Kandon enterprises, inc. , has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and, on november 15, 2021, kandon adopted a formal plan to sell the division. The sale was completed on april 30, 2022. At december 31, 2021, the component was considered held for sale.

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2022-02-10T12:03:59+01:00

The income statement beginning with income from continuing operation is $286,000.

First step

Loss on discontinued operations:

Loss from operations ($140,000)

Impairment loss ($50,000)

($250,000 − $200,000)

Net before-tax loss ($190,000)

Income tax benefit (40%) $76,000

(40%×$190,000)

Net after-tax loss on discontinued operations $114,000

($190,000-$76,000)

Second step

Kandon enterprises, inc. Partials income statement for the month endede December 31st 2021

Income from continuing operations $400,000

Discontinue operation gain (loss):

Loss from operation of discontinued components ($190,000)

Income tax benefit $76,000

Loss on discontinued operations ($114,000)

Net income $286,000

Inconclusion the income statement beginning with income from continuing operation is $286,000.

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