Munitions Inc. committed to sell its trade magazine division for $700,000 on October 1, Year 1. The book value of the division's net assets was $800,000. The disposal date is expected to be April 1, Year 2. Year 1 income of the division to October 1, Year 1 was a $30,000 loss, and income for the remainder of the year was $10,000. However, Munitions estimates that the division will lose $25,000 during the remainder of the phase-out period in Year 2. Ignoring taxes choose the correct reporting for discontinued operations in the income statement of Munitions, Inc., for the year ended December 31, Year 1. $$\begin{array} { | l | l | l | }
\hline &\text { Income (loss) from Discontinued operations } & \text { Gain (loss) from disposal of discontinued operations } \
\hline 1 &( \$ 30,000 ) & ( \$ 115,000 ) \
\hline 2 &( \$ 30,000 ) & \$ \$ 100,000 ) \
\hline 3 &( \$ 30,000 ) & ( \$ 90,000 ) \
\hline 4 &( \$ 45,000 ) & \$ \$ 100,000 ) \
\hline
\end{array}$$

Question

Munitions Inc. committed to sell its trade magazine division for $700,000 on October 1, Year 1. The book value of the division's net assets was $800,000. The disposal date is expected to be April 1, Year 2. Year 1 income of the division to October 1, Year 1 was a $30,000 loss, and income for the remainder of the year was $10,000. However, Munitions estimates that the division will lose $25,000 during the remainder of the phase-out period in Year 2. Ignoring taxes choose the correct reporting for discontinued operations in the income statement of Munitions, Inc., for the year ended December 31, Year 1. $$\begin{array} { | l | l | l | } 
\hline &\text { Income (loss) from Discontinued operations } & \text { Gain (loss) from disposal of discontinued operations } \
\hline 1 &( \$ 30,000 ) & ( \$ 115,000 ) \
\hline 2 &( \$ 30,000 ) & \$ \$ 100,000 ) \
\hline 3 &( \$ 30,000 ) & ( \$ 90,000 ) \
\hline 4 &( \$ 45,000 ) & \$ \$ 100,000 ) \
\hline
\end{array}$$

Quizplus · Accepted Answer

The income (loss) from discontinued operations for the year ended December 31, Year 1, is $(30,000), which represents the loss up to October 1, Year 1. The gain (loss) from disposal is calculated as the sale price ($700,000) minus the book value of the division's net assets ($800,000), resulting in a $(100,000) loss. Therefore, the correct reporting is $(30,000) for income (loss) from discontinued operations and $(100,000) for gain (loss) from disposal of discontinued operations.

Munitions Inc A) Choice 1 B) Choice 2 C) Choice 3 D)

Munitions Inc A) Choice 1
B) Choice 2
C) Choice 3
D)