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Question 31Q

Intermediate Accounting (Kieso)
Found in: Page 180

Short Answer

Linus Paper Company decided to close two small pulp mills in Conway, New Hampshire, and Corvallis, Oregon. These two closings do not represent a major shift in strategy for the company. Would these closings be reported in a separate section entitled “Discontinued operations after income from continuing operations”? Discuss.

Yes, the company must report the outcomes of closing other operations in the income statement.

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Step by Step Solution

Meaning of Multi-Step Income Statement

A multi-step income statement reports transactions by bifurcating the business operations into two parts. It includes continued and discontinued operations. The loss and gain associated with the discontinued section are reported separately in the income statement.

Reporting of closing business operations

The company should disclose the gain earned or loss incurred from the disposal of its other functions.

Also, such gains or losses should be disclosed in the discontinued operations section of the income statement after reporting the necessary information of continuing operations.

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