Slide 12-6 Discontinued Operations When management enters into a formal plan to sell or discontinue a segment of the business Income/Loss from operating the segment prior to disposal Discontinued Operations Income/Loss on disposal of the segment Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-6 Irwin/McGraw-Hill Discontinued Operations Income/Loss from operating the segment prior to disposal. Discontinued Operations Income/Loss on disposal of the segment. When management enters into a formal plan to sell or discontinue a segment of the business
Slide Discontinued Operations When management enters into a formal plan to sell or discontinue a segment of the business A segment must be a separate line of business activity or an operation that services a distinct category of customers Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-7 Irwin/McGraw-Hill Discontinued Operations When management enters into a formal plan to sell or discontinue a segment of the business. A segment must be a separate line of business activity or an operation that services a distinct category of customers
Slide 12-8 Discontinued operations Example During 2000, Apex Co sold an unprofitable segment of the company. The segment had a net loss from operations during the period of $150,000 and its assets sold at a loss of $100,000. Apex reported income from continuing operations of $350,000. All items are taxed at 30% How will this appear on the income statement? Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-8 Irwin/McGraw-Hill During 2000, Apex Co. sold an unprofitable segment of the company. The segment had a net loss from operations during the period of $150,000 and its assets sold at a loss of $100,000. Apex reported income from continuing operations of $350,000. All items are taxed at 30%. How will this appear on the income statement? Discontinued Operations Example
Slide 12-9 Discontinued Operations Example Loss on segment operations $(150,000) Less: Tax benefits($150,000? 30%) 45,000 Net loss $(105000 Loss on disposal of assets $(100,000) Less: Tax benefits($100,000? 30%) 30.000 Net loss $(70,000 Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc., 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-9 Irwin/McGraw-Hill Discontinued Operations Example Loss on segment operations $ (150,000) Less: Tax benefits ($150,000 ? 30%) 45,000 Net loss $ (105,000) Loss on disposal of assets $ (100,000) Less: Tax benefits ($100,000 ? 30%) 30,000 Net loss $ (70,000)
Slide 12-10 Discontinued Operations Example Income Statement Presentation Income from continuing operations 350,000 Discontinued operations: Loss on operations(net of tax benefit of $45, 000) (105,000) Loss on disposal of assets( net of tax benefits of $30,000) (70,000) Earnings before extraordinary item $ 175,000 Irwin/McGraw-Hill ?The McGraw-Hill Companies, Inc, 1999
?The McGraw-Hill Companies, Inc., 1999 Slide 12-10 Irwin/McGraw-Hill Income from continuing operations $ 350,000 Discontinued operations: Loss on ope ra tions (ne t of tax benefit of $45,000) (105,000) Loss on disposa l of a sse ts (ne t of ta x be ne fits of $30,000) (70,000) Earnings before extraordinary item $ 175,000 Income Statement Presentation: Discontinued Operations Example