On October 5 2014 Diamond in the Rough Recruiting

Group #1857
On October 5, 2014, Diamond in the Rough Recruiting Group Inc.'s board of directors decided
to dispose of the Blue Division. A formal plan was approved. Diamond derives approximately 7
5% of its income from its human resources management practice. The Blue Division gets
contracts to perform human resources management on an outsourced basis. The board
decided to dispose of the division because of unfavourable operating results.Net income for
Diamond was $91,000 for the fiscal year ended December 31, 2014 (after a charge for tax at
30% and after a writedown for the Blue assets). Income from operations of the Blue Division
accounted for $4,200 (after tax)of this amount.Because of the unfavourable results and the
extreme competition, the board believes that it cannot sell the business intact. Its final decision
is to auction off the office equipment. The equipment is the division's only asset and has a
carrying value of $25,000 at October 5, 2014. The board believes that proceeds from the sale
will be approximately $5,000 after the auction expenses. Currently, the estimated fair value of
the equipment is $8,000. T he Blue Division qualifies for treatment as a discontinued operation.
Diamond prepares financial statements in accordance with ASPE.Instructions(a) Prepare a
partial income statement for Diamond in the Rough Recruiting Group and the appropriate
footnote that relates to the Blue Division for 2014. The income statement should begin with
income from continuing operations before income tax.(b) Explain how the assets would be
valued and presented on the balance sheet.(c) Explain how the assets would be valued and
presented on the balance sheet if Diamond prepared financial statements in accordance with
IFRS.(d) From the perspective of an investor, comment on Diamond's quality of earnings if
Diamond presented the BlueDivision as a discontinued operation, but did not have a formal plan
in place to dispose of the division.View Solution:
On October 5 2014 Diamond in the Rough Recruiting Group

ANSWER
http://paperinstant.com/downloads/on-october-5-2014-diamond-in-the-rough-recruiting-group/

1/1
Powered by TCPDF (www.tcpdf.org)