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130M102-sol - PROBLEM 1 The following trial balance of...

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PROBLEM # 1 The following trial balance of Heinrich Manufacturing Company, Inc., at December 31, 2001, has been adjusted, except for income tax expense . DR. CR. Cash 700,000 Receivables (net) 2,000,000 Investments 1,000,000 Inventory 2,200,000 Property, plant and equipment (net) 8,000,000 Accounts payable and accruals 2,500,000 Income taxes payable 0 Common stock 3,000,000 Additional paid-in capital 3,000,000 Retained earnings, 1/1/01 3,550,000 Sales revenue 13,000,000 Cost of goods sold 6,200,000 Selling expenses 2,600,000 Administrative expenses 1,000,000 Loss from volcano damage 1,500,000 Income tax expense 0 Interest revenue 50,000 Loss from write-down of inventory 500,000 Gain on sale of assets - 600,000 25,700,000 25,700,000 Other information is as follows: a. 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 $1,400,000. 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: 1
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Sales revenue $2,000,000 Cost of goods sold 800,000 Selling expenses 300,000 These amounts are included in the above trial balance. There are no other revenue, expense, gain or loss amounts in the above trial balance that relate to the sold division. b. The loss from volcano damage is a result of an eruption to Mt. St. Helen’s in Washington. The volcano caused uninsured damage to company facilities.
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