Exit or Disposal Activities and Discontinued Operations

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    Topic
  • #1596932
    dab88
    Participant

    Wand, Inc., has adopted FASB ASC 205-20 (Presentation of Financial Statements—Discontinued Operations). On October 1, 20X1, in a strategic shift, Wand, Inc., committed itself to a formal plan to sell its Kam division’s assets. On that date, Wand estimated that the loss from the disposal of assets in February 20X2 would be $25,000. Wand also estimated that Kam would incur operating losses of $100,000 for the period of October 1, 20X1, through December 31, 20X1, and $50,000 for the period January 1, 20X2, through February 28, 20X2. These estimates were materially correct. Assuming that the Kam division qualifies as a component, disregarding income taxes, what should Wand report as loss from discontinued operations in its comparative 20X1 and 20X2 income statements?

    A.
    20X1: $175,000; 20X2: $0

    Correct B.
    20X1: $125,000; 20X2: $50,000

    C.
    20X1: $100,000; 20X2: $75,000

    D.
    20X1: $0; 20X2: $175,000

    This question below seems like it contradicts the answer. I am confused on what year you include the estimated loss.

    Host Co. has adopted FASB ASC 205-20 (Presentation of Financial Statements—Discontinued Operations). On October 1, 20X1, in a strategic shift, Host Co. approved a plan to dispose of a segment of its business. Host expected that the sale would occur on April 1, 20X2, at an estimated gain of $350,000. The segment had actual and estimated operating losses as follows:

    01/01/X1 to 09/30/X1 $(300,000)
    10/01/X1 to 12/31/X1 (200,000)
    01/01/X2 to 03/31/X2 (400,000)

    Assuming that the segment qualified as a component under FASB ASC 205-20-45, in its 20X1 income statement, what should Host report as a loss from operation of a discontinued segment?

    A.
    $200,000

    B.
    $250,000

    Correct C.
    $500,000

    D.
    $600,000

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  • #1596938
    dab88
    Participant

    Also this question seems to contradict the first question or I am missing something with in the question.

    Smith Co. has adopted FASB ASC 205-20 (Presentation of Financial Statements—Discontinued Operations). On November 1, 20X1, in a strategic shift, Smith Co. contracted to dispose of an industry segment on February 28, 20X2. Throughout 20X1 the segment had operating losses. These losses were expected to continue until the segment's disposition. Assuming that the segment qualifies as a component, if a loss is anticipated on final disposition, how much of the operating losses should be included in the loss on discontinued operations reported in Smith's 20X1 income statements?
    I. Operating losses for the period January 1 to October 31, 20X1
    II. Operating losses for the period November 1 to December 31, 20X1
    III. Estimated operating losses for the period January 1 to February 28, 20X2
    IV. A. II only
    B. II and III only
    C. I and III only
    Correct D. I and II only

    The first question is adding in III

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