Munitions Inc A) Choice 1
B) Choice 2
C) Choice 3
D)

question 110

Multiple Choice

Munitions Inc. committed to sell its trade magazine division for $700,000 on October 1, Year 1. The book value of the division's net assets was $800,000. The disposal date is expected to be April 1, Year 2. Year 1 income of the division to October 1, Year 1 was a $30,000 loss, and income for the remainder of the year was $10,000. However, Munitions estimates that the division will lose $25,000 during the remainder of the phase-out period in Year 2. Ignoring taxes choose the correct reporting for discontinued operations in the income statement of Munitions, Inc., for the year ended December 31, Year 1. $$\begin{array} { | l | l | l | } \hline &\text { Income (loss) from Discontinued operations } & \text { Gain (loss) from disposal of discontinued operations } \\\hline 1 &( \$ 30,000 ) & ( \$ 115,000 ) \\\hline 2 &( \$ 30,000 ) & \$ \$ 100,000 ) \\\hline 3 &( \$ 30,000 ) & ( \$ 90,000 ) \\\hline 4 &( \$ 45,000 ) & \$ \$ 100,000 ) \\\hline\end{array}$$

• A) Choice 1
• B) Choice 2
• C) Choice 3
• D) Choice 4

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Definitions:

Goodwill

An intangible asset that represents the excess value of a company over the fair value of its identifiable assets and liabilities, often arising from acquisitions.

Impairment

A decrease in the recoverable value of an asset to below its carrying amount on the balance sheet, leading to a written down value.

Share Capital

The funds raised by a company through the issuance of shares to investors.

Deferred Tax Liability

A tax obligation that a company owes but does not have to pay until a future date, usually resulting from differences in accounting methods for tax and financial reporting purposes.