Question

Gains and losses that are neither unusual nor infrequent are reported as:

(Multiple Choice)

A: Part of continuing operations in after-tax dollars.

B: A prior period adjustment on the statement of retained earnings.

C: A gain or loss from disposing of the discontinued segment's net assets.

D: A gain or loss from operation of a discontinued segment.

E: Part of continuing operations in before tax dollars.

Answer 1

Answer:- Gains and losses that are neither unusual nor infrequent are reported as:

Option E -: Part of continuing operations in before tax dollars

Explanation :-

1.Why Option A to D not support the answer :-

Most discontinued operations, extraordinary items, changes in accounting principle, and prior period adjustments affect the amount of income taxes a corporation must pay.

To report the income tax effect, FASB Statement No. 96 requires reporting all of these items net of their tax effects.[5] Net-of-tax effect means that items appear at the dollar amounts remaining after deducting the income tax effects. Thus, the total effect of a discontinued operation, an extraordinary item, a change in accounting principle, or a prior period adjustment appears in one place in the appropriate financial statement.

2.Why Option E supports the answer:-

The reference to “Income from continuing operations” that means which neither a unusual nor infrequent transaction , on the income statement represents the results of transactions (including income taxes) that are normal for the business and may be expected to recur.

Before Tax Dollars.