Sovereign Foods suffered a $1,500,000 loss (net of tax) when the FDA prohibited the sale of food products containing red dye no. 3. On its other products, Sovereign Foods had net sales of $6,580,000 and costs and other expenses of $6,505,000. Which of the following statements is not true? (Ignore taxes)

Question

Quizplus · Accepted Answer

The statement "Sovereign Foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000, since this item does not qualify for any special disclosure" is not true. The loss incurred due to the FDA prohibition would be shown as an extraordinary item in the income statement and disclosed separately from the other costs and expenses.

Sovereign Foods Suffered a $1,500,000 Loss (Net of Tax) When