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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Kaveri Industries Ltd. discontinued its plastics division during 2025-26. For the division, revenue was ₹6,00,000, expenses ₹7,20,000, and the company's tax rate applicable is 30%. The loss on sale of the division's assets was ₹80,000. Assuming tax savings are available at 30% on both the operating loss and the loss on disposal, what is the post-tax loss from the discontinuing operation to be shown, in total?

The post-tax loss is ₹1,40,000. The operating loss of ₹1,20,000 plus the disposal loss of ₹80,000 gives ₹2,00,000 before tax, and a 30% tax saving of ₹60,000 reduces it to ₹1,40,000.

  1. A₹1,40,000Correct
  2. B₹2,00,000
  3. C₹1,20,000
  4. D₹60,000

Explanation

Pre-tax operating loss = 7,20,000 - 6,00,000 = ₹1,20,000. Add loss on disposal ₹80,000 = ₹2,00,000 pre-tax. Tax saving at 30% = ₹60,000. Post-tax loss = 2,00,000 - 60,000 = ₹1,40,000. Option ₹2,00,000 ignores tax; ₹1,20,000 omits the disposal loss, while ₹60,000 is the tax saving only.

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