Exam 3: The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Which of the following is not presented in an income statement?

Roseland Company uses the periodic method of accounting for inventory.Unfortunately, the sales manager of Roseland Company failed to record a valid sale on account of merchandise that had been shipped to a customer prior to the end of the current year. However, he did exclude the merchandise from inventory at the end of the current year.As a result of this error, Roseland Company's

Revenues from marketable securities and investments in securities, interest expense on borrowings, and gains and losses from peripheral activities appear as _____.The firm expects these sources of earnings to continue.

Andrews Corporation's liability account balances at June 30, 2013, included a 10 percent note payable.The note is dated October 1, 2011, and carried an original principal amount of $600,000.The note is payable in three equal annual payments of $200,000 plus interest.The first interest and principal payment was made on October 1, 2012.In Andrews' June 30, 2013, balance sheet, what amount should be reported as Interest Payable for this note?

Which section includes income derived from a firm's primary business activities as well as from activities peripherally related to operations? (Assume the firm expects these sources of earnings to continue.)

Cookie and Clark incorporate as CC Designs, Inc.on January 1, Year 1.CC Designs creates custom wall finishes and sells painting products.The following transactions occur during January. a. Clark contributes cash of $75,000 and receives 15,000 shares of $1 par value stock. b. Cookie contributes $35,000 cash, office furniture with a value of $5,000, and computer equipment with a value of $10,000 and receives 15,000 shares of $1 par value stock. The furniture and equipment is expected to last 5 years and has no salvage value. c. On January 2, $10,000 of painting products were purchased. CC paid $8,000 cash with the remaining amount on account. d. During January, painting products are sold for $8,000 cash. The cost of the products is $2,000. e. Additional painting products with a value of $5,000 are sold, with a cost of $1,500, but the cash is not collected as of January 31st. It is expected that the $5,000 will be collected in full by February 15th. f. Clark is paid a salary of $2,000. g. CC paid $1,200 for January and February rent. Required: Prepare appropriate accrual basis journal entries.

What criterion or criteria must sales transactions meet in order for the seller to recognize revenues before collecting cash?

Which of the following is not a period expense?

Recognition of revenue usually occurs when

Entries for the following items were either omitted or recorded incorrectly in preparing the financial statements for Year 4.Indicate the amount and nature [understatement (U), overstatement (O), no effect (N)] of the effect of the omission on total assets, total liabilities, and net income for Year 4.Ignore income tax effects.Use the following format: $\text { Total Assets } \quad \text { Total Liabilities } \quad \text { Net Income }$ a. The company received a payment of $4,600 from a customer for an order that the company has not yet produced. It credited the $4,600 to sales revenue. b. The company failed to record a dividend of $5,000 that was declared but not yet paid. c. The company repaid a loan of $5,000 to the bank. It recorded the transaction in the appropriate accounts but in the amount of $50,000. The company has accounted for all interest on the loan correctly. d. The ending balance of finished goods inventory was incorrectly recorded at $4,000 more than its proper balance due to a mistake in taking a physical inventory. e. The company correctly entered a stock issue of $22,000 on December 31, Year 4, in the cash account but mistakenly credited it to Bonds Payable. f. On the basis of an incorrect report from the company's credit collection agency, specific accounts receivable of $2,700 were written off, but are actually expected to be collectible accounts. The company correctly made a provision for estimated uncollectible accounts for year 4.

U.S.GAAP and IFRS require separate income statement display of income from continuing operations and _____earnings that will not continue because the firm either sold, or made a decision to sell, a portion of its business).Such a requirement aids users of the income statement in predicting future earnings.

U.S.GAAP and IFRS require firms to initially report the results of most income transactions in the

The income statement typically provides information about the operating results of business segments.

Expenditures on advertising and research must be recognized as expense in the period of expenditure, regardless of the firm's expectation of future benefits.

_____ are part of the ongoing central operations of the firm, so they are relatively persistent and sustainable.

Describe the closing entries process at the end of the accounting period..

Which of the following accounts would not appear on a post-closing trial balance?

Describe the steps used for the accounting record-keeping process.

Malcolm Corporation purchased an insurance policy for three years beginning January 1, Year 2, and recorded the $6,000 premium in the Prepaid Insurance account.What adjusting entry is required to reflect the proper balances, in the insurance-related accounts at year-end, on December 31, Year 2?

As a new employee in the accounting department of The Education Company, you noticed that the company's financial software generates common-size financial statements.However, your supervisor stated that the common-size statements are not of importance.The statements are in fact trashed and never reviewed by upper management.Write a memo to your supervisor describing common-size financial statements (balance sheet and income statement) and explain how these statements might be utilized.