During July 2012,Ralston Company decides to dispose of one of its subsidiaries,which qualifies for accounting as a discontinued operation.At the July 2012 measurement date,Ralston Company estimates that it will report net losses of $1,500,000 dollars from the measurement date until the disposal date,which is expected to be in April 2013.In addition,Ralston estimates that it will lose $300,000 on the sale of the segment.How much gain or loss on discontinued operations will Ralston report in its 2012 income statement (net of income taxes)?

Question

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Under Accounting Standard Codification (ASC) 205-20, a discontinued operation is a component of an entity that has been disposed of or is classified as held for sale. When a component is classified as a discontinued operation, any gain or loss resulting from its disposal is reported separately in the income statement after continuing operations.

In this case, Ralston Company has decided to dispose of one of its subsidiaries, which qualifies as a discontinued operation under ASC 205-20. The estimated net losses from the measurement date until the disposal date are $1,500,000, and the estimated loss on the sale of the segment is $300,000. Therefore, the total estimated loss on discontinued operations is $1,800,000 ($1,500,000 + $300,000).

The net of income taxes needs to be considered while calculating the gain or loss on discontinued operations, which is not given in the question. Therefore, the answer is $1,800,000 loss, as per the available information.

During July 2012,Ralston Company Decides to Dispose of One of Its