Question

n October 28, 2013, 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, 2013, the end of the company's fiscal year. The division's loss from operations for 2013 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 2013 income statement?

Answer 1

$2,500,000

Step-by-step explanation:

The computation of the before tax amount that should be reported as loss on discontinued operations is shown below:

Division loss from operations $2,000,000

Add: Impairment loss ($3,000,000 - $2,500,000) $500,000

Total loss on discount operations $2,500,000

Hence, the before tax amount that should reported on loss on disconituned operations is $2,500,000