations ................ [2] (98,000) Net income ................................................. 812,000 [1] Income from continuing operations before taxes: Unadjusted $1,200,000 Add: Gain from sale of factory 100,000 Adjusted $1,300,000 [2] Loss on discontinued operations: Income from operations $ 160,000 Deduct: Loss on sale of assets (300,000) Loss before tax (140,000) Tax benefit (30% x $140,000) 42,000 Loss on discontinued operations $ (98,000)
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