[ak311]

I’m confused in a lot of spots exactly why the gain or loss from some sales/disposals are reported in continuing and why some are reported in discontinued.

Here’s part of a practice sim:

Where are the following items reported in the income statement?

1. Revenue from a cancelled product line in women’s clothing.

2. Loss on the sale of a subsidiary.

According to the answer key, number 1 should go in continuing operations and number 2 should go into discontinued operations. The reasons in the answer key don’t make sense to me, could someone explain?

FAR - F (2011), 5/16
AUD - F(2011)
BEC -
REG -

2nd attempt at this thing. Time to get serious.

[jbeans2009]

Discontinued operations is when an entire part of the company is discontinued. For example, a subsidiary, which is a part on its own. Another example is when there are distict product lines-eg. a sports equiptment line, a clothing line. If they discontinued selling clothing all together-that would be a discontinued operation. However, discontinuing one specific item of clothing, is not a separtate operation on its own.

[ak311]

Ok thanks that helps. What has confused me the most about #2 is that I thought the company had to declare that the part of the business was discontinued and planned to be sold before it could be classified as discontinued.

So if a company just sells a part of it's business the gain/loss is always classified as discontinued if the portion sold is a definitive component of the business?

FAR - F (2011), 5/16
AUD - F(2011)
BEC -
REG -

2nd attempt at this thing. Time to get serious.

[Author]

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