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    The Claxton Company manufactures children's toys

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    The Claxton Company manufactures children's toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to GAAP regarding disposal of long-lived assets. How should Claxton report the sale in its 2011 income statement?

    a. As an extraordinary item.

    b. As a discontinued operation, reported below income from continuing operations.

    c. Report the income or loss from operations of the division in discontinued operations below continuing operations and the gain or loss from disposal in continuing operations.

    d None of the above.

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    Solution Summary

    The Claxton Company manufactures children's toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to GAAP regarding disposal of long-lived assets. How should Claxton report the sale in its 2011 income statement?

    $2.19

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