Question

Under U.S. GAAP, the effect of a material transaction that is infrequent in occurrence but not unusual in nature should be presented separately as a component of income from continuing operations when the transaction results in a gain or loss:__________.

A. Yes / No
B. Yes / Yes
C. No / No
D. No / Yes

Answer 1

B. Yes / Yes

Step-by-step explanation:

From the question, the following two important group of words can be identified:

a. "infrequent in occurrence"

b. "unusual in nature"

Under U.S. Generally Accepted Accounting Principles (GAAP), those two group of words describe a transaction that is part of income from continuing operations of a business when it results in a gain or loss. The reason is that the transaction occurs frequently and it is normal in nature.

However, if the two words to describe a transaction were "unusual" and "infrequent", such a transaction will be reported as extraordinary items. The reason is that the transaction does not occur frequently and it is abnormal in nature.

Based the explanation above, the correct option is B. Yes / Yes. That is, under U.S. GAAP, the effect of a material transaction that is infrequent in occurrence but not unusual in nature should be presented separately as a component of income from continuing operations when the transaction results in a gain or loss.