Chapter 4, Problem 4.9DMP

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 retained earnings

2. Identify the situations that would be reported net-of-tax.