Dott Corporation experienced a $100,000 extraordinary loss in the second quarter of 2014 in their East Coast operating segment.The loss should be recognized
A)only at the consolidated report level at the end of the year.
B)entirely in the second quarter of 2014 in the East Coast operating segment.
C)in equal amounts allocated to the remaining three quarters of 2014 at the corporate level.
D)in equal amounts allocated to the remaining three quarters of 2014 of the East Coast segment.

Question

Quizplus · Accepted Answer

According to the matching principle of accounting, expenses should be recognized in the period in which the related revenue is recognized or in the period in which the expense is incurred. As the extraordinary loss was incurred in the second quarter of 2014 in the East Coast operating segment, it should be recognized entirely in that segment in the same quarter. Option A is incorrect as it suggests recognizing the loss only at the consolidated report level, which would disregard the segment reporting requirement. Option C and D are incorrect as they suggest equally allocating the loss over the remaining quarters, which would not reflect the actual timing and amount of the loss.

Dott Corporation Experienced a $100,000 Extraordinary Loss in the Second