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Generally Accepted Accounting Principles (GAAP) MCQs

Why do firms distinguish income from continuing operations and income from discontinued operations?

Because it makes the firm look smart for discontinuing an operation

Because it increases the company's per share price

Because it reduces the tax effect if it is reported separately

Because it gives investors and stockholders insight into the impact that the sale of the discontinued operation will have on the company

Answer

Correct Answer: Because it gives investors and stockholders insight into the impact that the sale of the discontinued operation will have on the company

Explanation:

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