Judgment Case 4–9
Income statement presentation; unusual items; comprehensive income
• LO4–3, LO4–4, LO4–5, LO4–6
Norse Manufacturing Inc. prepares an annual single, continuous statement of income and comprehensive income. The following situations occurred during the company’s 2018 fiscal year:
1. Restructuring costs were incurred due to the closing of a factory.
2. Investments were sold, and a loss was recognized.
3. A positive foreign currency translation adjustment was recognized.
4. Interest expense was incurred.
5. A division was sold that qualifies as a separate component of the entity according to GAAP.
6. Obsolete inventory was written off.
7. The controller discovered an error in the calculation of 2017’s patent amortization expense.
Required:
1. For each situation, identify the appropriate reporting treatment from the list below (consider each event to be material):
a. As a component of operating income
b. As a nonoperating income item (other income or expense)
c. As a discontinued operation
d. As an other comprehensive income item
e. As an adjustment to
2. Identify the situations that would be reported net-of-tax.
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