Question

On December 31, 20X0, Greer Co. entered into an agreement to sell its Hart segment's assets. On that date, Greer estimated the gain from the disposition of the assets in 20X1 would be $700,000 and Hart's 20X1 operating losses would be $200,000. Hart's actual operating losses were $300,000 in both 20X0 and 20X1, and the actual gain on disposition of Hart's assets in 20X1 was $650,000. Disregarding income taxes, what net gain (loss) should be reported for discontinued operations in Greer's comparative 20X1 and 20X0 income statements?

a. 20X1: $350,000; 20X0: $(300,000)
b. 20X1: $(150,000); 20X0: $200,000
c. 20X1: $50,000; 20X0: $(300,000)
d. 20X1: $0; 20X0: $50,000

Answer 1

a. 20X1: $350,000; 20X0: $(300,000)

Step-by-step explanation:

Provided there was operating losses in the year 20X0 and 20X1 each of $300,000

Thus this is the amount of loss.

Further provided that sale of Hart's segment assets happen in the end of year 20X1

Actual profit on sale such assets = $650,000

Net profit / (loss) for the year 20X1 = $650,000 profit from sale of segment assets - $300,000 Operating loss for the year = $350,000 profit

Thus for year 20X1 = $350,000 profit that is positive value

for the year 20X0 =($300,000) operating losses.

Final answer

a. 20X1: $350,000; 20X0: $(300,000)