Question

On October 28, 2018, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2018, the end of the company's fiscal year. The division's loss from operations for 2018 was $2,000,000.

The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement?

A) $2,000,000 loss.

B) $2,500,000 loss.

C) No loss would be reported.

D) $500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.

On October 28, 2018, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2018, the end of the company's fiscal year. The division's loss from operations for 2018 was $2,000,000.

The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement?

A) $2,000,000 loss.

B) $2,500,000 loss.

C) No loss would be reported.

D) $500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.

Answer 1

Answer : option (b)

The before tax amount thet mercedea should report as loss on discontinued operations in its 2018 income statement $ 2500000 loss.