When a Segment of a Business Has Been Discontinued During

question 123

Multiple Choice

When a segment of a business has been discontinued during the year, the gain or loss on disposal should:

• A) include operating losses of the current period up to the measurement date.
• B) be net of applicable income taxes.
• C) be reported as an infrequent item.
• D) include operating losses during the phase-out period.

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Definitions:

Fixed Costs

Expenses such as rent, salaries, and insurance that remain constant regardless of the amount of production or sales.

Variable Cost

A cost that varies with the level of output or production volume.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Depreciation

The allocation of the cost of an asset over its useful life, reflecting the reduction in value owing to wear and tear, age, or obsolescence.