Question

On November 1, 2016, Jamison Inc. adopted a plan to discontinue its barge division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by April 30, 2017. On December 31, 2016, the company's year-end, the following information relative to the discontinued division was accumulated:

Operating loss Jan. 1 – Dec. 31, 2016 $84 million
Estimated operating losses, Jan. 1 to April 30, 2017 80 million
Excess of fair value, less costs to sell, over book value at Dec. 31, 2016 14 million


In its income statement for the year ended December 31, 2016, Jamison would report a before-tax loss on discontinued operations of:

Answer 1

$66 million

Step-by-step explanation:

Jamison should report a before-tax loss on discontinued operations = estimated operating loss from January 1 to April 30 - excess of fair value = $80 million - $14 million = $66 million

The current operating loss of $84 million must also be reported but as loss on current operations.