Practice prompt · Q:statement-presentation-comprehensive-income-and-disclosure/discontinued-boundary-001

Do not infer a discontinued operation from approval alone

Tests the component, disposal status, strategic shift, and major effect sequence.

Updated Sep 20, 2026 Review due Nov 7, 2026

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Granite Harbor's board approves a plan to sell selected Home Monitoring rights and inventory while retaining service obligations and related product lines. Which analysis must precede discontinued-operation presentation?

Choose the best answer. a Establish the component and disposal status, then apply the strategic-shift and major-effect condition before determining presentation and disclosure. b Present every board-approved sale below continuing operations because approval creates a strategic shift. c Use the disposal's loss amount as the only test because a large loss defines a component. d Wait for cash collection; no earlier classification analysis is possible.

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Answer: a

Choice a. Define the component and disposal status first, then apply the strategic-shift and major-effect condition. If the disposal qualifies, trace the period, tax, presentation, and note effects.