Reference no: EM132020725

Problem - On September 1, 2015, Jacob Furniture Mart enters into an agreement to sell the assets of its office equipment division. This division qualifies as a component of the entity according to GAAP regarding discontinued operations. The division's contribution to Jacob's operating income for the year was a loss of $3 million, before taxes. Jacob has an average tax rate of 30%. Consider independently the appropriate accounting by Jacob under each of the three scenarios below:

Scenario 1: Assume that Jacob sold the division's assets on December 31, 2015, for $24 million. The book value of the division's assets was $19 million on December 31. Under these assumptions, what would Jacob report in its 2015 income statement regarding the office equipment division?

Scenario 2: Assume that Jacob had not yet sold the division's assets by year end. Further, assume that the fair value of the assets, less any costs to sell the assets was $24 million at year end and was expected to remain at $24 million for the foreseeable future.. The book value of the division's assets at year end was $19 million. Under these assumptions, what would Jacob report in its 2015 income statement regarding the office equipment division?

Scenario 3: Assume that Jacob had not yet sold the division's assets by year end. Further, assume that the fair value of the assets, less any costs to sell the assets was $12 million at year end and was expected to remain at $12 million for the foreseeable future. The book value of the division's assets at year end was $19 million. Under these assumptions, what would Jacob report in its 2015 income statement regarding the office equipment division?