Question 1

The normal ordering of items in the income statement would be best illustrated by which of the following?

Accepted Answer

A)  Extraordinary items, cumulative effects, income from continuing operations, discontinued operations, net income 
B)  Income from continuing operations, discontinued operations, extraordinary items, cumulative effects, net income 
C)  Income from continuing operations, extraordinary items, cumulative effects, discontinued operations, net income 
D)  Discontinued operations, income from continuing operations, extraordinary items, cumulative effects, net income 
A)  Extraordinary items, cumulative effects, income from continuing operations, discontinued operations, net income 
B)  Income from continuing operations, discontinued operations, extraordinary items, cumulative effects, net income 
C)  Income from continuing operations, extraordinary items, cumulative effects, discontinued operations, net income 
D)  Discontinued operations, income from continuing operations, extraordinary items, cumulative effects, net income

Question 2

All of the following components are shown in the income statement net of applicable income taxes except

Accepted Answer

A)  gain or loss on sale of plant assets. 
B)  cumulative effect of a change in accounting principle. 
C)  discontinued operations. 
D)  extraordinary gain or loss. 
A)  gain or loss on sale of plant assets. 
B)  cumulative effect of a change in accounting principle. 
C)  discontinued operations. 
D)  extraordinary gain or loss.

Question 3

Which of the following is true regarding Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," accounting and reporting standards for discontinued operations?

Accepted Answer

A)  A component of a business always represents the same concept as a segment of a business used in reporting disaggregated information. 
B)  Discontinued operations should follow extraordinary items on the face of the income statement. 
C)  A test for, and recognition of, an impairment loss would be necessary for a component that had not been sold by year-end if the fair value of the component was determined to be less than the book value. 
D)  The gain or loss recognized for reported in the discontinued operation section of the income statement includes only the gain or loss on disposal of the component and not the income or loss from operating the discontinued operation. 
A)  A component of a business always represents the same concept as a segment of a business used in reporting disaggregated information. 
B)  Discontinued operations should follow extraordinary items on the face of the income statement. 
C)  A test for, and recognition of, an impairment loss would be necessary for a component that had not been sold by year-end if the fair value of the component was determined to be less than the book value. 
D)  The gain or loss recognized for reported in the discontinued operation section of the income statement includes only the gain or loss on disposal of the component and not the income or loss from operating the discontinued operation.

Question 4

Romulan Corporation incurred the following losses during 2011:
 
Ignoring income taxes, what amount of loss should Romulan report as extraordinary on its annual income statement?

Accepted Answer

A)  $100,000 
B)  $150,000 
C)  $270,000 
D)  $520,000 
A)  $100,000 
B)  $150,000 
C)  $270,000 
D)  $520,000

Question 5

Neptune Company's gross sales in 2011 were $3,930,000. Assuming sales returns and allowances were $74,000, sales discounts were $35,000, and freight-out was $28,000, what were Neptune's net sales in 2011?

Accepted Answer

A)  $3,793,000 
B)  $3,821,000 
C)  $3,856,000 
D)  $3,930,000 
A)  $3,793,000 
B)  $3,821,000 
C)  $3,856,000 
D)  $3,930,000

Question 6

According to the FASB conceptual framework, the concept of "earnings"

Accepted Answer

A)  includes changes in market values of investments in marketable securities classified as available-for-sale. 
B)  includes foreign currency translation adjustments. 
C)  includes gains and losses resulting from the sale of a productive asset to another party in an arm's-length transaction. 
D)  is the same as comprehensive income. 
A)  includes changes in market values of investments in marketable securities classified as available-for-sale. 
B)  includes foreign currency translation adjustments. 
C)  includes gains and losses resulting from the sale of a productive asset to another party in an arm's-length transaction. 
D)  is the same as comprehensive income.

Question 7

Under which of the following conditions would hurricane damage be considered an extraordinary item for financial reporting purposes?

Accepted Answer

A)  Under any circumstances hurricane damage should be classified as an extraordinary item. 
B)  Only if hurricanes are unusual in nature and infrequent in occurrence in the geographic area 
C)  Only if hurricanes are normal in the geographic area but do not occur frequently 
D)  Only if hurricanes occur frequently in the geographic area but have been insured against 
A)  Under any circumstances hurricane damage should be classified as an extraordinary item. 
B)  Only if hurricanes are unusual in nature and infrequent in occurrence in the geographic area 
C)  Only if hurricanes are normal in the geographic area but do not occur frequently 
D)  Only if hurricanes occur frequently in the geographic area but have been insured against

Question 8

Financial statement elements relating to income are defined in FASB Concepts Statement 6 as follows:

Accepted Answer

A)  Gains are increases in equity from ongoing major or central operations of an entity. 
B)  Expenses are outflows of assets or liabilities incurred from peripheral or incidental transactions of an entity. 
C)  Revenues are inflows or other enhancements of assets or settlements of liabilities from ongoing major or central operations. 
D)  Losses are all decreases in equity other than from transactions with owners. 
A)  Gains are increases in equity from ongoing major or central operations of an entity. 
B)  Expenses are outflows of assets or liabilities incurred from peripheral or incidental transactions of an entity. 
C)  Revenues are inflows or other enhancements of assets or settlements of liabilities from ongoing major or central operations. 
D)  Losses are all decreases in equity other than from transactions with owners.

Question 9

The following amounts are from Cooper Co.'s 2011 income statement:
 
What amount would Cooper show for income from continuing operations on a multiple-step format income statement?

Accepted Answer

A)  $52,000 
B)  $57,000 
C)  $68,000 
D)  $96,000 
A)  $52,000 
B)  $57,000 
C)  $68,000 
D)  $96,000

Question 10

The revenue principle states that revenue should be recognized at a point when

Accepted Answer

A)  an exchange transaction involving goods and services has occurred and the earnings process is essentially complete. 
B)  an order for shipment of a definite amount of merchandise has been received. 
C)  a contract between buyer and seller has been signed by both parties. 
D)  the seller has shipped merchandise to a customer under the terms that the customer need not pay for the merchandise until it is sold. 
A)  an exchange transaction involving goods and services has occurred and the earnings process is essentially complete. 
B)  an order for shipment of a definite amount of merchandise has been received. 
C)  a contract between buyer and seller has been signed by both parties. 
D)  the seller has shipped merchandise to a customer under the terms that the customer need not pay for the merchandise until it is sold.

Question 11

Burns Company reported the following results from operations for 2011:
 
Income before extraordinary items was

Accepted Answer

A)  $54,400. 
B)  $65,200. 
C)  $76,000. 
D)  $83,200. 
A)  $54,400. 
B)  $65,200. 
C)  $76,000. 
D)  $83,200.

Question 12

The amount of income reported for tax purposes

Accepted Answer

A)  is normally greater than the net income reported to stockholders. 
B)  must be computed according to GAAP. 
C)  is used to compute earnings per share. 
D)  may differ from the amount of income determined for financial reporting purposes. 
A)  is normally greater than the net income reported to stockholders. 
B)  must be computed according to GAAP. 
C)  is used to compute earnings per share. 
D)  may differ from the amount of income determined for financial reporting purposes.

Question 13

Which of the following is true?
The results of operations of a component of an entity that either has been disposed of or classified as held for sale shall be reported in discontinued operations if:

Accepted Answer

A)  Only I is true. 
B)  Only II is true. 
C)  I and II are true, but III is not. 
D)  I, II, and III are all true. 
A)  Only I is true. 
B)  Only II is true. 
C)  I and II are true, but III is not. 
D)  I, II, and III are all true.

Question 14

All of the following would appear on a single-step income statement except

Accepted Answer

A)  cost of goods sold. 
B)  extraordinary items. 
C)  discontinued operations. 
D)  gross profit. 
A)  cost of goods sold. 
B)  extraordinary items. 
C)  discontinued operations. 
D)  gross profit.

Question 15

The changes in the account balances and the following additional information are taken from the accounts of the Rainbow Co.
   
Dividends for 2012 were $82,500. There were no transactions in 2012 affecting retained earnings other than the dividends and net income. Calculate the 2012 net income.

Accepted Answer

Debit changes in acc

Question 16

On June 30, 2011, Osborn Company's operating facilities in Nebraska were destroyed by an earthquake. The loss of $700,000 was not covered by insurance. Osborn's tax rate for 2011 is 40 percent. In Osborn's income statement for the year ended September 30, 2011, this event should be reported as an extraordinary loss of

Accepted Answer

A)  $0. 
B)  $280,000. 
C)  $420,000. 
D)  $700,000. 
A)  $0. 
B)  $280,000. 
C)  $420,000. 
D)  $700,000.

Question 17

On a multiple-step income statement, gains or losses on sale of equipment would be shown

Accepted Answer

A)  before gross profit on sales. 
B)  after gross profit on sales but before income from continuing operations. 
C)  after income from continuing operations but before income from extraordinary items. 
D)  after income before extraordinary items but before net income. 
A)  before gross profit on sales. 
B)  after gross profit on sales but before income from continuing operations. 
C)  after income from continuing operations but before income from extraordinary items. 
D)  after income before extraordinary items but before net income.

Question 18

Huntington Company has two divisions, A and B. The operations and cash flows of these two divisions are clearly distinguishable. On July 1, 2012, the company decided to dispose of the assets and liabilities of Division B. It is probable that the disposal will be completed early next year. The revenues and expenses of Huntington Company for 2012 and for the preceding two years are as follows:
   
During the latter part of 2012, Huntington disposed of a portion of Division B and recognized a pretax loss of $10,000 on the disposal. The income tax rate for Huntington Company is 40%.
Prepare the comparative income statements for Huntington Company for the years 2010, 2011, and 2012.

Accepted Answer

The answer of Huntington Company has two divisions, A and...

Question 19

Panther Corp. purchased a patent on January 2, 2006, for $700,000. The original life of the patent was estimated to be 14 years. In December of 2011, the company received information that the patent would be obsolete within 4 years. Accordingly, the company decided to write off the unamortized portion of the patent cost over 5 years beginning in 2011.
How would the change in useful life be reflected in the accounts for 2011 and subsequent years?

Accepted Answer

The answer of Panther Corp. purchased a patent on January...

Question 20

A single-step income statement is a format that

Accepted Answer

A)  compares the current year's income with last year's income. 
B)  recognizes subtotals at intermediate stages such as gross margin. 
C)  combines revenues and gains and subtracts from them expenses and losses, resulting in income from operations. 
D)  reports sales revenue, cost of goods sold, gross margin, and all other expenses. 
A)  compares the current year's income with last year's income. 
B)  recognizes subtotals at intermediate stages such as gross margin. 
C)  combines revenues and gains and subtracts from them expenses and losses, resulting in income from operations. 
D)  reports sales revenue, cost of goods sold, gross margin, and all other expenses.

The normal ordering of items in the income statement would be best illustrated by which of the following?

All of the following components are shown in the income statement net of applicable income taxes except

Which of the following is true regarding Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," accounting and reporting standards for discontinued operations?

Romulan Corporation incurred the following losses during 2011: Ignoring income taxes, what amount of loss should Romulan report as extraordinary on its annual income statement?

Neptune Company's gross sales in 2011 were $3,930,000. Assuming sales returns and allowances were $74,000, sales discounts were $35,000, and freight-out was $28,000, what were Neptune's net sales in 2011?

According to the FASB conceptual framework, the concept of "earnings"

Under which of the following conditions would hurricane damage be considered an extraordinary item for financial reporting purposes?

Financial statement elements relating to income are defined in FASB Concepts Statement 6 as follows:

The following amounts are from Cooper Co.'s 2011 income statement: What amount would Cooper show for income from continuing operations on a multiple-step format income statement?

The revenue principle states that revenue should be recognized at a point when

Burns Company reported the following results from operations for 2011: Income before extraordinary items was

The amount of income reported for tax purposes

Which of the following is true? The results of operations of a component of an entity that either has been disposed of or classified as held for sale shall be reported in discontinued operations if:

All of the following would appear on a single-step income statement except

The changes in the account balances and the following additional information are taken from the accounts of the Rainbow Co. Dividends for 2012 were $82,500. There were no transactions in 2012 affecting retained earnings other than the dividends and net income. Calculate the 2012 net income.

On a multiple-step income statement, gains or losses on sale of equipment would be shown

A single-step income statement is a format that

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 4: The Income Statement

The normal ordering of items in the income statement would be best illustrated by which of the following?

All of the following components are shown in the income statement net of applicable income taxes except

Which of the following is true regarding Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," accounting and reporting standards for discontinued operations?

Romulan Corporation incurred the following losses during 2011: Ignoring income taxes, what amount of loss should Romulan report as extraordinary on its annual income statement?

Neptune Company's gross sales in 2011 were $3,930,000. Assuming sales returns and allowances were $74,000, sales discounts were $35,000, and freight-out was $28,000, what were Neptune's net sales in 2011?

According to the FASB conceptual framework, the concept of "earnings"

Under which of the following conditions would hurricane damage be considered an extraordinary item for financial reporting purposes?

Financial statement elements relating to income are defined in FASB Concepts Statement 6 as follows:

The following amounts are from Cooper Co.'s 2011 income statement: What amount would Cooper show for income from continuing operations on a multiple-step format income statement?

The revenue principle states that revenue should be recognized at a point when

Burns Company reported the following results from operations for 2011: Income before extraordinary items was

The amount of income reported for tax purposes

Which of the following is true? The results of operations of a component of an entity that either has been disposed of or classified as held for sale shall be reported in discontinued operations if:

All of the following would appear on a single-step income statement except

The changes in the account balances and the following additional information are taken from the accounts of the Rainbow Co. Dividends for 2012 were $82,500. There were no transactions in 2012 affecting retained earnings other than the dividends and net income. Calculate the 2012 net income.

On a multiple-step income statement, gains or losses on sale of equipment would be shown

A single-step income statement is a format that

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters