Management of Walker Corporation Chose to Classify Its Major Losses

question 46

Multiple Choice

Management of Walker Corporation chose to classify its major losses as extraordinary items. Managers might be biased toward this approach because

• A) investors do not use extraordinary items when predicting future performance.
• B) this treatment reduces income taxes.
• C) extraordinary losses are considered a good predictor of the company's future solvency.
• D) extraordinary losses bypass net income and are reported directly as part of comprehensive income.