Execucomp Corporation's financial statements in the current year show a loss from discontinued operations, a retrospective restatement. If Execucomp income statement is prepared according to generally accepted accounting principles (as illustrated in your text), which of the following four items would appear second in sequence in the income statement?

Question

Quizplus · Accepted Answer

According to generally accepted accounting principles, the sequence in the income statement is as follows: 
1. Revenue 
2. Cost of goods sold 
3. Gross profit 
4. Operating expenses 
5. Operating income 
6. Other income or expenses (such as loss from discontinued operations) 
7. Income from continuing operations 
8. Extraordinary items (such as an extraordinary gain) 
9. Net income. 
Therefore, the item that would appear second in sequence in the income statement would be the cost of goods sold. However, since the options provided do not include this, the correct answer is C, loss from discontinued operations.

Execucomp Corporation's Financial Statements in the Current Year Show a Loss