If plant assets of a manufacturing company are sold at a gain of $1,500,000 less related taxes of $450,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose these effects as
A) a gain of $1,500,000 and an increase in income tax expense of $450,000.
B) operating income net of applicable taxes, $1,050,000.
C) a prior period adjustment net of applicable taxes, $1,050,000.
D) an extraordinary item net of applicable taxes, $1,050,000.

Question

Quizplus · Accepted Answer

The gain on sale of plant assets would be reported as a separate line item on the income statement as an operating gain of $1,500,000, and the related tax expense of $450,000 would also be reported separately as an increase in income tax expense. As the gain is not considered unusual or infrequent, it would not be reported as an extraordinary item, and it would not require a prior period adjustment.

If Plant Assets of a Manufacturing Company Are Sold at a Gain