The Riverside Company operates a manufacturing plant overlooking the Snake River.In early 2010, a tornado destroyed the uninsured plant, resulting in $400, 000 damage.Such damage had occurred previously only once in the last 110 years.Riverside's $400, 000 loss should be reported on the income statement
A)after ordinary income, but before extraordinary items
B)as an extraordinary item
C)as an adjustment to net income
D)as a separate component of income from continuing operations

Question

Quizplus · Accepted Answer

The destruction of the manufacturing plant by a tornado is an unusual and infrequent event that is not expected to occur again in the foreseeable future. Therefore, it meets the definition of an extraordinary item and should be reported separately, after the determination of income from continuing operations.

The Riverside Company Operates a Manufacturing Plant Overlooking the Snake