[TFA] Discontinued Operations

Question 1

Which disposal could qualify as discontinued operation?

a. Disposal of a component that is similar in nature to other components but has operations and cash flows distinguishable from the rest of the entity.
b. Disposal of a component due to a major change in business strategy.
c. Disposal of a small component within the current business strategy.
d. Disposal of a component with distinguishable operations and cash flows from the rest of the entity.

Answer 1

d. Disposal of a component with distinguishable operations and cash flows from the rest of the entity.

Question 2

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

a. Income statement as part of revenue and expenses.
b. Income statement as part of the loss on the discontinued operation.
c. Income from continuing operations.
d. Retained earnings.

Answer 2

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