Question

Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2018, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2018, at a price of $640,000. The book value of the division’s assets was $1,090,000, resulting in a before-tax loss of $450,000 on the sale.

The division incurred a before-tax operating loss from operations of $120,000 from the beginning of the year through December 15. The income tax rate is 30%. Chance’s after-tax income from its continuing operations is $440,000.

Required:
Prepare an income statement for 2018 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)
On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,150,000. During 2018, costs of $2,050,000 were incurred with estimated costs of $4,050,000 yet to be incurred. Billings of $2,550,000 were sent, and cash collected was $2,300,000.

In 2019, costs incurred were $2,550,000 with remaining costs estimated to be $3,675,000. 2019 billings were $2,800,000 and $2,525,000 cash was collected. The project was completed in 2020 after additional costs of $3,850,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.

Required:
1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method?
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

Answer 1

Ans-1- CHANCE COMPANY

Partial Income Statement

For the Year Ended December 31,2018

Income from continuing operations		$440,000
Discontinued opeartions:
Loss from operations of discontinued component	($570,000)
Income tax benefits	$171,000
Loss on discontinued operations		($399,000)
Net Income		$41,000

Earning per share
Income from continuing opeartions	$4.4
Gain (Loss) from discontinued opeartions	($3.99)
Net Income (Loss)	$0.41

Explanations:

Loss from opeartions of discontinued component (including loss on disposal of $450,000)=($570,000)

Loss on discontinued opeartions:

Loss on sale of assets ($450,000)

Operating loss ($120,000)

Total before tax loss ($570,000)

Less:Income tax benefit (30%) $171,000

Net loss on discontinued operations ($399,000)

Two different questions have been asked so i have answered 1 question only. Thanks