Which of the Following Events Would Be Considered an Extraordinary

question 54

Multiple Choice

Which of the following events would be considered an extraordinary item?

• A) An airline experienced a significant loss due to a strike by employees of the company who provide its aircraft maintenance.
• B) A food cannery was faced with a large loss of inventory of canned soups due to government condemnation because of possible botulism contamination;the company had never experienced a similar situation in its history.
• C) A company,located on an island which has experienced severe flooding three times in the past 25 years,was subjected to a heavy loss of physical plant due to flooding.
• D) A medical corporation was required to pay damages equal to three times its average net income to a patient.The corporation had experienced suits of this nature in the past,but the amount of the losses had never exceeded 5 percent of the corporation's average net income.

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Definitions:

Uncollectible Receivables

Amounts due from customers that are considered unlikely to be collected and are written off as a loss.

Bad Debt Expense

The expenses linked to the accounts receivable that a business cannot recover.

Debit Balance

A situation in an account where the sum of debits exceeds the sum of credits, indicating an amount owed or an asset.

Allowance for Doubtful Accounts

An estimation of the accounts receivable that is not expected to be collected, reducing the gross receivables to the amount that is expected to be collected.