The Claxton Company manufactures children's toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to SFAS No. 144. How should Claxton report the sale in its 2009 income statement?

Question

Quizplus · Accepted Answer

According to SFAS No. 144, the sale of a component that qualifies as a discontinued operation should be reported separately from income from continuing operations. Therefore, the sale of the automobile parts division should be reported as a discontinued operation in the income statement, below income from continuing operations. This would include reporting the income or loss from the division's operations up to the date of sale, as well as the gain or loss from disposal.

The Claxton Company Manufactures Children's Toys and Also Has a Division