Question

During 20x8, a firm discontinued a component qualifying for separate disclosure within the income statement. The disposal was completed before the end of 20x8 and resulted in a $300 disposal gain. The component earned $400 in 20x7 but lost $100 (negative income) in 20x8. The 20x7 income statement reported income from continuing operations (IFCO) of $6,000. The 20x8 income statement reported $7,000 of net income. Determine the following two amounts:
IFCO for 20x7 as it is reported comparatively in the 20x8 statements
IFCO for 20x8

Answer 1

Answer:

1. IFCO for 20x7 as it is reported comparatively in the 20x8 statements  = $5,600
2. IFCO for 20x8 = $6,800

Explanation:

1) IFCO for 20x7 as it is reported comparatively in the 20x8 statements, should not include the $400 operating income from the component = $6,000 - $400, or $5,600.

2) IFCO for 20x8 should not include the gains resulting from the disposal of the component nor the losses generated by it = $7,000 - $300 + $100 = $6,800