Question

During 2014, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of $2,400,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of taxes, were $2,800,000 in 2014. How should these facts be reported in Lopez's income statement for 2014? Total Amount to be Included in Income from Results of Continuing Operations Discontinued Operations A. 400,000 loss 0 B. $2,800,000 loss $2,400,000 gain C. 2,400,000 gain 2,800,000 loss D. 0 400,000 loss

Answer 1

The reported should be shown below:

Results of continuing operations = 0

Discontinued operations = $400,000 loss

Hence, the correct option is d. 0,400,0000 loss

Step-by-step explanation:

Since in the given question, the value of realized gain is $2,400,000 and operating losses is $2,800,000. So , by considering these value first we have to find out the profit or gain by subtracting this amount with each other.

In mathematically,

= Realized gain - Operating losses

= $2,400,000 - $2,800,000

= -$400,000

Since, the realized gain is smaller than operating losses, the Lopez corporation has a loss of $400,000

The Lopez corporation has disposed of the Pine Division, so this loss would come under the discontinued operations.

So,

The reported should be shown below:

Results of continuing operations = 0

Discontinued operations = $400,000 loss

Hence, the correct option is d. 0,400,0000 loss