Question:
On November 30, 2013, Pearman Company committed to a plan to sell a division that qualified as a
component of the entity according to GAAP, and was properly classified as held for sale on December 31,
2013, the end of the company’s fiscal year. The division was tested for impairment and a $400,000 loss
was indicated. The division’s loss from operations for 2013 was $1,000,000. The final sale was expected
to occur on February 15, 2014. What before-tax amount(s) should Pearman report as loss on discontinued
operations in its 2013 income statement?
Answer:
a. The $400,000 impairment loss and the $1,000,000 loss from operations should be combined for a total
loss of $1,400,000.
On November 30, 2013, Pearman Company committed to a plan to sell a division that qualified as a
component of the entity according to GAAP, and was properly classified as held for sale on December 31,
2013, the end of the company’s fiscal year. The division was tested for impairment and a $400,000 loss
was indicated. The division’s loss from operations for 2013 was $1,000,000. The final sale was expected
to occur on February 15, 2014. What before-tax amount(s) should Pearman report as loss on discontinued
operations in its 2013 income statement?
Answer:
a. The $400,000 impairment loss and the $1,000,000 loss from operations should be combined for a total
loss of $1,400,000.
