Unit 4 Discussion (ACC303 Intermediate Accounting)
Please complete judgment Case 4-5 (page 227-228). Please include explanations with your answers.
Judgment Case 4–5 Income statement presentation; unusual items; comprehensive income
Norse Manufacturing Inc. prepares an annual single, continuous statement of income and comprehensive income. The following situations occurred during the company’s 2024 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 2023’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 retained earnings
2. Identify the situations that would be reported net-of-tax.