Step by Step Assistance

Friday, 15 July 2016

On December 31, 2016, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $17 million. The business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $16 million. The loss from operations of the segment during 2016 was $4.6 million. Pretax income from continuing operations for the year totaled $6.7 million. The income tax rate is 30%. Prepare the lower portion of the 2016 income statement beginning with pretax income from continuing operations. Ignore EPS disclosures.

On December 31, 2016, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $17 million. The business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $16 million. The loss from operations of the segment during 2016 was $4.6 million. Pretax income from continuing operations for the year totaled $6.7 million. The income tax rate is 30%.
 
Prepare the lower portion of the 2016 income statement beginning with pretax income from continuing operations. Ignore EPS disclosures.

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Explanation:
Income tax expense = $6,700,000 × 30% = $2,010,000
Loss from operations of discontinued component:
  
         
  Gain on sale of assets $ 1,000,000   ($17 million less $16 million)
  Loss from operations   (4,600,000 )  
 


 
     Total before-tax loss $ (3,600,000 )  

The following is a partial year-end adjusted trial balance. Account Title Debits Credits Sales revenue 390,000 Loss on sale of investments 40,000 Interest revenue 8,500 Cost of goods sold 205,000 General and administrative expenses 49,000 Restructuring costs 59,000 Selling expenses 29,500 Income tax expense 0 Income tax expense has not yet been recorded. The income tax rate is 40%.

The following is a partial year-end adjusted trial balance.

  Account Title Debits Credits
  Sales revenue   390,000
  Loss on sale of investments 40,000    
  Interest revenue   8,500  
  Cost of goods sold 205,000    
  General and administrative expenses 49,000    
  Restructuring costs 59,000    
  Selling expenses 29,500    
  Income tax expense 0    


Income tax expense has not yet been recorded. The income tax rate is 40%.

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Explanation:

The following is a December 31, 2016, post-closing trial balance for the Jackson Corporation.

The following is a December 31, 2016, post-closing trial balance for the Jackson Corporation.

  Account Title Debits Credits
  Cash 47,000      
  Accounts receivable 41,000      
  Inventories 82,000      
  Prepaid rent 23,000      
  Marketable securities (short term) 17,000      
  Machinery 180,000      
  Accumulated depreciation—machinery     18,000  
  Patent (net of amortization) 86,000      
  Accounts payable     11,500  
  Wages payable     7,500  
  Taxes payable     39,000  
  Bonds payable (due in 10 years)     210,000  
  Common stock     100,000  
  Retained earnings     90,000  
  



      Totals 476,000   476,000  
  









Required:
Prepare a classified balance sheet for Jackson Corporation at December 31, 2016. (Amounts to be deducted should be indicated by a minus sign.)
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The following are the typical classifications used in a balance sheet: a. Current assets f. Current liabilities b. Investments and funds g. Long-term liabilities c. Property, plant, and equipment. h. Paid-in-capital d. Intangible assets i. Retained earnings e. Other assets Required: For each of the following balance sheet items, use the letters above to indicate the appropriate classification category. (If the item is a contra account, select the appropriate letter with a minus sign.)

The following are the typical classifications used in a balance sheet:

       
  a.  Current assets   f.  Current liabilities
  b.  Investments and funds   g.  Long-term liabilities
  c.  Property, plant, and equipment.   h.  Paid-in-capital
  d.  Intangible assets   i.  Retained earnings
  e.  Other assets    


Required:
For each of the following balance sheet items, use the letters above to indicate the appropriate classification category. (If the item is a contra account, select the appropriate letter with a minus sign.)
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For each of the following note disclosures, indicate whether the disclosure would likely appear in (A) the summary of significant accounts policies or (B) a separate note.

For each of the following note disclosures, indicate whether the disclosure would likely appear in (A) the summary of significant accounts policies or (B) a separate note.
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