Question:
Roco Company manufactures both industrial and consumer electronics. Due to a change in its strategic
focus, the company decided to exit the consumer electronics business, and in 2013 sold the division to
Sunny Corporation.
The consumer electronics division qualifies as a component of the entity according to GAAP. How
should Roco report the sale in its 2013 income statement?
a. Include in income from continuing operations as a nonoperating gain or loss. b. As an extraordinary
item.
c. As a discontinued operation, reported below income from continuing operations.
d. None of the above.
Answer:
c. U.S. GAAP requires that discontinued operations be disclosed separately below income from
continuing operations.
Roco Company manufactures both industrial and consumer electronics. Due to a change in its strategic
focus, the company decided to exit the consumer electronics business, and in 2013 sold the division to
Sunny Corporation.
The consumer electronics division qualifies as a component of the entity according to GAAP. How
should Roco report the sale in its 2013 income statement?
a. Include in income from continuing operations as a nonoperating gain or loss. b. As an extraordinary
item.
c. As a discontinued operation, reported below income from continuing operations.
d. None of the above.
Answer:
c. U.S. GAAP requires that discontinued operations be disclosed separately below income from
continuing operations.
