1. On November 30, 2017, Rocky Co. decided to dispose of acomponent A. The...

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Accounting

1. On November 30, 2017, Rocky Co. decided to dispose of acomponent A. The sale was not complete
at the end of 2017. During 2017, this component generatedoperating income of $200,000. The
historical cost of component A is $1,200,000 and the AccumulatedDepreciation for component A on
December 31, 2017 was $500,000. At December 31, 2017, the fairvalue of component A was
estimated at $710,000 and the cost to sell component A wasestimated to be $50,000. Rocky has a
30% tax rate in all years.
a) Provide the journal entry to record any impairment ofComponent A in 2017.
b) Provide the Discontinued Operations Section of the 2017Multistep Income Statement.
Rocky Co. sold component A on May 17, 2018 for a sales price of$735,000 with sales commissions
of $45,000. During 2018, component A generated operating incomeof $100,000. Rocky’s common
shares outstanding at the end of 2017 and 2018 were 500,000 and700,000 shares, respectively. In
2018, Rocky declared a preferred stock dividend of $30,000, butonly paid $24,000 of the dividend in
2018. In 2018, Rocky declared a common stock dividend of $60,000and only paid $40,000.
c) Provide the 2018 Partial Income Statement, starting withIncome from Continuing Operations
Before Taxes of $900,000. Include the first four lines and EPSinformation. Good format is
required.
d) Provide the journal entry to record the disposal of ComponentA. GJEF is required.

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4.4 Ratings (626 Votes)

As per AS26 Impairment of Fixed Assets Impairment required to debited to Profit Loss account PartA Calculations of Impairment Loss on the ComponentA Historical Cost 120000000 Less Accumulated Depreciation 50000000 Book Value 70000000 Fair Market Value 71000000 Less Selling expenses 5000000 Recoverable See Answer

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In: Accounting1. On November 30, 2017, Rocky Co. decided to dispose of acomponent A. The sale...1. On November 30, 2017, Rocky Co. decided to dispose of acomponent A. The sale was not completeat the end of 2017. During 2017, this component generatedoperating income of $200,000. Thehistorical cost of component A is $1,200,000 and the AccumulatedDepreciation for component A onDecember 31, 2017 was $500,000. At December 31, 2017, the fairvalue of component A wasestimated at $710,000 and the cost to sell component A wasestimated to be $50,000. Rocky has a30% tax rate in all years.a) Provide the journal entry to record any impairment ofComponent A in 2017.b) Provide the Discontinued Operations Section of the 2017Multistep Income Statement.Rocky Co. sold component A on May 17, 2018 for a sales price of$735,000 with sales commissionsof $45,000. During 2018, component A generated operating incomeof $100,000. Rocky’s commonshares outstanding at the end of 2017 and 2018 were 500,000 and700,000 shares, respectively. In2018, Rocky declared a preferred stock dividend of $30,000, butonly paid $24,000 of the dividend in2018. In 2018, Rocky declared a common stock dividend of $60,000and only paid $40,000.c) Provide the 2018 Partial Income Statement, starting withIncome from Continuing OperationsBefore Taxes of $900,000. Include the first four lines and EPSinformation. Good format isrequired.d) Provide the journal entry to record the disposal of ComponentA. GJEF is required.