Develop brief answers to each of the following questions:

1. In what way is selling an investment for a gain potentially a negative in evaluating quality of earnings?

2. Is it unethical for new management to take an extra large write-off (a “big bath”) in order to reduce future costs? Why or why not?

3. What is an argument against the recording of deferred income taxes?

4. Why is it useful to disclose discontinued operations separately on the income statement?

Discussion Questions