Play Cloth Company, a retailer of children's clothing, decided to dispose of its European division. The company announced the plan to sell the division on $20$ March $20$X$1.$ Once the announcement was made, management hired a professional services firm to assist with finding a buyer for the division. The firm would charge $4\mathrm{.}50\%$ commission on the sale of the division.

$$ The European division had a carrying value of $$51,380,000$ and was listed for sale at a price of $$49,210,000.$ The sale price was determined in reference to an independent fair value appraisal.

$$ The division earned $$5,570,000$ from $1$ July $20$X$0-19$ March $20$X$1$ and $$1,140,000$ between $20$ March $20$X$1-30$ June $20$X$1.$

$$ On $30$ June $20$X$1,$ an appraisal indicated that the fair value of the division was approximately $$49,640,000.$

$$ Play Cloth had total earnings from continuing operations $($after tax$)$ of $$131,400,000$ for the year ended $30$ June $20$X$1.$

$$ Play Cloth has a tax rate of $30\%.$

Required:

$1.$ Determine whether the European division qualifies as a discontinued$$operation$.$

Answer rating: 100% (QA)

In determining whether the European division qualifies as a discontinued operation we need to consid... View the full answer