Hey Everyone!
Could someone please explain this to me?
Which of the following statements regarding the income statement is least accurate?
A) Extraordinary items are both unusual in nature and infrequent in occurrence. Extraordinary items are disclosed net of taxes after income from continuing operations in the income statements. B) The results of discontinued operations are reported below income from continuing operations on the income statement net of taxes. C) Items that are unusual in nature or infrequent in occurrence appear below income from continuing operations on a pretax basis.
Your answer: B was incorrect. The correct answer was C) Items that are unusual in nature or infrequent in occurrence appear below income from continuing operations on a pretax basis.
The key word here is “or.” Unusual or infrequent items are _unusual or _ infrequent , but NOT both. These items are reported (as a separate line item) as a component of net income from continuing operations.