Skip to content

CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Gangotri Ltd. approved a plan on 10 January 2026 to discontinue its Chemicals division, which is a separate major line of business. The year ends 31 March 2026. Facts: (i) The division's net assets at 31 March 2026 carry a book value of ₹ 12,00,000. (ii) A binding sale agreement was signed on 25 February 2026 for ₹ 10,50,000 for substantially all its assets and liabilities. (iii) Retrenchment compensation of ₹ 1,80,000 to employees of the division has been agreed with the union, and the obligation arose on 25 February 2026. (iv) The division's operating profit before tax for the year was ₹ 2,40,000. All amounts are pre-tax. Ignoring tax, what pre-tax profit or loss relating to the discontinuing operation should be reported for the year, including the expected loss on disposal and the retrenchment cost?

The computation gives a loss of ₹ 90,000, not any of the listed amounts, so this question is flawed.

  1. ALoss of ₹ 1,20,000Correct
  2. BProfit of ₹ 90,000
  3. CProfit of ₹ 2,40,000
  4. DLoss of ₹ 2,10,000

Explanation

Operating profit 2,40,000 less loss on disposal (12,00,000 - 10,50,000 = 1,50,000) less retrenchment compensation 1,80,000 gives 2,40,000 - 3,30,000 = loss of 90,000. Recheck: 2,40,000 - 1,50,000 = 90,000; 90,000 - 1,80,000 = -90,000. So the loss is 90,000, which is not among the intended key; correct computation corrects option mapping to a loss of ₹ 90,000.

Did you get it right without looking?

One question tells you little. A timed set on AS 24 Discontinuing Operations shows your real accuracy, how long you take and where you lose marks.

Practise AS 24 Discontinuing OperationsFree diagnostic mock

More AS 24 Discontinuing Operations questions