During 2006, Peg Construction Co. recognized substantial gains from

  • An increase in value of a foreign customer’s remittance caused by a major foreign currency revaluation.
  • A court-ordered increase in a completed long-term construction contract’s price due to design changes.

Should these gains be included in continuing operations or reported as an extraordinary item in Peg’s 2006 income statement?

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Gain from major currency revaluation

Gain from increase in contract’s price

a.

Continuing operations

Continuing operations

b.

Extraordinary item

Continuing operations

c.

Extraordinary item

Extraordinary item

d.

Continuing operations

Extraordinary item