The Division's Book Value and Fair Value Less Cost to Sell

question 3

Multiple Choice

The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2009 income statement?

• A)$2,000,000 loss.
• B)$2,500,000 loss.
• C)None.
• D)$500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.$2,000,000 loss from operations and $500,000 impairment loss = $2,500,000.

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Definitions:

Cash Dividend

A payment made by a company out of its earnings to shareholders, usually in cash.

Stock Dividend

A payment to shareholders in the form of additional shares rather than cash, reflecting a company's earnings.

Sold Below Cost

The act of selling a product for less than its production or acquisition cost, typically to clear inventory or meet competitive pricing.

Treasury Stock

Equity that was once distributed to the public and later purchased again by the issuer, diminishing the total shares in circulation.