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 2009 income statement?
A)$2,000,000 loss.
B)$2,500,000 loss.
C)None.
D)$500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.$2,000,000 loss from operations and $500,000 impairment loss = $2,500,000.

Question

Quizplus · Accepted Answer

The loss on discontinued operations is calculated as the difference between the book value and fair value less cost to sell. In this case, it is $3,000,000 - $2,500,000 = $500,000, which should be reported as a loss on discontinued operations in the income statement. Therefore, the correct answer is B.

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