Exam 4: The Income Statement

Orchard Corporation's capital stock at December 31 consisted of the following: Orchard's common stock, which is listed on a major stock exchange, was quoted at $4 per share on December 31. Orchard's net income for the year ended December 31 was $50,000. The yearly preferred dividend was declared. No capital stock transactions occurred. What was the price earnings ratio on Orchard's common stock at December 31?

Indicate which of the items below should be reported in the financial statements as an extraordinary item. Assume the dollar amounts associated with all items are material. The items are:

An example of direct matching of an expense with revenues would be

Neptune Company's income statement for the year ended December 31, 2011, included the following items: The office space is used equally by Neptune's sales and accounting departments. What amount of the above-listed items should be classified as general and administrative expenses in Neptune's multiple-step income statement?

Accrual-basis net income is most useful for

The forecast of income for future periods begins with a forecast of sales. An accurate projection of sales is essential to the determination of the amount of assets needed to do business and the level of financing required. What factors should be considered in preparing the forecast of sales?

Which of the following is not an acceptable basis for the recognition of expenses?

A flood destroyed the home office building of a company located in an inland city. This should be reported as a(n)

Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period?

In contrast with a multiple-step income statement, a single-step income statement does not show the amount of

The following data are available from the records of Jazz, Inc.: Prepare a single-step income statement and a retained earnings statement for Jazz, Inc. for the year ended December 31, 2011.

All of the following are a component of comprehensive income except

Bad debts are recognized according to which of the following expense recognition principles?

Most forecasting exercises begin with a forecast of

Blocker Enterprises, Inc., has two operating divisions, one manufactures farm machinery and the other manufactures office furniture. Both divisions are considered separate components as defined by SFAS No. 144. The management of Blocker Enterprises wants to focus on the manufacturing of farm machinery and accordingly adopted a formal plan to sell the office furniture division on September 20, 2011. The sale was completed on March 10, 2012. At December 31, 2011, the office furniture component was considered as held for sale. On December 31, 2011, the company's fiscal year-end, the book value of the assets of the office furniture division was $1,000,000. On that date, the fair value of the assets, less costs to sell, was $800,000. The before-tax operating loss of the division for the year was $130,000. The company's tax rate is 40%. The after-tax income from continuing operations for 2011 was $350,000. Prepare a partial income statement for 2011 beginning with income from continuing operations. Ignore EPS disclosures.

Which of the following is correct?

A classic definition of income states that income is the amount one could consume at the end of a period and still be as well off as at the beginning of the period. Embedded in this definition of income is the concept of capital maintenance. Conceptually, income can occur only after the beginning capital has been recovered. When accountants adopt different measuring units, they are attempting to maintain different concepts of capital. Identify the type of capital maintained when the measuring unit is (a) nominal dollars, (b) constant dollars, and (c) current costs. When would nominal cost and constant dollar measurements provide equivalent results?

On December 31, 2011 and 2012, Taft Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and outstanding. Additional information: The price-earnings ratio on common stock at December 31, 2012, was

The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet, is an application of the

Provo Water Products had sales during 2011 of $895,000. Provo's gross profit percentage is 55 percent. Purchases of inventory during 2011 totaled $466,250 and a count of inventory on hand at the end of the year totaled $189,500. Selling expenses are 18 percent of sales and general and administrative expenses are equal to 80 percent of selling expenses. Provo's income tax rate is 30 percent and the company has 60,000 shares of common stock outstanding. Prepare an income statement, including earnings per share data, for the year ended December 31, 2011.