Question 1

Operating income is gross profit less all operating expenses and income taxes.

Accepted Answer

A) True 
 B)False  False

Question 2

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

Accepted Answer

A)  revenue 
B)  comprehensive income 
C)  gain 
D)  net income 
A)  revenue 
B)  comprehensive income 
C)  gain 
D)  net income A

Question 3

The following data include all the elements from Cambridge Company's income statement: $$\begin{array} { l r } 
\text { Administrative Expense } & \$ 873 \
\text { Cost of Goods Sold } & 3,615 \
\text { Gain on Sale of Securities } & 623 \
\text { Income Tax Expense } & 1,234 \
\text { Loss on Discontinued Operations } & 1,229 \
\text { Loss on Disposal of Equipment } & 237 \
\text { Revenue } & 8,771 \
\text { Selling Expense } & 1,425
\end{array}$$ What is the amount of income from continuing operations for Cambridge Company?

Accepted Answer

A)  $3,244 
B)  $2,621 
C)  $2,010 
D)  $3,481 
A)  $3,244 
B)  $2,621 
C)  $2,010 
D)  $3,481 C

Question 4

Which of the following is not a drawback of the single-step income statement?

Accepted Answer

A)  It does not separate operating and non-operating items. 
B)  It combines revenues and gains without classification. 
C)  It does not classify expenses by function. 
D)  It misstates net income due to oversimplification. 
A)  It does not separate operating and non-operating items. 
B)  It combines revenues and gains without classification. 
C)  It does not classify expenses by function. 
D)  It misstates net income due to oversimplification.

Question 5

A sporting goods retailer sells some of its cash registers. Which of the following would be a false statement?

Accepted Answer

A)  If it sells the registers for more than their book value, then this transaction results in a gain. 
B)  If it sells the registers for less than their book value, it would be an expense added to cost of goods sold. 
C)  The inflow from the sale of the cash registers would only be classified as revenue if the retailer were in the business of selling cash registers. 
D)  In no cases would the inflow from the sale of cash registers be classified as a revenue. 
A)  If it sells the registers for more than their book value, then this transaction results in a gain. 
B)  If it sells the registers for less than their book value, it would be an expense added to cost of goods sold. 
C)  The inflow from the sale of the cash registers would only be classified as revenue if the retailer were in the business of selling cash registers. 
D)  In no cases would the inflow from the sale of cash registers be classified as a revenue.

Question 6

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 7

IFRS requires companies to disclose write-downs of inventory or of property, plant, and equipment if they are not presented on the income statement.

Accepted Answer

A) True 
 B)False

Question 8

Key performance measures on the statement of net income include gross profit and net assets, among others.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following transactions is not reported as other comprehensive income according to U.S. GAAP?

Accepted Answer

A)  unrealized gains and losses from available-for-sale portfolio of debt investment securities 
B)  unrealized gains on the upward valuation of property, plant, and equipment 
C)  adjustments to unrecognized pension costs (benefits) 
D)  foreign currency translation gains and losses 
A)  unrealized gains and losses from available-for-sale portfolio of debt investment securities 
B)  unrealized gains on the upward valuation of property, plant, and equipment 
C)  adjustments to unrecognized pension costs (benefits) 
D)  foreign currency translation gains and losses

Question 10

How are expenses similar to losses and how are they different?

Accepted Answer

Expenses and losses are both outflows or

Question 11

Companies report earnings per share for all of the following except ________.

Accepted Answer

A)  operating income 
B)  net income 
C)  income from continuing operations 
D)  discontinued operations 
A)  operating income 
B)  net income 
C)  income from continuing operations 
D)  discontinued operations

Question 12

What items are included in a company's operating income?

Accepted Answer

Operating income includes reve

Question 13

The noncontrolling interest line item on the income statement represents ________.

Accepted Answer

A)  the portion of the subsidiary owned by others, which is deducted to determine net income 
B)  the portion of the subsidiary owned by the reporting entity, which is added to determine net income 
C)  the portion of earnings that belongs to others, which is deducted to determine net income attributable to the controlling interest 
D)  the portion of earnings that belongs to others, which is added to determine net income attributable to the controlling interest 
A)  the portion of the subsidiary owned by others, which is deducted to determine net income 
B)  the portion of the subsidiary owned by the reporting entity, which is added to determine net income 
C)  the portion of earnings that belongs to others, which is deducted to determine net income attributable to the controlling interest 
D)  the portion of earnings that belongs to others, which is added to determine net income attributable to the controlling interest

Question 14

A discontinued operation must be a business segment or unit that is a portion of an entity with operations and cash flows.

Accepted Answer

A) True 
 B)False

Question 15

Presented below are performance measure data from the income statement of Wheezer Company.
Gross Profit $2,345,000
Operating Income 1,987,000
Income from Continuing Operations before Taxes 1,776,000
Income from Continuing Operations 1,234,000
Net Income 1,486,000
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 per share:
Income fro

Question 16

Companies use ________ income statements when a large number of line items distracts the user from identifying key measures and relationships.

Accepted Answer

A)  comprehensive 
B)  condensed 
C)  single-step 
D)  multi-step 
A)  comprehensive 
B)  condensed 
C)  single-step 
D)  multi-step

Question 17

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

Accepted Answer

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

Question 18

Golgotha Industries provided the following partial trial balance for the current year. Beginning with the line item Income from Continuing Operations Before Taxes, prepare a statement of comprehensive income for the year ended December 31. Golgotha is subject to a 40% income tax rate.
Golgotha Industries
Partial Trial Balance (Selected Accounts)
For the Year Ended December 31
Accounts Debit Credit
Income from Continuing Operations Before Taxes $99,000
Dividend Income 11,680
Gain on Sale of Closed Sales Office 15.420
Unrealized Gain on Trading Investments 37,260
Gain on Foreign Currency Translation 29,970
Loss on Pension Adjustment 37,260
Loss on from Discontinued Operations 41,820
Loss on Asset Impairment 23,030
Unrealized Loss on Available-for-Sale Debt Investments 18,340

Accepted Answer

Golgotha Industries
Statement of Compreh

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

Most elements of operating income are permanent in nature.

Accepted Answer

A) True 
 B)False

Exam 5: Statements of Net Income and Comprehensive Net Income

Operating income is gross profit less all operating expenses and income taxes.

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

Which of the following is not a drawback of the single-step income statement?

A sporting goods retailer sells some of its cash registers. Which of the following would be a false statement?

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

IFRS requires companies to disclose write-downs of inventory or of property, plant, and equipment if they are not presented on the income statement.

Key performance measures on the statement of net income include gross profit and net assets, among others.

Which of the following transactions is not reported as other comprehensive income according to U.S. GAAP?

How are expenses similar to losses and how are they different?

Companies report earnings per share for all of the following except ________.

What items are included in a company's operating income?

The noncontrolling interest line item on the income statement represents ________.

A discontinued operation must be a business segment or unit that is a portion of an entity with operations and cash flows.

Companies use ________ income statements when a large number of line items distracts the user from identifying key measures and relationships.

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

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

Most elements of operating income are permanent in nature.

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

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

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