Question

On November 1, 2021, Jamison Inc. adopted a plan to discontinue its barge 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 April 30, 2022. On December 31, 2021, the company's year-end, the following information relative to the discontinued division was accumulated:
Operating loss Jan. 1–Dec. 31, 2021 $67 million
Estimated operating losses, Jan. 1 to April 30, 2022 99 million
Excess of fair value, less costs to sell, over book value at Dec. 31, 2021 16 million

In its income statement for the year ended December 31, 2021, Jamison would report a before-tax loss on discontinued operations of:

a. $150 million.
b. $166 million.
c. $51 million.
d. $67 million.

Answer 1

Answer:

d. $67 million.

Explanation:

The asset is not impaired because the fair value is higher than the book value. Therefore, the only operating loss of $67,000,000 can be reported.

Particulars                                                           Amount

Operating Loss(Jan 1 to 31 Dec 2021              $67,000,000

Before Tax loss on discontinued operation   $67,000,000

Hence, Jamison would report a before-tax loss on discontinued operations of $67,000,000.