【正文】 I n c o m e f r o m c o n t i n u i n g o p e r a t i o n s 5 5 , 0 0 0 D i s c o n t i n u e d o p e r a t i o n s :L o s s f r o m o p e r a t i o n s , n e t o f t a x 315 L o s s o n d i s p o s a l , n e t o f t a x 189 T o t a l l o s s o n d i s c o n t i n u e d o p e r a t i o n s 504 I n c o m e b e f o r e e x t r a o r d i n a r y i t e m 5 4 , 4 9 6 E x t r a o r d i n a r y l o s s , n e t o f t a x 539 N e t i n c o m e 5 4 , 4 9 6$ I n c o me S t a t e me n t ( i n t h o u s a n d s )S a l e s 2 8 5 , 0 0 0$ C o s t o f g o o d s s o l d 1 4 9 , 0 0 0 G r o s s p r o f i t 1 3 6 , 0 0 0 Extraordinary Items Reporting Irregular Items 431 Irregular transactions such as discontinued operations and extraordinary items should be reported separately in a. both a singlestep and multiplestep ine statement. b. a singlestep ine statement only. c. a multiplestep ine statement only. d. neither a singlestep nor a multiplestep ine statement. Review LO 4 Explain how to report irregular items. Reporting Irregular Items 432 Material items that are unusual or infrequent, but not both, should be reported in a separate section just above “Ine from continuing operations before ine taxes.” Examples can include: ? Writedowns of inventories ? Foreign exchange transaction gains and losses The Board prohibits oftax treatment for these items. Reporting Irregular Items LO 4 Explain how to report irregular items. Unusual Gains and Losses 433 Reporting Irregular Items LO 4 Explain how to report irregular items. Illustration 49 Ine Statement Presentation of Unusual Charges Unusual Gains and Losses 434 ? Retrospective adjustment. ? Cumulative effect adjustment to beginning retained earnings. ? Approach preserves parability. ? Examples include: ? change from FIFO to average cost. ? change from the percentageofpletion to the pletedcontract method. Reporting Irregular Items LO 4 Explain how to report irregular items. Changes in Accounting Principles 435 Reporting Irregular Items LO 4 Explain how to report irregular items. Change in Accounting Principle: Gaubert Inc. decided in March 2020 to change from FIFO to weightedaverage inventory pricing. Gaubert?s ine before taxes, using the new weightedaverage method in 2020, is $30,000. Illustration 410 Calculation of a Change in Accounting Principle Illustration 411 Ine Statement Presentation of a Change in Accounting Principle (Based on 30% tax rate) Pretax Ine Data 436 ? Accounted for in the period of change and future periods. ? Not handled retrospectively. ? Not considered errors or extraordinary items. ? Examples include: ? Useful lives and salvage values of depreciable assets. ? Allowance for uncollectible receivables. ? Inventory obsolescence. Reporting Irregular Items LO 4 Explain how to report irregular items. Changes in Estimate 437 Change in Estimate: Arcadia HS, purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been recorded for 7 years on a straightline basis. In 2020 (year 8), it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time. Questions: ? What is the journal entry to correct the prior years? depreciation? ? Calculate the depreciation expense for 2020. Change in Estimate Example LO 4 Explain how to report irregular items. 438 Equipment $510,000 Fixed Assets: Accumulated depreciation 350,000 Net book value (NBV) $160,000 Balance Sheet (Dec. 31, 2020) Change in Estimate Example After 7 years Equipment cost $510,000 Salvage value 10,000 Depreciable base 500,000 Useful life (original) 10 years Annual depreciation $ 50,000 x 7 years = $350,000 First, establish NBV at date of change in estimate. LO 4 Explain how to report irregular items. 439 Change in Estimate Example Net book value $160,000 Salvage value (new) 5,000 Depreciable base 155,000 Useful life remaining 8 years Annual depreciation $ 19,375 Depreciation Expense calculation for 2020. Depreciation expense 19,375 Accumulated depreciation 19,375 Journal entry for 2020 LO 4 Explain how to report irregular items. After 7 years 440 ? Result from: ? mathematical mistakes. ? mistakes in application of accounting principles. ? oversight or misuse of facts. ? Corrections treated as prior period adjustments. ? Adjustment to the beginning balance of retained earnings. Reporting Irregular Items LO 4 Explain how to report irregular items. Corrections of Errors 441 Corrections of Errors: To illustrate, in 2020, Hillsboro Co. determined that it incorrectly overstated its accounts receivable and sales revenue by $100,000 in 2020. In 2020, Hillboro makes the following entry to correct for this error (ignore ine taxes). Reporting Irregular Items LO 4 Explain how to report irregular items. Retained earnings 100,000 Accounts receivable 100,000 442 Relates the ine tax expense to the specific items that give rise to the amount of the tax expense. Ine tax is allocated to the following items: (1) Ine from continuing operations before tax. (2) Discontinued operations. (3) Extraordinary items. Special Reporting Issues LO 5 Explain intraperiod tax allocation. Intraperiod Tax Allocation 443 Extraordinary Gain: Schindler Co. has ine before ine tax and extraordinary item of $250,000. It has an extraordinary gain of $100,000 from a condemnation settlement received on one its properties. Assuming