Parrish, Inc.decided on January 1 to discontinue its telescope manufacturing division.On July 1, the division's assets with a book value of $1,250,000 are sold for $850,000.Operating income from January 1 to June 30 for the division amounted to $125,000.Ignoring income taxes, what total amount should be reported on Parrish's income statement for the current year under the caption, Discontinued Operations?

Question

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The discontinued operations section of the income statement should report a loss of $275,000, which is the difference between the operating income of $125,000 and the loss on disposal of assets of $400,000 ($1,250,000 - $850,000).