Op item in I/S disposal, otherwise, following, principles, accounting

heart

Assume U.S. GAAP (generally accepted accounting principles) applies unless
otherwise noted.

For the most recent year a manufacturing company reports the following items on
their income statement:

Interest expense $62,500
Loss on disposal of fixed assets $50,000
Realized gain on sale of available-for-sale securities $17,750

Which of the items is classified as an operating item in the company’s income
statement?

A. Interest expense.
B. Loss on disposal of fixed assets.
C. Realized gain on sale of available-for-sale securities.

I answered (A) interest expense. the correct answer is (b) loss on disposal of fixed assets.

I cant seem to get this. I thought interest rev/exp was an operating item.

pogo

Interest expense is non operating per the income statement however it is considered an operating item on the statement of cashflows. Think of EBIT earnings before interest and tax which is a proxy for operating income also if you look at an example of an income statement it shows operating income followed by interest expense. Realized gain on sale of available for sale securities is a comprehensive income item so it bypasses the income statement and it goes direct to equity under comprehensive income on the balance sheet.



Edited 1 time(s). Last edit at Wednesday, June 3, 2009 at 10:45AM by chung.da.neu.

koba

ahhhh.... thanks!!!
i def understand now. I know its these little things that are going to mess me up.

thanks again!