Question

On November 1, 2016, 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, 2017. On December 31, 2016, the company's year-end, the following information relative to the discontinued division was accumulated: Operating loss Jan. 1–Dec. 31, 2016 $65 million Estimated operating losses, Jan. 1 to April 30, 2017 80 million Excess of fair value, less costs to sell, over book value at Dec. 31, 2016 15 million In its income statement for the year ended December 31, 2016, Jamison would report a before-tax loss on discontinued operations of: $50 million. $145 million. $65 million. $130 million.

Answer 1

Answer: Option (C) is correct.

Explanation:

Given that,

On December 31, 2016

Operating loss Jan. 1–Dec. 31, 2016 = $65 million

Estimated operating losses, Jan. 1 to April 30, 2017 = 80 million

Excess of fair value = 15 million

As the asset is not impaired because it was given that fair value exceeds the book value at 15 million.

Hence, only the operating loss of $65 million from January 1st to December 31, 2016 would be reported into the books of Jamison.