Answered: All of the following components are…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Related questions

Question

8.All of the following components are shown in the income statement net of applicable income taxes EXCEPT

Group of answer choices

A.cumulative effect of a change in accounting principle.

B.extraordinary gain or loss.

C.discontinued operations.

D.gain or loss on sale of plant assets.

Expert Solution

Step 1

Cumulative effect of change in Accounting policy : As per accounting standards accounting policy should remain consistent over the period, however accounting policy can be changed if it give more meaningful presentation. Further it states that the cumulative effect of change in accounting policy should be shown be shown in the income statement net of taxes to show the net effect on income.

Extraordinary items : These are Unusual item, means it did not occur in normal period of time. These items must be be shown as separate line item as net of tax effect.