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    16 - Discontinued Operations

    Uploaded by

    Jessa
    The document contains multiple choice questions about accounting for discontinued operations under IFRS and US GAAP. It tests understanding of criteria for classifying a component as a discontinued operation, presentation of discontinued operations in the income statement and statement of financial position, and treatment of gains, losses, and expenses associated with discontinued operations. Key points covered include that a component must be a separate major line of business to be classified as discontinued, results of discontinued operations are presented as a single amount below income from continuing operations, and operating losses and employee termination costs are included in the loss on discontinued operations.

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    16 - Discontinued Operations

    Uploaded by

    Jessa
    128 views3 pages
    The document contains multiple choice questions about accounting for discontinued operations under IFRS and US GAAP. It tests understanding of criteria for classifying a component as a discontinued operation, presentation of discontinued operations in the income statement and statement of financial position, and treatment of gains, losses, and expenses associated with discontinued operations. Key points covered include that a component must be a separate major line of business to be classified as discontinued, results of discontinued operations are presented as a single amount below income from continuing operations, and operating losses and employee termination costs are included in the loss on discontinued operations.

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    16 - DISCONTINUED OPERATIONS

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    The document contains multiple choice questions about accounting for discontinued operations under IFRS and US GAAP. It tests understanding of criteria for classifying a component as a discontinued operation, presentation of discontinued operations in the income statement and statement of financial position, and treatment of gains, losses, and expenses associated with discontinued operations. Key points covered include that a component must be a separate major line of business to be classified as discontinued, results of discontinued operations are presented as a single amount below income from continuing operations, and operating losses and employee termination costs are included in the loss on discontinued operations.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    128 views3 pages

    16 - Discontinued Operations

    Uploaded by

    Jessa
    The document contains multiple choice questions about accounting for discontinued operations under IFRS and US GAAP. It tests understanding of criteria for classifying a component as a discontinued operation, presentation of discontinued operations in the income statement and statement of financial position, and treatment of gains, losses, and expenses associated with discontinued operations. Key points covered include that a component must be a separate major line of business to be classified as discontinued, results of discontinued operations are presented as a single amount below income from continuing operations, and operating losses and employee termination costs are included in the loss on discontinued operations.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
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    of 3

    CHAPTER 16

    DISCONTINUED OPERATIONS

    QUESTION 16-5 Multiple choice (IFRS)

    1. Which criterion does not have to be met in order for an operation to be classified as discontinued?

    a. The operation shall represent a separate major line of business or geographical area.
    b. The operation is part of a single plan to dispose of a separate major line of business or geographical
    area.
    c. The operation is a subsidiary acquired exclusively with a view to resale.
    d. The operation must be sold within three months of the year-end.

    2. An entity manufactures and sells household products. The entity experienced losses associated with the
    small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest
    of the entity's operations. The entity decided to sell the small appliance group. What is the earliest point at
    which the entity shall report the small appliance group as a discontinued operation?

    a. When the entity classifies it as held for sale.


    b. When the entity receives an offer for the segment.
    c. When the entity first sells any of the assets of the segment.
    d. When the entity sells the majority of the assets of the segment.

    3. Which is a requirement for a component of an entity to be classified as a discontinued operation?

    a. The activities must cease permanently prior to the financial statements being authorized for issue.
    b. The component must be a reportable segment.
    c. The assets must have been classified as held for sale in the previous financial statements.
    d. The component must have been a cash generating unit while being held for use.

    4. What is the presentation of the results from discontinued operation in the income statement?

    a. The entity shall disclose a single amount on the face of the income statement below the income from
    continuing operations.
    b. The amounts from discontinued operations shall be broken down over each category of revenue and
    expense.
    c. Discontinued operations shall he shown as movement on retained earnings.
    d. Discontinued operations shall be shown as a line item after gross income with the related tax being
    shown as part of income tax expense.

    5. Which statement is incorrect concerning the presentation of the discontinued operation in the
    statement of financial position?

    a. Assets of the component held for sale are presented separately under current assets.
    b. Assets of the component held for sale are measured at the lower between fair value less cost of disposal
    and carrying amount.
    c. Liabilities of the component held for sale are presented separately under current liabilities.
    d. Depreciable assets of the component held for sale shall be depreciated.
    QUESTION 16-6 Multiple choice (AICPA Adapted)

    1. Which of the following criteria is not required for the results of a component of an entity to be
    classified as discontinued operation?

    a. Management must have entered into a sale agreement.


    b. The component is available for immediate sale.
    c. The operations and cash flows of the component shall be eliminated from the operations of the entity as
    a result of the disposal.
    d. The entity shall not have any significant continuing involvement in the operations of the component
    after disposal.

    2. Which disposal could qualify as discontinued operation?

    a. Disposal of a component that is similar in nature to other components but has operations and cash flows
    distinguishable from the rest of the entity.
    b. Disposal of a component due to a major change in business strategy.
    c. Disposal of a small component within the current business strategy.
    d. Disposal of a component with distinguishable operations and cash flows from the rest of the entity.

    3. Which should be considered as discontinued operation?

    a. The operations and cash flows of a component have been eliminated from the ongoing operations of the
    entity as a result of a disposal transaction.
    b. The entity continues to have a significant continuing involvement in the operations of a component
    after the disposal transaction.
    c. The entity outsources the manufacturing operations of a component and sells the manufacturing facility
    of the component but continues to sell the product.
    d. All of these should be considered as discontinued operations.

    4. When a component of an entity was discontinued during the current year, the loss on discontinued
    operation should

    a. Exclude the associated employee relocation cost.


    b. Exclude operating loss for the period.
    c. Include associated employee termination cost.
    d. Exclude associated lease cancelation cost.

    5. When an entity decided to sell a business component, the gain on the disposal should be

    a. Presented as other income.


    b. Presented as an adjustment to retained earnings, gain on the disposal should be
    c. Netted against the loss from operations of the component as a part of discontinued operation.
    d. Included in other comprehensive income.

    6. When a component of a business has been discontinued during the year, the loss on discontinued
    operation should

    a. Include operating loss of the current period.


    b. Exclude operating loss during the period.
    c. Be classified an extraordinary item.
    d. Be classified an operating item.

    7. When a component of a business has been discontinued during the year, the component's operating loss
    of the current period should be included in

    a. Income statement as part of revenue and expenses


    b. Income statement as part of the loss on the discontinued operations.
    c. Income from continuing operations.
    d. Retained earnings.

    8. When an entity discontinued an operation and disposed of the discontinued operation, the transaction
    should be reported in the income statement as

    a. A prior period error


    b. Other income and expense item
    c. An amount after income from continuing operations and before net income
    d. A bulk sale of assets included in income from continuing operations.

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