PROBLEM # 1
The following trial balance of Heinrich Manufacturing Company, Inc., at December 31,
2001, has been adjusted, except for income tax expense
Property, plant and equipment (net)
Accounts payable and accruals
Income taxes payable
Additional paid-in capital
Retained earnings, 1/1/01
Cost of goods sold
Loss from volcano damage
Income tax expense
Loss from write-down of inventory
Gain on sale of assets
Other information is as follows:
The company operates numerous divisions.
In October of 2001, management
decided to sell one of its divisions that qualifies as a separate component
(discontinued operation) as defined by SFAS 144.
On that date, the assets of
the division had a book value of $1,200,000 and a fair market value of
The division was sold on December 20 for $1,600,000 resulting in
a gain on sale of $400,000.
This gain is included in the $600,000 gain on sale
of assets in the above trial balance.
The remaining $200,000 gain is from the
sale of investments.
The sold division’s results of operations for the period
1/1/01 through 12/20/01 included the following: