Question

On November 1, 2021, Warren Co. 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 $ 74 million Estimated operating losses, Jan. 1 to April 30, 2022 96 million Excess of fair value, less costs to sell, over book value at Dec. 31, 2021 11 million In its income statement for the year ended December 31, 2021, Warren would report a before-tax loss on discontinued operations of:A. $170 million.B. $159 million.C. $74 million.D. $63 million.

Answer 1

Answer:

C. $74 million

Explanation:

The computation of before-tax loss on discontinued operations is shown below:-

Before-tax loss on discontinued operations = Operating loss (From Jan 1 to 31 Dec 2021)

= $74 million

Here, the assets are not impaired, because the fair value is greater than the book value. So, $74 million can be recorded as it is the operating loss and the same is to be considered