A review of the December 31, 2010, financial statements of Rule Corporation revealed that under the caption "extraordinary losses, " Rule had reported a total of $300, 000.Further analysis revealed that the $300, 000 in losses comprised the following items: 1.Rule recorded a gain of $ \$ 80,000 $ incurred in the sale of equipment.
2.In an umusual and infrequent occurrence, a loss of $ \$ 250,000 $ was sustained as a result of tomado damage to a manufacturing facility
3. During 2010, several factorieswere shut down chuing a najor strike by employees of Rule's major customer. Shut clown expenses totaled $ \$ 100,000 $.
4. Inventory in the amount of $ \$ 30,000 $ waswritten off as obsolete. Ignoring income taxes, what amount of loss should Rule report as an extraordinary loss on its 2010 income statement?
A)$100, 000
B)$250, 000
C)$280, 000
D)$350, 000

Question

Quizplus · Accepted Answer

The only item that qualifies as an extraordinary loss under accounting standards is the $250,000 loss due to tornado damage, as it is both unusual and infrequent. The other items listed do not meet the criteria for extraordinary loss.

A Review of the December 31, 2010, Financial Statements of Rule