Katherine's Fashions is going to discontinue one of its manufacturing divisions. The division's assets with a book value of $1,010,000 are sold for $80,000. The division generated an operating loss of $1,480,000 after the decision was made to discontinue the segment. Ignoring income taxes, what total amount should be reported on the income statement as discontinued operations?
A)$550,000 loss
B)$930,000 loss
C)$2,410,000 loss
D)$1,480,000 gain

Question

Quizplus · Accepted Answer

The total loss from discontinued operations includes both the operating loss and the loss on the sale of assets. The operating loss is $1,480,000, and the loss on the sale of assets is $1,010,000 (book value) - $80,000 (sale price) = $930,000. Therefore, the total loss is $1,480,000 + $930,000 = $2,410,000.

Katherine's Fashions Is Going to Discontinue One of Its Manufacturing