Accounting question - discontinued operations?

Question

Hi, can some please help me with this question I have been working on it all day but my answer seems to be wrong:

Assume that Shengru Inc. decides to sell CBTV, its television subsidiary, on September 30, 2007. There is a formal plan to dispose of the subsidiary and the sale qualifies for discontinued operations treatment. Pertinent data on the operations of the TV subsidiary are as follows:

loss from operations from beginning of year to September 30, $1,300,000 (net of tax)
loss from operations from September 30 to end of 2007, $700,000 (net of tax)
estimated loss on sale of net assets on disposal date June 1, 2008, $150,000 (net of tax)
The year end is December 31.






What is the net income/loss from discontinued operations reported in 2007? In 2008?

Net income/loss (2007): $

Net income/loss (2008): $





Prepare the discontinued operations section of the income statement for the year ended 2007.

Discontinued operations (2007):

If the amount reported in 2008 as a gain or loss from disposal of the subsidiary by Shengru Inc. becomes materially incorrect, when and how is the correction reported, if at all?

Answer 1

Under SFAS 144, the following rules apply:

Operating income or loss of the component from the beginning of the period to the earlier of (a) the disposal date or (b) the end of the reporting period is included in the income statement under discontinued operations.

If a loss is expected from the proposed sale or abandonment of a segment, the estimated loss should be provided for at the measurement date. If a gain is expected, it should be recognized when realized, which ordinarily is the disposal date.

2007
Income from continuing operations $xxxx
Discontinued operations (Note ?):
Loss from operations of discontinued CBTV
(including loss on disposal of $150,000) $2,150,000

Net income $xxxx

2008
Loss from discontinued operations Nil

If the amount reported in 2008 as a gain or loss from disposal of the subsidiary by Shengru Inc. becomes materially incorrect, when and how is the correction reported, if at all?
The income statement presented for the previous year must be adjusted retroactively to enhance comparability with the current year’s income statement.