Reporting various income items illustration 4 6

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Chapter 4 / Exercise EX4-26
Accounting
Reeve/Warren
Expert Verified
Reporting Various Income ItemsIllustration 4-6Number of Irregular Items Reported in a Recent Year by 500 Large CompaniesUnusual Gains and Losses
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Accounting
The document you are viewing contains questions related to this textbook.
Chapter 4 / Exercise EX4-26
Accounting
Reeve/Warren
Expert Verified
4-29Occurs when,(1)company eliminates the results of operations of a component of the business, and(2)there is no significant involvement in that component after the disposal transaction.Amounts reported “net of tax.”Discontinued OperationsLO 4 Explain how to report various income items.Reporting Various Income Items
4-30Illustration: KC Products Inc., a highly diversified company, decides to discontinue its electronics division. During the current year, the electronics division lost $300,000 (net of tax). Multiplex sold the division at the end of the year at a loss of $500,000 (net of tax). Show how the discontinued operations would be reported on the income statement for KC Products. Discontinued OperationsIncome from continuing operations$20,000,000Discontinued operations:Loss from operations, net of tax300,000Loss on disposal, net of tax500,000Net income$19,200,000Total loss on discontinued operations800,000LO 4Advance slide in presentation mode to reveal answers.Illustration 4-8
4-31Discontinued Operationsare reported after“Income from continuing operations.” Without a discontinued operations this line would be “net income.”Illustration 4-9Discontinued Operations
4-32The allocation of tax within a period. Helps users understand the impact of income taxes on the various components of net income.Intraperiod tax allocation is used for:(1) income from continuing operations, (2) discontinued operations, and(3) extraordinary items. Intraperiod Tax AllocationLO 4 Explain how to report various income items.Discontinued Operations
4-33Illustration:Schindler Co. has income before income tax of $250,000. It has a gain of $100,000 from a discontinued operation. Assuming a 30 percent income tax rate, Schindler presents the following information on the income statement.Discontinued Operations (Gain)LO 4 Explain how to report various income items.Discontinued OperationsIllustration 4-10
4-34Illustration: Schindler Co. has income before income tax of $250,000. It suffers a loss from discontinued operations of $100,000. Assuming a 30 percent tax rate, Schindler presents the income tax on the income statement as shownDiscontinued Operations (Loss)LO 4 Explain how to report various income items.Discontinued OperationsIllustration 4-11
4-35Extraordinary items are nonrecurring materialitems that differ significantly from a company’s typical business activities.Extraordinary item must meet both of the following criteria: Unusual nature and Infrequently of occurrenceCompany must consider the environment in which it operates.Amount reported “net of tax.”LO 4 Explain how to report various income items.Reporting Various Income Items
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