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Sour Soup Corporation operates several stores in British Columbia (Vancouver, Victoria, Kamloops, Penticton and Prince George).
Sour Soup Corporation operates several stores in British Columbia (Vancouver, Victoria, Kamloops,
Penticton and Prince George). The restructuring of its organization on November 20, 2018 has led to
the decision to sell its Prince George store. In preparing financial statements at December 31, 2018, the following information was made available:
o The Prince George operation incurred a loss of $283,500 for the 2018 calendar year, including $225,000 for the period January 1 to November 20, 2018.
o Estimated costs to sell are $300,000.
o At December 31, 2018, the fair value of the Prince George assets is estimated at $7 million and the carrying (book) value is $7.3 million.
o The combined provincial and federal income tax rate is 30%.
o It is estimated that the operation will lose an additional $250,000 before it is sold.
1. The Prince George operation qualifies for reporting as a discontinued operation. What amount should be reported in the discontinued operations section of Sour Soup's 2018 income statement?
2. In early 2019, the Prince George operation is sold for $8.5 million, with actual costs to sell of $400,000. Additional income tax expense related to the sale is $500,000. The operation lost an additional $150,000 before it was sold. What amount should be reported in the discontinued operations section of Sour Soup's 2019 income statement?
