Question 1

Which of the following criteria for determining a discontinued operation is the same for IFRS as for U.S. GAAP?

Accepted Answer

The answer of Which of the following criteria for determining...

Question 2

On May 1, Jonson Industries decided to discontinue its prepackaged business segment. At the end of the year, the company is still holding the business segment for disposal, which is expected early in the following year. On its year-end income statement, Jonson Industries will report as income from discontinued operations the profits generated by the prepackaged business segment ________.

Accepted Answer

The income from discontinued operations is reported net of taxes for the entire year, as the decision to discontinue was made during the year and the segment is still held for disposal.

Question 3

Which of the following is not a characteristic that must be considered when determining that a business activity is a component of an entity for purposes of classifying that activity as a discontinued operation?

Accepted Answer

A strategic advantage is not a required characteristic for classifying a business activity as a discontinued operation. The focus is on whether the activity can be clearly distinguished operationally and for financial reporting purposes.

Question 4

Why are the results from discontinued operations separated from the results from continuing operations on an income statement?

Accepted Answer

The answer of Why are the results from discontinued operations...

Question 5

Paxdot Labs provided the following partial trial balance for the current year. Beginning with the line item Operating Income, prepare a statement of net income for the year ended December 31. Paxdot is subject to a 40% income tax rate.
Paxdot Labs
Partial Trial Balance (Selected Accounts)
For the Year Ended December 31
 $$\begin{array} { l r r } 
\text { Accounts } & \text { Debit } & \text { Credit } \
\text { Operating Income } & & \$ 233,000 \
\text { Dividend Income } & & 24,680 \
\text { Gain on Sale of Discontinued Operations } & & 37,010 \
\text { Unrealized Gain on Trading Investments } & & 37,260 \
\text { Gain on Foreign Currency Translation } & 23,030 & \
\text { Loss on Asset Impairment } & 15,420 & \
\text { Loss from Discontinued Operations } & 18,340 &
\end{array}$$

Accepted Answer

The answer of Paxdot Labs provided the following partial trial...

Question 6

When a company initially remeasures the value of a discontinued operation, an adjustment is made to recognize ________.

Accepted Answer

The answer of When a company initially remeasures the value...

Question 7

Earnings per share is presented for continuing operations, discontinued operations, and net income.

Accepted Answer

Earnings per share (EPS) is typically presented for continuing operations, discontinued operations, and net income to provide a comprehensive view of a company's profitability across different segments.

Question 8

After a company has determined that a portion of a business is a component of an entity, evaluating whether the disposal of a component of an entity constitutes a discontinued operation includes ________.

Accepted Answer

A discontinued operation is identified when its disposal represents a strategic shift that has a major effect on the entity's operations and financial results.

Question 9

When a company decides to discontinue an operation, it values the assets and liabilities of that operation at ________ if this amount is lower than the carrying value.

Accepted Answer

When discontinuing an operation, a company values the assets and liabilities at "fair value less selling costs" if this amount is lower than the carrying value, to reflect the net realizable value.

Question 10

What items are included in a company's results from discontinued operations? For this purpose, how is a component defined?

Accepted Answer

The answer of What items are included in a company's...

Question 11

Gains and losses from discontinued operations are shown on the income statement after the provision for income taxes is presented.

Accepted Answer

Gains and losses from discontinued operations are reported net of tax, meaning they are shown after the provision for income taxes on the income statement.

Question 12

When a significant operation that does meet the definition of a discontinued operation is disposed of, U.S. GAAP requires disclosure of the pre-tax profit (loss) of that operation.

Accepted Answer

U.S. GAAP requires that the results of discontinued operations, including pre-tax profit or loss, be separately disclosed in the financial statements.

Question 13

If a company writes down the net assets of a discontinued operation from original carrying value to a remeasurement of fair value in one year, and then in the next year the fair value changes ________.

Accepted Answer

The answer of If a company writes down the net...

Question 14

What items are included in a company's operating income?

Accepted Answer

The answer of What items are included in a company's...

Question 15

Baggow Styles provided the following partial trial balance for the current year. Beginning with the line item Income from Operations, prepare a statement of net income for the year ended December 31. Baggow is subject to a 40% income tax rate.
Baggow Styles
Partial Trial Balance (Selected Accounts)
For the Year Ended December 31
Accounts Debit Credit
Income from Operations $567,000
Interest Income 12,870
Gain from Discontinued Operations 44,700
Gain on Sale of Land 19,560
Unrealized Gain on Available-for-Sale Debt Investments 41,920
Accumulated Depreciation on Assets from
Discontinued Operations 23,630
Loss on Pension Adjustment $29,510
Loss on Disposal of Discontinued Operations 13,440
Amortization of Intangible Asset 19,280
Unrealized Loss on Trading Investments 62,050

Accepted Answer

The answer of Baggow Styles provided the following partial trial...

Question 16

Which of the following is not part of the U.S. GAAP definition of a component of an entity under discontinued operations?

Accepted Answer

A subsidiary acquired exclusively with a view to resale is not part of the U.S. GAAP definition of a component of an entity under discontinued operations because it is not a portion of the entity that is clearly distinguished, operationally, and for financial reporting purposes from the rest of the entity.

Question 17

What items are included in a company's income from continuing operations and how are these items categorized if the company uses (a) a multi-step format or (b) a single-step format?

Accepted Answer

The answer of What items are included in a company's...

Question 18

A discontinued operation must be a business segment or unit that is a portion of an entity with operations and cash flows.

Accepted Answer

A discontinued operation refers to a component of an entity that has been disposed of or is classified as held for sale, and it must have operations and cash flows that can be clearly distinguished from the rest of the entity.

Question 19

A noncontrolling interest represents the portion of the reporting entity that is owned by others (noncontrolling owners).

Accepted Answer

A noncontrolling interest refers to the ownership stake in a subsidiary that is not held by the parent company, representing the portion owned by other investors.

Question 20

The noncontrolling interest line item on the income statement represents the income attributable to the portion of a subsidiary owned by others.

Accepted Answer

The noncontrolling interest on the income statement reflects the share of income attributable to minority shareholders who own a portion of a subsidiary not controlled by the parent company.

Quiz 5: Statements of Net Income and Comprehensive Net Income

Which of the following criteria for determining a discontinued operation is the same for IFRS as for U.S. GAAP?

Which of the following is not a characteristic that must be considered when determining that a business activity is a component of an entity for purposes of classifying that activity as a discontinued operation?

Why are the results from discontinued operations separated from the results from continuing operations on an income statement?

When a company initially remeasures the value of a discontinued operation, an adjustment is made to recognize ________.

Earnings per share is presented for continuing operations, discontinued operations, and net income.

After a company has determined that a portion of a business is a component of an entity, evaluating whether the disposal of a component of an entity constitutes a discontinued operation includes ________.

When a company decides to discontinue an operation, it values the assets and liabilities of that operation at ________ if this amount is lower than the carrying value.

What items are included in a company's results from discontinued operations? For this purpose, how is a component defined?

Gains and losses from discontinued operations are shown on the income statement after the provision for income taxes is presented.

When a significant operation that does meet the definition of a discontinued operation is disposed of, U.S. GAAP requires disclosure of the pre-tax profit (loss) of that operation.

If a company writes down the net assets of a discontinued operation from original carrying value to a remeasurement of fair value in one year, and then in the next year the fair value changes ________.

What items are included in a company's operating income?

Which of the following is not part of the U.S. GAAP definition of a component of an entity under discontinued operations?

What items are included in a company's income from continuing operations and how are these items categorized if the company uses (a) a multi-step format or (b) a single-step format?

A discontinued operation must be a business segment or unit that is a portion of an entity with operations and cash flows.

A noncontrolling interest represents the portion of the reporting entity that is owned by others (noncontrolling owners).

The noncontrolling interest line item on the income statement represents the income attributable to the portion of a subsidiary owned by others.