Question

On August 1, 2016, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by June 30, 2017. On January 31, 2017, Rocket's fiscal year-end, the following information relative to the discontinued division was accumulated: Operating loss Feb. 1, 2016–Jan. 31, 2017 $115,000 Estimated operating losses, Feb. 1–June 30, 2017 80,000 Impairment of division assets at Jan. 31, 2017 10,000 In its income statement for the year ended January 31, 2017, Rocket would report a before-tax loss on discontinued operations of:
A. $125,000.
B. $65,000.
C. $115,000.
D. $195,000.

Answer 1

Answer:

A. $125,000

Explanation:

before tax loss on discontinued operations

= Operating loss Feb. 1, 2016 – Jan. 31, 2017 + Operating loss Feb. 1, 2016 – Jan. 31, 2017

= $115,000 + $10,000

= $125,000

Therefore, Rocket would report a before-tax loss on discontinued operations of $125,000.