A review of the December 31, 2014, financial statements of Run Corporation revealed that under the caption "extraordinary losses," Run reported a total of $300,000. Further analysis revealed that the $300,000 in losses comprised the following items:
1.Run recorded a gain of $80,000 incurred in the sale of equipment.
2.In an unusual and infrequent occurrence, a loss of $350,000 was sustained as a result of tornado damage to a manufacturing facility.
3.During 2014, several factories were shut down during a major strike by employees of Run's major customer. Shutdown expenses totaled $150,000.
4.Inventory in the amount of $30,000 was written off as obsolete.

Ignoring income taxes, what amount of loss should Run have reported as an extraordinary loss on its 2014 income statement?
A) $150,000
B) $350,000
C) $280,000
D) $500,000

Question

A review of the December 31, 2014, financial statements of Run Corporation revealed that under the caption "extraordinary losses," Run reported a total of $300,000. Further analysis revealed that the $300,000 in losses comprised the following items: 
1.Run recorded a gain of $80,000 incurred in the sale of equipment.
2.In an unusual and infrequent occurrence, a loss of $350,000 was sustained as a result of tornado damage to a manufacturing facility.
3.During 2014, several factories were shut down during a major strike by employees of Run's major customer. Shutdown expenses totaled $150,000.
4.Inventory in the amount of $30,000 was written off as obsolete.

Ignoring income taxes, what amount of loss should Run have reported as an extraordinary loss on its 2014 income statement?
A) $150,000
B) $350,000
C) $280,000
D) $500,000

Quizplus · Accepted Answer

The tornado damage is the only item that meets the criteria for extraordinary losses.

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