Question

In order for a loss on the disposal of a discontinued operation to be classified on the income statement as a discontinued operation, it must be unusual in nature. True or False True False

Answer 1

Answer:

False

Explanation:

When a company divests from a product line or shuts down one of it's operations which earlier formed part of it's core business, such a process is referred to as discontinuation of operations.

Loss arising out of disposal of discontinued operations yields tax benefits in the form of tax savings since such a loss is tax deductible.

The loss on the disposal of discontinued operations is reported in a separate section of the income statement.

Such losses are deducted from the income of continuing operations to arrive at the net income of an entity.