On January 1, 2017, Apricot Ltd.decided to discontinue its plastics making division.The division, considered a reportable segment, was sold on June 1, 2017.Division assets with a carrying value of $650,000 were sold for $500,000.Operating income from January 1, to May 31, 2017 for the division was $50,000.Ignoring taxes, what amount should be reported on Apricot's income statement for the year ended December 31, 2017, under the caption "discontinued operations"?
A)$200,000 gain
B)$150,000 loss
C)$50,000 gain
D)$100,000 loss

Question

Quizplus · Accepted Answer

When a segment is discontinued, the operating results for the period up until disposal are reported as part of discontinued operations on the income statement. The gain or loss on disposal is also reported separately as part of discontinued operations.

Operating Income from the division for the period January 1 to May 31, 2017, of $50,000 should be reported as part of discontinued operations.

The division assets were sold at a loss of $150,000 ($650,000 - $500,000), which should also be reported as part of discontinued operations.

Therefore, the amount reported on Apricot's income statement for the year ended December 31, 2017, under the caption "discontinued operations" is a loss of $100,000 ($50,000 - $150,000). The correct answer is D.