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?

Answer 1

$2,500,000

Step-by-step explanation:

Calculation for What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement

Division's loss from operations for 2018 $2,000,000

Add division's book value and fair value less cost to sell $500,000

($3,000,000- $2,500,000)

Loss on discontinued operations in 2018 $2,500,000

Therefore what before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement is $2,500,000