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 2016 income statement?
A)$2,000,000 loss.
B)$2,500,000 loss.
C)No loss would be reported.
D)$500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.

Question

Quizplus · Accepted Answer

The loss on discontinued operations would be calculated as the difference between the book value and the fair value less cost to sell, which is $500,000 ($3,000,000 - $2,500,000). Therefore, Mercedes should report a $2,500,000 loss on discontinued operations in its 2016 income statement.

The Division's Book Value and Fair Value Less Cost to Sell