Reference no: EM132880436
Problem - Results of Discontinued Operations - On November 1, 2019, Woods Company announced its plans to sell its subsidiary, Williams Division (a major strategic component of the company). By December 31, 2019, Woods had not sold Williams Division and so it classifies the division as held for sale. During 2019, Woods recorded the following revenues and expenses for Williams Division and the remainder of the company:
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Williams Division
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Remainder of Company
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Sales revenues
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$170,000
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$950,000
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Cost of goods sold
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119,000
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560,000
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Operating expenses
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42,000
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190,000
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Woods is subject to a 30% income tax rate.
On December 31, 2019, the net book value of Williams Division is $500,000, consisting of assets of $910,000 and liabilities of $410,000. On this date, Woods estimates that the fair value of Williams Division is $420,000. The company had 50,000 shares of common stock outstanding during all of 2019.
Required -
1. Prepare the journal entry on December 31, 2019, to record the pretax loss on held-for-sale Williams Division. Show supporting calculations.
2. Prepare a 2019 multiple-step income statement for Woods.
3. Show how Williams Division would be reported on Woods's December 31, 2019, balance sheet.