3 - The income statement should show non-operating expenses after the operating income line. One of the examples given in the text is vandalism. How would you classify the expenses of vandalism for a company with clothing stores in areas where these expenses happen once or twice every month? Why? Contrast this with how you treat theft of inventory (from the warehouse or shoplifting from the shelves).
If these expenses happen regularly, classify them under operating expenses as "Loss from ...
Methods for classifying expenses due to vandalism and theft of inventory are discussed.