Question

As an auditor for Bernard and Thomas, you are responsible for determining the proper classification of income statement items in the audit of California Sports Grill.

Required:

Select whether each of the following items should be classified as discontinued operations, other revenues, or other expenses.

Items		Description
a.	One of the company’s restaurants was destroyed in a forest fire that raged through Southern California. Uninsured losses from the fire are estimated to be $450,000.
b.	The company owns and operates over 40 restaurants but sold one restaurant this year at a gain of $650,000.

Answer 1

Part - (a) - This should be classified as other expenses since it is a loss and also it is not because of discontinued operation. There is no such specific head where this loss can be shown, hence it will be shown under other expenses.

Part - (b) -  This should be classified as other revenues since it is a revenue and also it is not because of discontinued operation. There is no such specific head where this revenue can be shown, hence it will be shown under other revenues