Question

When the discontinued component is sold before the end of the reporting period, the reported income effects of the discontinued operation will include what two elements?

Answer 1

The reported income effects of the discontinued operation will include operating income/loss from discontinued operations and gain/loss on disposal of discontinued operations.

Step-by-step explanation:

When the discontinued component is sold before the end of the reporting period, the reported income effects of the discontinued operation will include two elements:

Operating Income/Loss from Discontinued Operations: This represents the income or loss generated by the discontinued component up until the sale.

Gain/Loss on Disposal of Discontinued Operations: This accounts for the difference between the proceeds from selling the discontinued component and its carrying value on the company's books.

For example, if a company sells a division that was generating $500,000 in operating income and the carrying value of the division was $400,000, the reported income effects would include $500,000 as operating income from discontinued operations and a gain of $100,000 on the disposal of discontinued operations.