Question

The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $3,500,000, respectively. What before-tax amount(s) should the company report as loss on discontinued operations in its 2021 income statement?

a. $2,000,000 loss.
b. $2,500,000 loss.
c. No loss would be reported.
d. $500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.

Answer 1

$2,000,000 loss from operations only. There is no impairment loss.

Step-by-step explanation:

Since the division’s book value and fair value less cost to sell on December 31 were $3,000,000 and $3,500,000, respectively.

The before-tax amount(s) Mercedes would report is $2,000,000 loss on discontinued operations since there is no impairment loss.

Answer 2

A $2,000,000 loss

Step-by-step explanation:

See attached file