Suppose a severe storm floods a company's headquarters,causing damages to the building of $300,000 and destruction of inventory of $200,000.Because of the unusual nature of this event,the company had no flood insurance to cover these losses.Under U.S.GAAP,how much would the company report as an extraordinary loss in the current year's income statement?

Question

Quizplus · Accepted Answer

The company would report the total amount of damage and destruction as an extraordinary loss of $500,000, which is the sum of $300,000 (building damage) and $200,000 (inventory destruction) since the loss is unusual in nature and not expected to occur frequently.

Suppose a Severe Storm Floods a Company's Headquarters,causing Damages to the Building