Extraordinary item must be both of an u unusual

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Extraordinary Item must be both of an u Unusual Nature and u Occur Infrequently Company must consider the environment in which it operates. Amount reported “net of tax.” Reporting Irregular Items LO 4 Explain how to report irregular items.
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Are these items Extraordinary? (a) A large portion of a tobacco manufacturer’s crops are destroyed by a hail storm. Severe damage from hail storms in the locality where the manufacturer grows tobacco is rare. (b) A citrus grower's Florida crop is damaged by frost. (c) A company sells a block of common stock of a publicly traded company. The block of shares, which represents less than 10% of the publicly-held company, is the only security investment the company has ever owned. Reporting Extraordinary Items LO 4 Explain how to report irregular items.
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Are these items Extraordinary? (d) A large diversified company sells a block of shares from its portfolio of securities which it has acquired for investment purposes. This is the first sale from its portfolio of securities. (e) An earthquake destroys one of the oil refineries owned by a large multi-national oil company. Earthquakes are rare in this geographical location. (f) A company experiences a material loss in the repurchase of a large bond issue that has been outstanding for 3 years. The company regularly repurchases bonds of this nature. Reporting Extraordinary Items LO 4
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Illustration: KC Corporation had after tax income from continuing operations of $55,000,000 during the year. In addition, it suffered an unusual and infrequent pretax loss of $770,000 from a volcano eruption. The corporation’s tax rate is 30%. Prepare a partial income statement for KC Corporation beginning with income from continuing operations. Income from continuing operations $55,000,000 Extraordinary loss, net of $231,000 tax 539,000 Net income $54,461,000 Reporting Extraordinary Items ($770,000 x 30% = $231,000 tax) LO 4 Explain how to report irregular items.
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Extraordinary Items are reported after “Income from continuing operations.” LO 4 Other revenue (expense): Interest revenue 17,000 Interest expense (21,000) Total other (4,000) Income before taxes 79,000 Income tax expense 24,000 Income from continuing operations 55,000 Extraordinary loss, net of tax 539 Net income 54,461 $ Income Statement (in thousands) Sales 285,000 $ Cost of goods sold 149,000 Gross profit 136,000 Previously labeled as “Net Income”. Moved to Reporting Extraordinary Items
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LO 4 Illustration 4-8 Income Statement Presentation of Extraordinary Items Reporting Extraordinary Items
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Reporting when both Discontinued Operations and Extraordinary Items are present. Discontinued Operations LO 4 Income before taxes 79,000 Income tax expense 24,000 Income from continuing operations 55,000 Discontinued operations: Loss from operations, net of tax 315 Loss on disposal, net of tax 189 Total loss on discontinued operations 504 Income before extraordinary item 54,496 Extraordinary loss, net of tax 539 Net income 54,496 $ Income Statement (in thousands) Sales 285,000 $ Cost of goods sold 149,000 Gross profit 136,000 Extraordinary Items Reporting Irregular Items
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Material items that are unusual or infrequent , but not both , should be reported in a separate section just above “Income from continuing operations before income taxes.” Examples can include: u
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