(L.O. 4) During the year ended December 31, 2014, Schmelya Corporation incurred the following infrequent losses:

1. A factory was shut down during a major strike by employees; costs were $120,000.

2. A loss of $50,000 was incurred on the abandonment of computer equipment used in the business.

3. A restructuring charge of $75,000.

4. A loss of $82,000 was incurred as a result of flood damage to a warehouse.

How much total loss should Schmelya report in the extraordinary item section of its 2014 income statement?

a. $82,000

b. $120,000

c. $202,000

d. $252,000 Approach and Explanation: It is wise to review the list of items that are classified as extraordinary items and the list of items that are not extraordinary items (see Illustration 4-3) until you can readily recognize items that appear in the list. In the question at hand, the first three items are on the list of items that are not extraordinary. Therefore, the only possible one being extraordinary is the loss from flood damage. A flood would be considered infrequent in some locations but not others. The stem of the question indicates it is deemed infrequent for Schmelya. To be classified as extraordinary, an item needs to be unusual in nature and infrequent in occurrence. However, there are certain items that do not constitute extraordinary items. (Solution = a.)