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accounts- ABC Inc. sold a component of their business to XYZ Inc. for $700,000

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Question;1.;On March 1, 2010, ABC Inc. sold;a component of their business to XYZ Inc. for $700,000. ABC determined the;component would be discontinued in 2009 and properly reported the component in;the discontinued operations section of the income statement. At 12/31/2009, ABC;estimated the fair value less cost to sell of the component to be $725,000;while the book value was $775,000.;During 2010, ABC had a pre-tax operating;loss of $60,000 for the component. ABC is subject to a 30% income tax rate. Use;() to show a loss.;1) Determine the net income/(loss) on;operations from the discontinued component as of December 31, 2010: $;2) Determine the net gain/loss on disposal;from the discontinued component as of December 31, 2010: $;2.;ABC Inc. began operations on;January 1, 2006. During its first 3;years of operations, ABC reported net income and declared dividends as follows.;Net Income Dividends;2006 $ 50,000 $ 0;2007 75,000 10,000;2008 125,000 0;2009 150,000 50,000;The following information relates to 2010.;?;Net income was originally calculated as $200,000 and no dividends were declared;during the period.;?;Assume ABC is charged a tax rate of 30%.;?;Additionally, ABC discovered in 2010 that they understated depreciation expense;in 2008 by $25,000 and understated 2009 depreciation expense by $20,000.;? At the end of 2010, after the net income;above was determined ABC decided to change from FIFO to LIFO. The following COGS information was determined;under each method. The net income number;given above was calculated for 2010 using FIFO.;FIFO COGS LIFO COGS;2006 $135,000 $120,000;2007 $115,000 $130,000;2008 $140,000 $110,000;2009 $150,000 $100,000;2010 $145,000 $115,000;ABC;reported two years on the face of the income statement during 2010. Using the information given complete the 2009;and 2010 Statements of Retained Earnings as reported in the 2010 Annual;Report. Use a parenthesis to indicate a;negative balance (or subtraction).;2010;Annual Report;Retained;Earnings Statements 2009 and 2010;Beginning Retained Earnings, 1/1/2009 $;Cumulative Effect due to a Change in;Accounting Principle $;Prior Period Adjustment $;2009 Net Income $;Dividends;$;Ending Retained Earnings $;Beginning Retained Earnings, 1/1/2010 $;Cumulative Effect due to a Change in;Accounting Principle $;Prior Period Adjustment $;2010;Net Income $;Dividends;$;Ending Retained Earnings $

 

Paper#43559 | Written in 18-Jul-2015

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