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McGill University
Management Core
MGCR 211
Karen Zajdman- Borden

15 MAY 2012 Discontinued Operations: Notes to f/s; Segmented info 2012 Line 1 Line 2 Line 3 Shampoo Conditioner Soap 500,000 250,000 250,000 400,000 175,000 225,000 100,000 75,000 25,000 (Total Revenue $1M, COGS 800,000)  Discontinued Operation if discontinue line 3.  Discontinued operation a company may sell/ dispense of business segment.  Sell a division; Sell or drop a product; Sell a line  Results from a discontinued business that was sold well before sown separately on the income statement and will be shown net of income taxes Net of inc. tax Gain on sale of discontinued line 200,000 Net income (gross?) before tax Income tax Expense (20%) -40,000 Net gain on sale of discontinued line 160,000 Loss on the discontinued operations(expense): ($100,000) Decrease income tax Income tax saving (20%) 20,000 Net less discontinues operations (80,000) Extraordinary Item  A business my incur a gain or loss due to extraordinary item  Very unusual, very infrequent: Can create a loss or gain  3 criteria: a. not expected to occur frequently b. not typical of normal business activity c. subject to management decisions  lawsuits can be extraordinary gain or loss  Examples: fire, earthquake, government expropriating land  Shown separately on income statement  Will be shown net of income taxes Unusual item  1 or 2 of the criteria exists; it is not an extra item, but rather an unusual item  included with other income/gains or other exp/losses  not shown net of income taxes Chapter 12  Analysis: what’s strong/weak  Look at all areas of the company, tells us about history of a company, try to predict/project the future  Look at relationships between figures on f/s  Compare/contrast over time  Compare with other companies Who use
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