Review Question #1
Carlsberg Corporation management formally decided to discontinue operation of its
Corona Division on December 1, 2012. Carlsberg is a successful corporation with
earnings of $150 million or more before taxes for each of the past 5 years. The Corona
Division, a major part of Carlsberg’s operations, is being discontinued because it has
not contributed to this profitable performance.
The main assets of the division are the land, plant and equipment used to manufacture
Corona beer. The land, plant and equipment had a net book value of $96 million on
December 1, 2012.
Carlsberg’s management has entered into negotiations for a cash sale of the division for
$87 million. The expected sale date and final disposal of the division is July 1, 2012.
Carlsberg Corporation has a fiscal year ending May 31. The results of operations for
the Corona Division for the 2012 -2012 fiscal year and the estimated results for June
2011 are presented below. The before tax losses after November 30, 2012 are
calculated without depreciation on the plant and equipment.
June 1, 2012 to November 30, 2012 $(6,100,000)
December 1, 2012 to May 31, 2013 (3,900,000)
June 1 – 30, 2013 (estimated) (750,000)