Question

Papco, a U.S. entity, has a subsidiary, Sapco, located in a foreign country. Sapco is essentially a sales unit for Papco. After remeasuring Sapco's financial statements from the foreign currency to Papco's reporting currency, Papco determined that it had a loss on the remeasurement. How should Papco report the loss in its consolidated financial statements?

Answer 1

Answer: The options are given below:

A. As an item of other comprehensive income.

B. As a deferred item until the subsidiary is sold.

C. As income from continuing operations.

D. As an extraordinary loss.

The correct option is C.

Explanation: Income from continuing operations is an income category that is found on the income statement and which accounts for a company’s regular business activities.

Income from continuing operations is also known as Operating Income.

In order for a business to succeed in the long term, it must consistently generate earnings from operations.

Income gotten from continuing operations is the primary source of income for successful businesses.