Question

James, Inc. incurred the following infrequent losses during 2014:

A $210,000 write-down of equipment leased to others.
A $120,000 adjustment of accruals on long-term contracts.
A $180,000 write-off of obsolete inventory.

In its 2014 income statement, what amount should James report as total infrequent losses that are not considered extraordinary?

Answer 1

James, Inc. should report a total of $510,000 as infrequent losses on the 2014 income statement, which includes the sum of a write-down of equipment, adjustment of accruals, and write-off of obsolete inventory.

Step-by-step explanation:

The student has asked about the total amount to report as infrequent losses on James, Inc.'s 2014 income statement, excluding extraordinary items. The three losses provided include a $210,000 write-down of equipment leased to others, a $120,000 adjustment of accruals on long-term contracts, and a $180,000 write-off of obsolete inventory. To calculate the total infrequent losses, one must simply add these amounts together.

The total infrequent losses that are not considered extraordinary would be calculated as follows:

• Write-down of equipment: $210,000
• Adjustment of accruals: $120,000
• Write-off of obsolete inventory: $180,000

Adding these together yields:

$210,000 + $120,000 + $180,000 = $510,000

Therefore, James, Inc. should report a total of $510,000 as infrequent losses on the 2014 income statement.