A review of the December 31, 2014, financial statements of Somer Corporation revealed that under the caption "extraordinary losses," Somer reported a total of $1,130,000. Further analysis revealed that the $1,130,000 in losses was comprised of the following items:(1) Somer recorded a loss of $300,000 incurred in the abandonment of equipment formerly used in the business.(2) In an unusual and infrequent occurrence, a loss of $600,000 was sustained as a result of hurricane damage to a warehouse.(3) During 2014, several factories were shut down during a major strike by employees, resulting in a loss of $170,000.(4) Uncollectible accounts receivable of $60,000 were written off as uncollectible.Ignoring income taxes, what amount of loss should Somer report as extraordinary on its 2014 income statement?
A) $300,000.
B) $600,000.
C) $900,000.
D) $1,130,000.

Question

Quizplus · Accepted Answer

Extraordinary items are both unusual and infrequent in nature. In this case, only the hurricane damage ($600,000) qualifies as an extraordinary item because it is both unusual and infrequent. The abandonment of equipment, the loss due to a strike, and the write-off of uncollectible accounts do not meet both criteria to be classified as extraordinary.

A Review of the December 31, 2014, Financial Statements of Somer