A manufacturing company reports research costs and a loss on the sale of a business segement on its income statement. Which of these items should be included in operating expense?
A.Neither of these items
B.Only one of these items
C.Both of these items
Corret Answer: C. A loss on the sale of a business segement is extraordinary items and
is not included in operating expense? Am I wrong ?
I think this question is referring to the classification of non-recurring items (but I am not sure) of which there are 3, namely:
1) Discontinued Operations
2) Unusual or Infrequent Operations
3) Extraordinary Items
and 3) are reported below income from continuing operations, while 2) is part of continuing operations.
describes the disposal of a part of the business
includes (among other things) gain or loss from the sale of business.
From the wording I would guess that we are dealing with 2) here and thus we include this above income from continuing operations as part of operating expenses.