Question

1/ On November 1, 2018, Jamison Inc. adopted a plan to discontinue its barge division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by April 30, 2019. On December 31, 2018, the company's year-end, the following information relative to the discontinued division was accumulated:

Operating loss Jan. 1–Dec. 31, 2018	$	68	million
Estimated operating losses, Jan. 1 to April 30, 2019		92	million
Excess of fair value, less costs to sell, over book value at Dec. 31, 2018		12	million

In its income statement for the year ended December 31, 2018, Jamison would report a before-tax loss on discontinued operations of:

Multiple Choice

• $56 million.

• $148 million.

• $160 million.

• $68 million.

2/ During its 2018 fiscal year, Jacobsen Corporation reported before-tax income of $629,000. This amount does not include the following two items, both of which are considered to be material in amount:

Unusual gain	$	209,000
Loss on discontinued operations	(	309,000	)

The company's income tax rate is 20%.

Jacobsen Corporation prepares its financial statements applying U.S. GAAP. In its 2018 income statement, Jacobsen would report income from continuing operations of:

Multiple Choice

• $670,400.

• $503,200.

• $423,200.

• $629,000.

3 During its 2018 fiscal year, Jacobsen Corporation reported before-tax income of $639,000. This amount does not include the following two items, both of which are considered to be material in amount:

Unusual gain	$	219,000
Loss on discontinued operations	(	319,000	)

The company's income tax rate is 40%.

Jacobsen Corporation prepares its financial statement applying International Financial Reporting Standards (IFRS). In its 2018 income statement, Jacobsen would report income from continuing operations of:

Multiple Choice

• $383,400.

• $323,400.

• $639,000.

• $514,800.

Answer 1

1
The income statement includes the actual loss and not estimated loss from discontinued operation as per GAAP
and therefore $ 92 million will not be reported in the icnome statement
The excess of fair value less costs to sell over book value is an unrealized gain and there is no impairment loss and therefore this is not recognized unless realized
Therefore, Jamison Inc would report a before tax loss on discontinued operations of $ 68 million for the year ended December 31, 2018
2
As per GAAP the unusual gain is part of income from continuing operation
Therefore the company would report income from continuing operation as follows
Income before tax		$629,000
Unsual gain		$209,000
Income from continuing operation before tax		$838,000
Less : Income tax @ 20%		-$167,600
Income from continuing operation		$670,400
Therefore, Jamison inc would report income from continuing operations of $670,400
3
As per IFRS the unusual gain is part of income from continuing operation
Therefore the company would report income from continuing operation as follows
Income before tax		$639,000
Unsual gain		$219,000
Income from continuing operation before tax		$858,000
Less : Income tax @ 40%		-$343,200
Income from continuing operation		$514,800
Therefore, Jamison inc would report income from continuing operations of $514,800