Income Statement Discontinued Operations - YouTube

welcome class

this is a

video describing

how to complete the practice problem

of specifically about

concept of discontinued operations and preparation of the income statement

so we're looking at the problem as presented of it is an excel spreadsheet to make a little easier for you to use

I have mixed up the trial balance but I've given you some information about this sale of a piece of the business

of this case a bank

and so were needing to make income statement from the trial balance

of all items have a normal balance

the information we need to make a decision is there in number two is sold a segment of this

business ever resolve a shift in strategy and as a indicated in the codification

that is sufficient for there to be a

discontinued operation of disclosure so that means that is what we are dealing with

sale closes on December 31, 2017 so recorded in 2017

net assets are 420 sales prices 450 so the actual sale is going to be a gain of 30

tax rate is 40% the sale of the center is not reflected in the trial balance

of all so that we're going two of

how to put that gain in our income statement even though it is not reflected on the trial balance

revenues expenses are assigned to discontinue segment are listed as percentages so you'll see that above we have various

percentages listed out to the side of the items that are

not was not a percentage are entirely

going to continue

only those that have percentages are going to be that those things are discontinued so lets look at how we might

word this with an excel spreadsheet so first I want to do is make sure I know what the income statement was like before we separate

the discontinued operations so here's my revenues

and the total

for those

who've been memo that are the expenses as given on the trial balance

various

seeded various items there and total from other losses in

their

and then you have income before taxes

the provision for taxes or tax expense net income

and as we discussed non controlling interest is the part of the business that is

owned by shareholders

that don't represent a majority

of stocks or if we own a subsidiary and we only own 80% of the subsidiary the other 20% as well as referred to as non controlling interests only

separate that have as their part of the net income and then keeping with our

earnings per share calculation which is net income

subtract preferred dividends

giving an income for, shareholders and dividing by the shares outstanding

you get earnings per share and this is weighted average shares outstanding on the bottom and

that was given to you in the trial balance information

that once we have an income statement that looks reasonable

then we can go ahead and

separated into discontinued and continuing

some of those percentages that we're apply to each of the items were the percentages were given

the end of your discontinue so you have a column with discontinued are and then the law that expenses and

discontinued so for the part being sold in revenues for 2017 were

of 1769.77

and then the expenses were 1560.35 of the total

take the difference and summarize the entire discontinued operation down to one number of income

subtract out the taxes as a percentage given an end up with net income

of for discontinued operation

now over and this other column is the continuing operations

we then do the same thing add up that revenue after subtracting of the discontinued

and expenses

losses and so far from over his most of those are fully continue

they have a income before taxes and taxes minus the part that was discontinued

and income continues

into into the operations of 2100.18 that does something two of a earnings per share calculation because

any special items or subtotal before special items you have to calculate the earnings per share

so this case we start with the income from continuing mess that name if there isn't a sting

operation reason for income from continuing operations

now the discontinued operations going be one number on that income statement

you'll see in my form a lot is the

amount from the discontinued operations

plus the $30.00 $30,000,000 gain from the sale of the segment minus the tax on the gain on

that sale was to be 40% were 12 so that would mean that we're adding 18

two on discontinued operation recalculated from income statement Sorrento discontinued

operation one number to summarize all the upper all the

revenues and expenses and Regina or loss from the sale of the acts assets

of the disclose that that tax is part of that so that taxes than 83.6 and 84 plus the 12:00 AM and gain total of 96 some input that time as out

of that description right on the face of the income statement

review and earnings per share calculation subtract these are inviting the 144

by the number of shares outstanding

and do the same thing with and are controlling interest has now a

earnings per share calculation net income to hold the bee gees recent track of preferred dividends

and then raced

provided by the earnings per share one more than our share the same one more time to get to 81

and so you see it change and that's only because of the game

on the ceo that was not originally recorded in this trial balance if there had not been that

gainer to gain an ivory and record in the trial balance then

even as closures you would not have a difference in our earnings per share or our net income per common shareholders

now this think of something operations plus the discontinued operations minus the on controlling interest should equal your net

income for common now in this case we are off a penny because of rounding

right and we call it fix that rounding issue of what do you know

change it by one penny to make it all add up

so that's how you check to make sure your earnings per share calculations

are correct so this is a good review of several concepts from this action to sell weeks material

first of all

the idea of discontinue operations

second of all how we see controlling of foreign interest on the income statement

third of the calculation of earnings per share

especially with a special item like discontinue operations

so those are the things that got you to get from this review in Oakland this practice