Aug 16, 2017

What before-tax amount(s) should Pearman report as loss on discontinued operations in its 2016 income statement?

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On November 30, 2016, 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, 2016, 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 2016 was $1,000,000. The final sale was expected to occur on February 15, 2017. What before-tax amount(s) should Pearman report as loss on discontinued operations in its 2016 income statement?

a. $1,400,000 loss.

b. $400,000 loss.

c. None.

d. $400,000 impairment loss included in continuing operations and a $1,000,000 loss from discontinued operations.


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