In the estimation of value process, which of the following are true concerning discontinued operations? I.The...

In the estimation of value process, which of the following are true concerning discontinued operations?

I.The earnings from discontinued operations are explicitly shown in the income statement.

II.The netassetpositionofdiscontinuedoperations isdisclosedonthe balancesheet.

Ill. For an outside analyst, the most recent book value usually serves as a good estimate of the value of discontinued operations.

iv.The value of discontinued operations should be modeled as part of free cash flow or included inthe DCF value of operations.

a. I, II, and Ill only.

b. II and Illonly.

c. I and IV only.

d. I,II, III,and IV

Expert Solution

Reporting of Discontinued Operations

Discontinued operations are the results of operations of a component of an entity that is either being held for sale or which has already been disposed of. The designated results of operations must be reported as a discontinued operation within the financial statements if both of the following conditions are present:

Resulting elimination. The disposal transaction will result in the operations and cash flows of the component being eliminated from company operations.t
Continuing involvement. There will be no significant continuing involvement by the company in the operations of the component, once the disposal transaction has been completed. Continuing involvement implies the ability to influence the operating or financial policies of the disposed component.

The earning from discontinued operations are shown seperately in the income statement.

The Net asset position of the discontinued operation is disclosed in the balance sheet.

The fair market value value usually serves as a good estimate of the value of discontinued operations.

Assuming most recent book value is fair market value answer should be a. 1, 2, 3

ekkarill92 answered 2 years ago

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