Discontinued Operation

Question 1

Which criterion does not have to be met in order for an operation to be classified as discontinued?

Answer 1

d. The operation must be sold within three months of the year-end.

Question 2

An entity manufactures and sells household products. The entity experienced losses associated with the small appliance group.
Operations and cash flows for this group
can be clearly distinguished from the rest of the entity’s operations. The entity decided to sell the small appliance group. What is the earliest point at which the entity shall
report the small appliance group as a discontinued operation?

Answer 2

a. When the entity classifies it as held for sale.

Question 3

Which is a requirement for a component of an entity to be classified as a discontinued operation?

Answer 3

d. The component must have been a cash generating unit while being held for use.

Question 4

Which statement is incorrect concerning th presentation of the discontinued operation in the statement of financial position?

Answer 4

d.Depreciable assets of the component held for sale shall be depreciated.

Question 5

Which of the following criteria is not required for the results of a component of an entity to be classifieds discontinued operation?

Answer 5

a. Management must have entered into a sale agreement

Question 6

Which disposal could qualify as discontinued operation?

Answer 6

b. Disposal of a component due to a major change in business strategy.

Question 7

When a component of an entity was discontinued during the current year, the loss on discontinued operation should

Answer 7

c. Include associated employee termination cost.

Question 8

When an entity decided to sell a component, the gain on disposal should be

Answer 8

c. Netted against the loss from operations of the component as a part of discontinued operation.

Question 9

When a component of a business has been discontinued during the year, the loss on discontinued operation should

Answer 9

a. Include operating loss of the current period.

Question 10

When a component of a business has been discontinued during the year, the component’s operating loss of the current period should be included in

Answer 10

b. Income statement as part of the loss on the discontinued operation.

Question 11

When an entity discontinued an operation and disposed of the discontinued operation, the transaction should be reported in the income statement as

Answer 11

c.An amount after income from continuing operations and before net income