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Homework answers / question archive / If a gain is expected from the sale of a component of a business, the estimated gain should be recorded at the date the board of directors adopts the plan of disposal when realized, the disposal date as unearned revenue until the date of disposal directly to retained earnings at the disposal date
If a gain is expected from the sale of a component of a business, the estimated gain should be recorded at the date the board of directors adopts the plan of disposal when realized, the disposal date as unearned revenue until the date of disposal directly to retained earnings at the disposal date
Correct Answer is B when realized, the disposal date
Gain from sale of a component of a business has to be reported in the income statement when realized. Gain or loss is reported on the date of disposal of component of a business.
Gain from sale of a component of business has to be reported as income from discontinued operations.The gains combined/aggregated with income from continuing operation
Analysis of Other options
A- at date the board of directors adopts the plan of disposal. There is no financial impact on the date when the board of directors adopts the plan of disposal. This is incorrect
C- as unearned revenue until the date of disposal - Gain cannot be recorded as unearned revenue until the date of disposal. This is incorrect
D- directly to retained earnings at the disposal date- This is incorrect as gains from sale of a component of business has to be reported as income from discontinued operations in income statement. These are not reported directly to retained earnings at the disposal date
