When a component of a business has been discontinued during the year, this component's operating losses of the current period up to the measurement date should be included in the
A) Income statement as part of the income (loss) from operations of the discontinued component
B) Income statement as part of the loss on disposal of the discontinued component
C) Income statement as part of the income (loss) from continuing operations
D) Retained earnings statement as a direct decrease in retained earnings

Question

Quizplus · Accepted Answer

When a component of a business has been discontinued during the year, the operating losses of the component should be included in the income statement as part of the income (loss) from operations of the discontinued component. This means that the losses should be reported separately from the income (loss) from continuing operations. Option B is not correct because the loss on disposal would only be relevant if the component had been sold. Option C is also not correct as the losses would not be included as part of the income (loss) from continuing operations. Option D is not correct as the losses would not be reported on the retained earnings statement, which only shows the change in retained earnings resulting from dividends and net income.

When a Component of a Business Has Been Discontinued During