When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as
A) a prior period adjustment.
B) an extraordinary item.
C) an amount after continuing operations but before extraordinary items.
D) a bulk sale of plant assets included in income from continuing operations.

Question

Quizplus · Accepted Answer

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as an amount after continuing operations but before extraordinary items. This is because gains and losses related to discontinued operations are not considered part of the company's continuing operations and are therefore reported separately. These gains and losses are not considered prior period adjustments, extraordinary items, or bulk sales of plant assets included in income from continuing operations.

When a Company Discontinues an Operation and Disposes of the Discontinued