Results of Discontinued Operations On November 1, 2007, Woods Company announced its plans to sell Division J (a component of the company). By December 31, 2007, Woods Company had not sold Division J and so it classifies the division as held for sale. During 2007, Woods Company recorded the following revenues and expenses for Division J and the remainder of the company.
|
Division J |
Remainder of Company |
|
|
Sales revenues |
$170,000 |
$950,000 |
|
Cost of goods sold |
119,000 |
560,000 |
|
Operating expenses |
42,000 |
190,000 |
The company is subject to a 30% income tax rate.
On December 31, 2007, the net book value of Division J is $500,000, consisting of assets of $910,000 and liabilities of $410,000. On this date, Woods Company estimates that the fair value of Division J is $420,000. The company had 50,000 shares of common stock outstanding during all of 2007.
Required
1. Prepare the journal entry on December 31, 2007 to record the pretax loss on held for sale Division J. Show supporting calculations.
2. Prepare a 2007 multiple step income statement for Woods Company.
3. Show how Division J would be reported on Woods Company’s December 31, 2007 balance sheet.