A Corporation Closes a Facility and Moves to a New

question 160

Multiple Choice

A corporation closes a facility and moves to a new location. How would a loss on the disposal of the equipment at the closed facility be reported on an income statement?

• A) As an operating expense in net income from continuing operations
• B) As a component of discontinued operations
• C) As an extraordinary loss
• D) As another loss in net income from continuing operations

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Definitions:

Financial Leases

Covers the entire expected life of the equipment; does not provide for maintenance service, is not cancellable, and is fully amortized.

NPV

Net Present Value; a calculation used to determine the value of a project or investment by discounting future cash flows to the present.

NAL

NAL, or Net Advantage to Leasing, is a calculation used to determine the financial benefits, if any, of leasing an asset compared to purchasing it outright.

Lease-Versus-Purchase Analysis

A financial comparison to determine whether leasing or purchasing assets is more cost-effective for a business.