CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

Assume U.S. GAAP. A manufacturing company reports the following items on their income statement for the most recent year:

Interest expense: $62,500
Loss on disposal of fixed assets: $50,000
Realized gain on sale of available-for-sale securities: $17,750

Which of the items is classified as an operating item in the company's income statement?
A. Interest expense
B. Loss on disposal of fixed assets
C. Realized gain on sale of available-for-sale securities
Explanation: The loss on the disposal of fixed assets is an unusual or infrequent item but it is still part of normal operating activities. The interest expense is the result of financing activities and would be classified as a non-operating expense by non-financial service companies. The realized gain on the sale of available-for-sale securities is an investing activity and would also be classified as a non-operating gain by a manufacturing company.

User Contributed Comments 2

User Comment
superbus interest paid and received not considered operating activities?
drods91 Yes, superbus, (under US GAAP), but only in the cash flow statement; this questions refers to the income statement.
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