a. The treatment of the disposal on the Statement of Financial Position would involve classifying the assets and liabilities of the Industrial Design Division as held for sale. This means that they would be presented separately from the other assets and liabilities on the balance sheet. The criteria for determining if an asset or a group of assets qualifies as held for sale include the following:
- The asset or group of assets must be available for immediate sale in its present condition.
- The sale must be highly probable, meaning that it is expected to occur within one year from the date of classification.
- The asset or group of assets must be actively marketed for sale at a reasonable price.
- The sale is being actively pursued, and actions required to complete the sale have been initiated.
- It is unlikely that significant changes to the plan for the sale will occur or that the sale will be withdrawn.
b. Comparative partial "income statement" for Forestine for 2023 and 2024:
Forestine Ltd.
Income Statement
For the Years Ended December 31, 2023 and 2024
Net Income from Continuing Operations:
2023: $4,950,000
2024: $6,862,500
Discontinued Operations:
Loss from Operations of Industrial Design Division:
2023: ($2,400,000)
2024: ($750,000)
Gain on Sale of Industrial Design Division:
2024: $225,000
Net Income:
2023: $4,950,000
2024: $6,862,500
Note: The above income statement includes the results from the Industrial Design Division and reflects the treatment of the division as a discontinued operation.