karoliukas

To be classified as an extraordinary item on the income statement under U.S. GAAP, the item must be:

A) unusual in nature and infrequent in occurrence.

B) probable and infrequent in nature.

C) estimated and probable.

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Extraordinary items are unusual and infrequent events that are reported separately, net of tax "below the line." Examples are expropriations by foreign governments and uninsured losses from earthquakes, eruptions, and tornadoes.

karoliukas

Extraordinary items are:

A) unusual in nature and infrequent.

B) unusual in nature or infrequent.

C) related to the normal course of business.

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Extraordinary items are unusual and infrequent items reported below the line net of taxes. “Below the line” means after net income from continuing operations but before net income.- Discontinued operations are reported below the line net of taxes.  - Unusual or infrequent items are unusual or infrequent, but not both. They appear (a separate line item) as a component of net income from continuing operations that must be removed if not deemed to be a component of persistent income. They are reported above the line before taxes.  - Changes in accounting principle are reported below the line net of taxes.  
- Accounting errors go directly to retained earnings.

karoliukas

Which of the following statements regarding making changes in accounting principles is least accurate?

A) Changes in accounting estimates are now treated the same as changes in accounting principles.

B) A change in accounting principle is a change from one generally accepted accounting principle to another generally accepted principle. The firm making the change must justify the change.

C) The general rule is retrospective application.

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Changes in accounting estimates are not treated the same as changes in principles. Changes in principles are treated retrospectively, whereas changes in accounting estimates are accounted for in the current and future periods. Both remaining statements are accurate.

karoliukas

Extraordinary items are:

A) unusual or infrequent.

B) unusual and infrequent.

C) reported above the line.

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Extraordinary items are unusual and infrequent, reported below the line separate from income from continuing operations on the income statement, and would include such items as: foreign government confiscation, earthquake damages, losses from volcanic eruptions, etc.