Which statement about nonoperating items is true?

Which statement about nonoperating items is true?

• A. They always appear on the income statement before operating income.
• B. They are always recurring.
• C. They are always tax-exempt.
• D. They relate only tangentially to normal operations.

Answer: (D)

Nonoperating items come from activities outside the firm’s core business, such as interest, gains or losses from investments, or foreign exchange, rather than from selling goods or providing services. They are shown after operating income in most income statements because they don’t reflect the ongoing, primary operations. This is why the statement that they relate only tangentially to normal operations is true. The other choices misstate how these items behave: they are not typically shown before operating income; they are not always recurring (many are nonrecurring or irregular); and they are not inherently tax-exempt (tax treatment varies).

Nonoperating items come from activities outside the firm’s core business, such as interest, gains or losses from investments, or foreign exchange, rather than from selling goods or providing services. They are shown after operating income in most income statements because they don’t reflect the ongoing, primary operations. This is why the statement that they relate only tangentially to normal operations is true. The other choices misstate how these items behave: they are not typically shown before operating income; they are not always recurring (many are nonrecurring or irregular); and they are not inherently tax-exempt (tax treatment varies).