FA12 Problem: Discontinued Operations - Big Blue Fish Company

FA12 Problem: Discontinued Operations - Big Blue Fish Company

Big Blue Fish Company is a fish processing company that operates divisions in several types of fish, canned fish, fresh fish and frozen fish sticks.

On August 10, 20X5, the Board of Directorsvoted to put the frozen fish stick division up for sale. The division's operating results had beendeclining for the past several years due to intense competition from foreign competitors.The Board hired a consulting firm to conduct a search for potential buyers. The consulting feewas to be 3.5% of the value of any sale transaction.By December 31, 20X5, the consulting firm had found a highly interested buyer for the frozenfish division, and serious negotiations were underway. The potential buyer was a US fish processor based in the northeastern US states; the company offered to buy the division for $6.53million cash.On March 3, 20X6, after further negotiations with the potential buyer, the Big Blue FishCompany Board of Directors accepted an enhanced offer from the buyer to buy the division for $7.50 million. The transfer of ownership took place on March 31, 20X6.Big Blue Fish Company’s income tax rate is 30%. Other information is as follows (before tax, inmillions of dollars):August 10, 20X5 Dec 31, 20X5

Book Fair Value Value Fair ValueFrozen fish division's net assets:Current assets $1.101.05 1.00Property, plant, and equipment (net) 7.305.40 5.53Current liabilities .80.80 .80

 Net earnings (loss) of the frozen fish division,January 1 to 31 December 31, 20X5 $0.60 Net earnings (loss) of the frozen fish division,January 1 to March 31, 20X6 $(0.25)

 Required:

Calculate the dollar impact of the above events on discontinued operation reporting in thefollowing order:August 10, 20X5December 31, 20X5March 3, 20X6