Question

A review of the December 31, 2014, financial statements of Somer Corporation revealed that under the caption ""extraordinary losses,"" Somer reported a total of $1,130,000. Further analysis revealed that the $1,130,000 in losses was comprised of the following items:

(1) Somer recorded a loss of $300,000 incurred in the abandonment of equipment formerly used in the business.
(2) In an unusual and infrequent occurrence, a loss of $600,000 was sustained as a result of hurricane damage to a warehouse.
(3) During 2014, several factories were shut down during a major strike by employees, resulting in a loss of $170,000.
(4) Uncollectible accounts receivable of $60,000 were written off as uncollectible.

Ignoring income taxes, what amount of loss should Somer report as extraordinary on its 2014 income statement?

Answer 1

The extraordinary loss reported by Somer Corporation on its 2014 income statement would be $60,000. losses incurred in the abandonment of equipment, hurricane damage to the warehouse, and the shut down of factories during a strike. The uncollectible accounts receivable is not considered an extraordinary loss.

Step-by-step explanation:

To calculate the extraordinary loss to be reported on Somer Corporation's 2014 income statement, we need to deduct the non-extraordinary losses from the total reported losses. The non-extraordinary losses in this case include the losses incurred in the abandonment of equipment, hurricane damage to the warehouse, and the shut down of factories during a strike. The uncollectible accounts receivable is not considered an extraordinary loss.

The extraordinary loss reported by Somer Corporation on its 2014 income statement would be $60,000. losses incurred in the abandonment of equipment, hurricane damage to the warehouse, and the shut down of factories during a strike. The uncollectible accounts receivable is not considered an extraordinary loss. Therefore, the extraordinary loss reported by Somer Corporation on its 2014 income statement would be $1,130,000 - ($300,000 + $600,000 + $170,000) = $60,000.