ACCOUNTING -Complete the requirements outlined in the following case

ACTG 350 – Case 1Due:Tuesday, October 27 (at the beginning of class). Also, please be prepared todiscuss the case and your solution in class on this date.Required:Complete the requirements outlined in the following case developed by the Ernst& Young Foundation. Please submit one case per group.To access ACS 205-20-50 and ASC 360-10-45 please log into the FASB Accounting StandardsCodification website.Instructions for accessing the FASB Codification database:1. Go to http://aaahq.org/ascLogin.cfm2. User ID: AAA515263. Password: f5J5WSCDiscontinued operationsDiversified Holdings Inc.BackgroundDiversified Holdings Inc. (DHI), a calendar-year company, operates three separate businesses. InSeptember 2014, DHI decided to make a strategic shift in its business and sell its candy segment becauseits revenues and earnings were declining due to health-conscious consumers. The Chocolate House (TCH)subsidiary represents the entire candy segment. You have been asked to help determine the appropriateaccounting treatment related to this decision. In your analysis, you should consider the following additionalinformation:► DHI engaged a broker to help determine the value of the candy segment and to help locate a buyer.The broker indicated that given the age of the property, plant and equipment, the candy segment likelycould be sold in less than a year if the offering price was $200 million.► This offering price would also allow DHI to fully recover the cost of TCH’s inventory. DHI considered thisa reasonable value for these operations. DHI obtained Board approval to sell TCH for $200 million inNovember 2014.► The Board was informed that the estimated cost of selling TCH was $10 million.► On December 1, 2014, DHI publicly announced its intention to dispose of its candy segment. At thistime, DHI informed the broker that TCH was available for immediate sale. Prior to year-end, the brokerwas actively seeking buyers.► Management has concluded that TCH should be accounted for as a discontinued operation.► Relevant financial information as of December 31 is provided on the following page for DHI and TCH.► All intercompany eliminations are already reflected in DHI’s consolidated financial information. Theeffective income tax rate in both 2013 and 2014 is 50%. For purposes of this analysis, do not considerany required segment disclosures.Required► Review the required disclosures for a discontinued operation in ASC 205-20-50 and ASC 360-10-45.Identify which paragraphs are the most relevant in detailing the necessary disclosures for discontinuedoperations.► Provide and record the journal entries required for TCH’s remeasurement.► Draft the required disclosures and revisions to the comparative consolidated financial statementsassuming DHI reports using US GAAP.Discontinued operations – case studies© 2014 Ernst & Young Foundation (US). All Rights Reserved.SCORE No. MM4159I1(All $ amounts in millions)Consolidated DHIStatement of financial positionCash2014$20TCH2013$302014$2013(30)$10Inventory3603808050PP&E450460200210Liabilities100902020Equity730780230250Revenue1,7001,750500600Expenses(1,400)(1,350)(540)(580)Income statementPretax income (loss)300Net income (loss)(40)20(150)Income tax expense (benefit)400(200)20(10)$150$200$(20)$10$150$200$(20)$10Cash flowsOperating activitiesInvesting activities(100)(120)–(10)Financing activities(60)(100)(20)(10)30501020Beginning cashEnding cash$20Discontinued operations – case studies© 2014 Ernst & Young Foundation (US). All Rights Reserved.SCORE No. MM4159I$30$(30)$102