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AICPA Exam CPA-Financial Topic 3 Question 43 Discussion
Actual exam question for
AICPA's
CPA-Financial exam
Question #: 43
Topic #: 3
[All CPA-Financial Questions]
Topic #: 3
In 1990, Teller Co. incurred losses arising from its guilty plea in its first antitrust action, and from a substantial increase in production costs caused when a major supplier's workers went on strike. Which of these losses should be reported as an extraordinary item?
Suggested Answer:
C
Choice 'c' is correct. Yes - No.
Rule: Losses arising from a company's first (and probably 'last') 'anti-trust' action are unusual and extraordinary and should be reported as an extraordinary item. Losses resulting from additional costs caused by a strike at a major supplier or even at one's own company are not extraordinary and should be disclosed as a separate component of 'income from continuing operations.'
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