Choice "B" is correct. The loss from discontinued operations for Year 1 includes the Year 1 operating losses of $100,000 and the impairment loss of $25,000. Since the fair value of the component's assets is less than the carrying value, there has been an impairment of the assets of the component, and the impairment loss is recognized in Year 1, the year in which the component is classified as held for sale. Thus, disregarding income taxes, the Year 1 loss from discontinued operations is $125,000.
The loss from discontinued operations for Year 2 includes the Year 2 operating losses of $50,000. If there had been a loss on disposal larger than what had been estimated as the $25,000 difference between the fair value and carrying value of the component's assets, that "additional" loss would have been included in Year 2, the year in which it occurred.
Choice "a" is incorrect. It includes all projected losses in the earlier of the two years. The results of operations should be reported in the period in which they occur; projected losses from operations are not anticipated.
Choice "c" is incorrect. It excludes the impairment loss of $25,000 from Year 1. The results of operations of the component, including any loss recognized in recording impairment of the component, are reported in discontinued operations in the period in which the component is either disposed of or classified as held for sale. In this question, the plan to sell the assets was committed to in Year 1, and that would be the period in which the assets were held for sale. At that date, the impairment had already occurred, and the impairment loss is recognized in that period and not in the later period of disposal.
Choice "d" is incorrect. It includes all projected losses in the later of the two years.