7. In 2006, the Sykes Company wrote off a $100,000 debt from a major customer; l

Question

7.         In 2006, the Sykes Company wrote off a $100,000 debt from a major customer; lost $1,350,000 when a foreign country devalued its currency; gained $1,500,000 when a manufacturing plant was destroyed by a flood; lost $800,000 on the early retirement of its long-term bonds; and lost $65,000 on the sale of stock from its investment portfolio. What amount of extraordinary items (before income taxes) will Sykes report in 2006?

a.         $250,000

b.         $165,000

c.         $1,515,000

d.         $1,500,000

Explanation / Answer

Ans D  $1,500,000

when a manufacturing plant was destroyed by a flood should be reported as extraordinary item

Extra ordinary items are unusual and infrequent in nature

Examples of extraordinary items are losses from various catastrophic events, such as earthquakes, tsunamis and fire etc

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