Which of the following events would be considered an extraordinary item?
A) An airline experienced a significant loss due to a strike by employees of the company who provide its aircraft maintenance.
B) A food cannery was faced with a large loss of inventory of canned soups due to government condemnation because of possible botulism contamination;the company had never experienced a similar situation in its history.
C) A company,located on an island which has experienced severe flooding three times in the past 25 years,was subjected to a heavy loss of physical plant due to flooding.
D) A medical corporation was required to pay damages equal to three times its average net income to a patient.The corporation had experienced suits of this nature in the past,but the amount of the losses had never exceeded 5 percent of the corporation's average net income.

Question

Quizplus · Accepted Answer

An extraordinary item is an event or transaction that is both unusual in nature and infrequent in occurrence. Option B describes a situation where a food cannery faced a large loss of inventory due to government condemnation because of possible botulism contamination, which has never happened before in the company's history. This is an unusual and infrequent event and thus, an extraordinary item. Options A, C, and D are not extraordinary items as they are events that a company could reasonably expect to occur in their normal course of business.

Which of the Following Events Would Be Considered an Extraordinary