Question

Part B

On January 1, 20X6, the Board of Directors of HDI decided to list RET for sale and determined that it met the criteria of a disposal group. Independent of Part A, assume that RET had previously used the cost model to value its property, plant and equipment. Following is the net book value of the various assets, together with their estimated fair value and other information:

	NBV Jan 1 20X6	Value in use Jan 1 20X6	FV Jan 1 20X6	Estimated costs of disposal	FV less disposal costs Jan 1 20X6
Land	$730,000		$730,000	$75,000	$655,000
Buildings	1,500,000		1,500,000	150,000	1,350,000
Equipment	290,000		290,000	15,000	275,000
Goodwill	400,000
Disposal group	$2,920,000	2,700,000	2,520,000	240,000	2,280,000

- HDI estimates that the value in use of the RET disposal group is $2,700,000.

- HDI estimates that the fair value of the RET disposal group is $2,520,000 and that the disposal costs will be approximately $240,000.

- On June 14, 20X6, HDI received $2,385,000 cash from the sale of the RET disposal group ($2,660,000 less a $275,000 sales commission).

Required:

Prepare a summary of the journal entries RET will need to make to record the board’s decision to designate RET as a disposal group and to record its subsequent sale. Ensure that the journal entries are dated and include a brief description of the pertinent details. Supporting calculations are to be referenced or included in the description of each journal entry.

Answer 1

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