Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 13

For the following questions, circle the best respones.

Extraordinary items include all of the following except

a. utilization of tax loss carryforwards.

b. litigation settlements.

c. earthquake losses.

d. All of the above are examples of extraordinary items.

Step 1 of 5

(a)

A gain or a loss that occurs from a transaction that is both unusual in nature and infrequent in occurrence should be classified as an extraordinary item. Extraordinary items are reported separately on an income statement (net of taxes) specifically to emphasize that the item is extraordinary and should not be expected to occur again in subsequent financial statements. Utilization of tax loss carry forwards is an example of an extraordinary item.