Extraordinary Items, Income Statements, and Revenue Recognition
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1. What are the requirements for extraordinary items? What are some examples of extraordinary items?
2. Which format of income statement is the most widely used? Why?
3. Why are there so many revenue recognition methods? Why is it so subjective?
4. Why do construction companies use the percentage of completion method of recognizing revenue?
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Solution Summary
Various bookkeeping concepts are explained.
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1. The requirements for an item to be extraordinary for financial reporting purposes are:
i. "The nature of the event or transaction is unusual, and
ii. "The occurrence of the event or transaction is unusual" (Jarnagin, 2002, p. 40).
Examples of extraordinary items are insurance recoveries, gains and losses on discontinued operations, and debt restructuring.
2. The most common income ...
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