Question 1

Which of the following income statement elements is an economic outflow that occurs from primary operations?

Accepted Answer

A) loss 
B) expense 
C) revenue 
D) deficit 
A) loss 
B) expense 
C) revenue 
D) deficit

Question 2

Gains and losses from discontinued operations are shown on the income statement after the provision for income taxes is presented.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is typically included in the income tax provision?

Accepted Answer

A) deferred income tax 
B) state and local income tax 
C) federal income tax on gain from discontinued operations 
D) federal,state,and local payroll tax 
A) deferred income tax 
B) state and local income tax 
C) federal income tax on gain from discontinued operations 
D) federal,state,and local payroll tax

Question 4

How does the fact that accounting standards allow managers to exercise their professional judgment when making accounting policy decisions constitute a limitation of the income statement?

Accepted Answer

In general,allowing managers to use judg

Question 5

Presented below are performance measure data from the income statement of Wheezer Company.
   Wheezer has 200,000 shares of common stock outstanding.Prepare the summary schedule of earnings per share required by U.S.GAAP.

Accepted Answer

Earnings p

Question 6

Which of the multi-step income statement reports revenues and expenses related to secondary operations of the entity?

Accepted Answer

A) discontinued operations section 
B) secondary section 
C) non-operating section 
D) operating section 
A) discontinued operations section 
B) secondary section 
C) non-operating section 
D) operating section

Question 7

When a company remeasures the value of a discontinued operation,a value adjustment is made to recognize ________.

Accepted Answer

A) a loss,but not a gain,for the difference between book value of the net assets and their fair value. 
B) a loss,but not a gain,for the difference between book value of the net assets and their fair value net of selling costs. 
C) the gain or loss for the difference between book value of the net assets and their fair value. 
D) the gain or loss for the difference between book value of the net assets and their fair value net of selling costs. 
A) a loss,but not a gain,for the difference between book value of the net assets and their fair value. 
B) a loss,but not a gain,for the difference between book value of the net assets and their fair value net of selling costs. 
C) the gain or loss for the difference between book value of the net assets and their fair value. 
D) the gain or loss for the difference between book value of the net assets and their fair value net of selling costs.

Question 8

Which of the following is a classification of expenses using the nature approach?

Accepted Answer

A) cost of goods sold 
B) postage expense 
C) sales expense 
D) administration expense 
A) cost of goods sold 
B) postage expense 
C) sales expense 
D) administration expense

Question 9

Which of the following is typically included in the determination of operating income?

Accepted Answer

A) other comprehensive income 
B) provision for income tax 
C) gross profit 
D) restructuring charges 
A) other comprehensive income 
B) provision for income tax 
C) gross profit 
D) restructuring charges

Question 10

Which of the following is not an account type reported in the statement of stockholders' equity?

Accepted Answer

A) accumulated other comprehensive income 
B) controlling interest 
C) treasury stock 
D) contributed capital 
A) accumulated other comprehensive income 
B) controlling interest 
C) treasury stock 
D) contributed capital

Question 11

In what ways is management motivated to engage in earnings management?

Accepted Answer

Management is motivated to manage earnin

Question 12

Sales minus cost of goods sold equals gross profit.

Accepted Answer

A) True 
 B)False

Question 13

What two alternatives does a company have for reporting its comprehensive income under U.S.GAAP and IFRS?

Accepted Answer

Companies may choose to report comprehen

Question 14

Compare and contrast two earnings management techniques.

Accepted Answer

When low earnings are expected,managemen

Question 15

IFRS allows companies to include in Other Comprehensive Income the increase in fair value of long-lived assets such as buildings.

Accepted Answer

A) True 
 B)False

Question 16

There is a noncontrolling interest when ________.

Accepted Answer

A) a company uses the equity method to account for ownership of another company 
B) a company owns less than 50% of another company but exercises significant control 
C) a company controls another company but owns less than 100% of that other company 
D) a company is owned by others outside the company 
A) a company uses the equity method to account for ownership of another company 
B) a company owns less than 50% of another company but exercises significant control 
C) a company controls another company but owns less than 100% of that other company 
D) a company is owned by others outside the company

Question 17

Companies presenting comprehensive income in two statements will include the statement of comprehensive income in the notes somewhere after the statement of net income.

Accepted Answer

A) True 
 B)False

Question 18

U.S.GAAP requires firms to classify revenues and expenses using the functional approach.

Accepted Answer

A) True 
 B)False

Question 19

The "big bath" earnings management technique involves increasing an expected net loss so as to report an even larger net loss.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following transactions will most likely result in a loss reported on the income statement?

Accepted Answer

A) A shoe store acquires a large supply of shoe polish from a supplier going through bankruptcy. 
B) A manufacturer pays a company a fee to license that company's proprietary technology. 
C) A bank pays more interest than expected on customers savings accounts. 
D) A grocery store sells marketable securities after a decline in value. 
A) A shoe store acquires a large supply of shoe polish from a supplier going through bankruptcy. 
B) A manufacturer pays a company a fee to license that company's proprietary technology. 
C) A bank pays more interest than expected on customers savings accounts. 
D) A grocery store sells marketable securities after a decline in value.

Exam 5: Statements of Net Income and Comprehensive Net Income

Which of the following income statement elements is an economic outflow that occurs from primary operations?

Gains and losses from discontinued operations are shown on the income statement after the provision for income taxes is presented.

Which of the following is typically included in the income tax provision?

How does the fact that accounting standards allow managers to exercise their professional judgment when making accounting policy decisions constitute a limitation of the income statement?

Presented below are performance measure data from the income statement of Wheezer Company. Wheezer has 200,000 shares of common stock outstanding.Prepare the summary schedule of earnings per share required by U.S.GAAP.

Which of the multi-step income statement reports revenues and expenses related to secondary operations of the entity?

When a company remeasures the value of a discontinued operation,a value adjustment is made to recognize ________.

Which of the following is a classification of expenses using the nature approach?

Which of the following is typically included in the determination of operating income?

Which of the following is not an account type reported in the statement of stockholders' equity?

In what ways is management motivated to engage in earnings management?

Sales minus cost of goods sold equals gross profit.

What two alternatives does a company have for reporting its comprehensive income under U.S.GAAP and IFRS?

Compare and contrast two earnings management techniques.

IFRS allows companies to include in Other Comprehensive Income the increase in fair value of long-lived assets such as buildings.

There is a noncontrolling interest when ________.

Companies presenting comprehensive income in two statements will include the statement of comprehensive income in the notes somewhere after the statement of net income.

U.S.GAAP requires firms to classify revenues and expenses using the functional approach.

The "big bath" earnings management technique involves increasing an expected net loss so as to report an even larger net loss.

Which of the following transactions will most likely result in a loss reported on the income statement?

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

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