When a Company Discontinues an Operation and Disposes of the Discontinued

question 24

Multiple Choice

When a company discontinues an operation and disposes of the discontinued operation (component) , the transaction should be included in the income statement as a gain or loss on disposal reported as

• A)a prior period adjustment.
• B)an other income and expense item.
• C)an amount after continuing operations and before net income.
• D)a bulk sale of plant assets included in income from continuing operations.

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Definitions:

Accounts Receivable

Unsettled financial obligations to a corporation from its customers for products or services already delivered or engaged in, awaiting payment.

Accounts Payable

Money owed by a business to its suppliers shown as a liability on the company’s balance sheet.

Just-in-time

An inventory strategy companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Restrictive Policy

Measures taken by a government or financial institution to limit borrowing and spending in an attempt to curb inflation or stabilize the economy.