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CA Intermediate · Advanced Accounting · AS 24 Discontinuing Operations

Mehta Industries Ltd. has discontinued its packaging segment. For the year ended 31 March 2026, the segment's revenue was Rs 80 lakh and its expenses were Rs 92 lakh. The company's continuing operations earned a profit before tax of Rs 60 lakh. Ignoring tax, what pre-tax profit or loss from the discontinuing operation should be disclosed separately under AS 24, and what is the pre-tax profit of the enterprise as a whole?

The discontinuing operation shows a pre-tax loss of Rs 12 lakh (revenue 80 less expenses 92). Combined with the continuing operations' profit of Rs 60 lakh, the enterprise's total pre-tax profit is Rs 48 lakh, with the loss disclosed separately.

  1. ALoss of Rs 12 lakh from discontinuing operation; total profit Rs 48 lakhCorrect
  2. BLoss of Rs 12 lakh from discontinuing operation; total profit Rs 72 lakh
  3. CProfit of Rs 12 lakh from discontinuing operation; total profit Rs 72 lakh
  4. DLoss of Rs 92 lakh from discontinuing operation; total profit Rs 60 lakh

Explanation

Discontinuing operation result = 80 - 92 = loss of Rs 12 lakh. Total pre-tax profit = 60 - 12 = Rs 48 lakh. Option B adds the loss instead of deducting it, and option D shows only expenses and ignores revenue and the loss's effect on total.

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