Question Details

Indicate whether the following items would be reported as an ordinary or an extraordinary item 


Ex. 1
Indicate whether the following items would be reported as an ordinary or an extraordinary item in
Hartley Corporation's income statement.
(a) Loss attributable to labor strike.
(b) Gain on sale of fixed assets.
(c) Loss from fire. Hartley is a chemical company.
(d) Loss from sale of marketable securities.
(e) Expropriation of property by a foreign government.
(f) Loss from tornado damage. Hartley Corporation is located in the Midwest's tornado alley.
(g) Loss from government condemnation of property through a newly enacted law.
Ex. 2
Stiner Company has income from continuing operations of $480,000 for the year ended
December 31, 2002. It also has the following items (before considering income taxes):
(1) An extraordinary fire loss of $180,000.
(2) A gain of $120,000 on the discontinuance of a major segment.
(3) A cumulative effect of a change in accounting principle that resulted in an increase in prior
years' depreciation of $70,000.
Assume all items are subject to income taxes at a 30% tax rate.
Instructions
Prepare an income statement, beginning with income from continuing operations.




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