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

question 79

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 2013 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.

---

Definitions:

Effective Interest Method

A technique used in accounting to allocate the interest expense or income of a bond over its lifetime based on the bond's carrying amount at each interest period.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Effective Interest Method

The effective interest method is a finance and accounting technique used to allocate loan or bond interest expense over the relevant period based on the loan's book value.