Question

llini Inc. incurred a material loss that was unusual in character. This loss should be reported as: a. a line item between income from continuing operations and income from discontinued operations. b. a line item within income from continuing operations. c. a line item in the retained earnings statement. d. a discontinued operation.

Answer 1

Answer:

The correct answer is letter "B": a line item within income from continuing operations.

Explanation:

Unusual items are those not inherent in the operations of a business. Examples of unusual in character items are plant shutdown costs, costs from acquiring other businesses, or losses due to ti natural disasters. Unusual items according to the Generally Accepted Accounting Principles (GAAP) must appear in the income statement. Though, they appear in separate lines like items to give a better idea of the transactions a company incurs given a period.

Thus, losses incurred as an unusual character will have to be registered in the income statement in the operating income section.