Waters Edge Company operates a manufacturing plant overlooking the Chesapeake Bay. In early 2015, a hurricane destroyed the uninsured plant, resulting in $500,000 damage. Such damage had occurred previously only once in the last 110 years. Waters Edge's $500,000 loss should be reported on the income statement

Question

Quizplus · Accepted Answer

The loss of $500,000 due to the hurricane is an extraordinary item because it is both unusual and infrequent. As per the accounting standards, extraordinary items are reported separately from ordinary income and excluded from continuing operations. Therefore, the loss should be reported as an extraordinary item on Waters Edge's income statement.

Waters Edge Company Operates a Manufacturing Plant Overlooking the Chesapeake