Question

The Holiday House had severe damage done to its Christmas inventory due to an

escaped circus monkey rampaging through the store. The inventory loss was $150,000
before applicable taxes of $30,000. The Holiday House should record the loss as a(n)
A) $150,000 loss in other expenses and losses.
B) $180,000 extraordinary loss.
C) $120,000 extraordinary loss.
D) $130,000 extraordinary loss

Answer 1

The Holiday House should record the loss as a $180,000 extraordinary loss due to the rampage by the escaped circus monkey.

Step-by-step explanation:

The Holiday House should record the loss as a(n) $180,000 extraordinary loss.

1. An extraordinary loss is a significant and unusual event that is not expected to occur regularly in the normal course of business.
2. In this case, the rampage by the escaped circus monkey causing severe damage to the Christmas inventory is an extraordinary event.
3. The loss of $150,000 before applicable taxes should be increased by the amount of the taxes, $30,000, to reflect the total loss of $180,000.