Leisure Attire Corporation discontinued Princess Fashions, its entire line of ch

Question

Leisure Attire Corporation discontinued Princess Fashions, its entire line of childrens clothing, in November of 2001. Prior to the disposal, Princiss Fashions generated a loss of $300,000(net of tax) for the period from January through the sale date. Because of the value of the real estate and the machinery, there was a gain of $750,000(net of tax) on the actual sale. How should this situation be reported in the financial statements of Leisure Attire for 2001? a. $450,000 included in the 2001 income tax statement as an extraordinary item. b. $300,000 loss included in the income from operations and a $750,000 gain reported in the "discontinued operations" section og the income statement. c. $450,000 adjustment to beginning retained earnings in the statement of retained earnings. d. $450,000 gain in the "discontinued operations" section of the income statement.Type your question here

Explanation / Answer

b. $300,000 loss included in the income from operations and a $750,000 gain reported in the "discontinued operations" section og the income statement.

Reason- $300,000 loss was incurred through operations prior to the disposal. On the other hand $750,000 gain was due to disposal of assets in the discontinued operations

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