Badger, Inc. is planning a major stock issuance in early 2017. During 2016, the company reported net income from operations of $530,000 before taxes. The items below describe major events that occurred during 2016.
1. A $52,000 gain was recognized on the sale of a subsidiary
2. Inventory was written down by $21,000 due to obsolescence
3. Casualty loss of $320,000
4. A $31,000 gain was recognized due to the adoption of a new FASB statement
The company's tax rate is 30 percent.
A. Which items should not be reported as a component of income from continuing operations?
B. Suppose management decided to exclude all of the above items from income from continuing operations. What effect might this have on investor and creditor decisions?

Question

Badger, Inc. is planning a major stock issuance in early 2017. During 2016, the company reported net income from operations of $530,000 before taxes. The items below describe major events that occurred during 2016. 
1.	A $52,000 gain was recognized on the sale of a subsidiary
2. 	Inventory was written down by $21,000 due to obsolescence 
3.	Casualty loss of $320,000 
4.	A $31,000 gain was recognized due to the adoption of a new FASB statement
The company's tax rate is 30 percent.
A. Which items should not be reported as a component of income from continuing operations?
B. Suppose management decided to exclude all of the above items from income from continuing operations. What effect might this have on investor and creditor decisions?

Quizplus · Accepted Answer

The Answer of Badger, Inc. is planning a major stock issuance in early 2017. During 2016, the company reported net income from operations of $530,000 before taxes. The items below describe major events that occurred during 2016. 
1.	A $52,000 gain was recognized on the sale of a subsidiary
2. 	Inventory was written down by $21,000 due to obsolescence 
3.	Casualty loss of $320,000 
4.	A $31,000 gain was recognized due to the adoption of a new FASB statement
The company's tax rate is 30 percent.
A. Which items should not be reported as a component of income from continuing operations?
B. Suppose management decided to exclude all of the above items from income from continuing operations. What effect might this have on investor and creditor decisions?