Question 1

Classification as an extraordinary item on the income statement would be appropriate for the

Accepted Answer

A) gain or loss on disposal of a component of the business. 
B) substantial write-off of obsolete inventories. 
C) loss from a strike. 
D) none of these. 
A) gain or loss on disposal of a component of the business. 
B) substantial write-off of obsolete inventories. 
C) loss from a strike. 
D) none of these. D

Question 2

Which of the following items will not appear in the retained earnings statement?

Accepted Answer

A) Net loss 
B) Prior period adjustment 
C) Discontinued operations 
D) Dividends 
A) Net loss 
B) Prior period adjustment 
C) Discontinued operations 
D) Dividends C

Question 3

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

Accepted Answer

A) The gain or loss on disposal should be reported as an extraordinary item. 
B) Results of operations of a discontinued component should be disclosed immediately below extraordinary items. 
C) Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement. 
D) The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations. 
A) The gain or loss on disposal should be reported as an extraordinary item. 
B) Results of operations of a discontinued component should be disclosed immediately below extraordinary items. 
C) Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement. 
D) The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations. C

Question 4

Information in the income statement helps users to

Accepted Answer

A) evaluate the past performance of the enterprise. 
B) provide a basis for predicting future performance. 
C) help assess the risk or uncertainty of achieving future cash flows. 
D) all of these. 
A) evaluate the past performance of the enterprise. 
B) provide a basis for predicting future performance. 
C) help assess the risk or uncertainty of achieving future cash flows. 
D) all of these.

Question 5

Use the following information for questions
At Hall Company, events and transactions during 2007 included the following.The tax rate for all items is 30%.
(1) Depreciation for 2005 was found to be understated by $30,000.
(2) A strike by the employees of a supplier resulted in a loss of $25,000.
(3) The inventory at December 31, 2005 was overstated by $40,000.
(4) A flood destroyed a building that had a book value of $500,000.Floods are very uncommon in that area.
-The effect of these events and transactions on 2007 income from continuing operations net of tax would be

Accepted Answer

A) $17,500. 
B) $38,500. 
C) $66,500. 
D) $416,500. 
A) $17,500. 
B) $38,500. 
C) $66,500. 
D) $416,500.

Question 6

Companies frequently report income tax expense as the last item before net income on a single-step income statement.

Accepted Answer

A) True 
 B)False

Question 7

Earnings management generally makes income statement information more useful for predicting future earnings and cash flows.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a selling expense?

Accepted Answer

A) Advertising expense 
B) Office salaries expense 
C) Freight-out 
D) Store supplies consumed 
A) Advertising expense 
B) Office salaries expense 
C) Freight-out 
D) Store supplies consumed

Question 9

The following information was extracted from the accounts of Boone Corporation at December 31, 2007: $\begin{array}{lr}&CR(DR)\
\text { Total reported income since incorporation } & \$ 1,700,000 \
\text { Total cash dividends paid } & (800,000) \
\text { Unrealized holding loss } & (120,000) \
\text { Total stock dividends distributed } & (200,000) \
\text { Prior period adjustment, recorded January 1, } 2007 & 75,000
\end{array}$ What should be the balance of retained earnings at December 31, 2007?

Accepted Answer

A) $655,000. 
B) $700,000. 
C) $580,000. 
D) $775,000. 
A) $655,000. 
B) $700,000. 
C) $580,000. 
D) $775,000.

Question 10

Agler Corp.had the following infrequent transactions during 2007: A $150,000 gain from selling the only investment Agler has ever owned.
A $210,000 gain on the sale of equipment.
A $70,000 loss on the write-down of inventories.
In its 2007 income statement, what amount should Agler report as total infrequent net gains that are not considered extraordinary?

Accepted Answer

A) $80,000. 
B) $140,000. 
C) $290,000. 
D) $360,000. 
A) $80,000. 
B) $140,000. 
C) $290,000. 
D) $360,000.

Question 11

Joe Novak Corporation reports the following information: Correction of overstatement of depreciation expense $\begin{array}{lr}
\text { in prior years, net of tax } & \$ 215,000 \
\text { Dividends declared } & 160,000 \
\text { Net income } & 500,000 \
\text { Retained earnings, } 1 / 1 / 07 \text { as reported } & 1,000,000
\end{array}$ Joe Novak should report retained earnings, 12/31/07, at

Accepted Answer

A) $785,000. 
B) $1,125,000. 
C) $1,340,000. 
D) $1,555,000. 
A) $785,000. 
B) $1,125,000. 
C) $1,340,000. 
D) $1,555,000.

Question 12

Use the following information for questions 
Meyer Corp.reports operating expenses in two categories: (1) selling and (2) general and administrative.The adjusted trial balance at December 31, 2007, included the following expense accounts: $$\begin{array} { l r } 
\text { Accounting and legal fees } & \$ 140,000 \
\text { Advertising } & 120,000 \
\text { Freight-out } & 75,000 \
\text { Interest } & 60,000 \
\text { Loss on sale of long-term investments } & 30,000 \
\text { Officers' salaries } & 180,000 \
\text { Rent for office space } & 180,000 \
\text { Sales salaries and commissions } & 110,000
\end{array}$$ One-half of the rented premises is occupied by the sales department.
-How much of the expenses listed above should be included in Meyer's general and administrative expenses for 2007?

Accepted Answer

A) $410,000. 
B) $440,000. 
C) $470,000. 
D) $500,000. 
A) $410,000. 
B) $440,000. 
C) $470,000. 
D) $500,000.

Question 13

Prior period adjustments can either be added or subtracted in the Retained Earnings Statement.

Accepted Answer

A) True 
 B)False

Question 14

An item that should be classified as an extraordinary item is

Accepted Answer

A) write-off of goodwill. 
B) gains from transactions involving foreign currencies. 
C) losses from moving a plant to another city. 
D) gains from a company selling the only investment it has ever owned. 
A) write-off of goodwill. 
B) gains from transactions involving foreign currencies. 
C) losses from moving a plant to another city. 
D) gains from a company selling the only investment it has ever owned.

Question 15

For Garret Wolfe Company, the following information is available: $\begin{array}{lr}
\text { Cost of goods sold } & \$ 60,000 \
\text { Dividend revenue } & 2,500 \
\text { Income tax expense } & 6,000 \
\text { Operating expenses } & 23,000 \
\text { Sales } & 100,000
\end{array}$ In Garret Wolfe's single-step income statement, gross profit

Accepted Answer

A) should not be reported. 
B) should be reported at $13,500. 
C) should be reported at $40,000. 
D) should be reported at $42,500. 
A) should not be reported. 
B) should be reported at $13,500. 
C) should be reported at $40,000. 
D) should be reported at $42,500.

Question 16

Which one of the following types of losses is excluded from the determination of net income in income statements?

Accepted Answer

A) Material losses resulting from transactions in the company's investments account. 
B) Material losses resulting from unusual sales of assets not acquired for resale. 
C) Material losses resulting from the write-off of intangibles. 
D) Material losses resulting from correction of errors related to prior periods. 
A) Material losses resulting from transactions in the company's investments account. 
B) Material losses resulting from unusual sales of assets not acquired for resale. 
C) Material losses resulting from the write-off of intangibles. 
D) Material losses resulting from correction of errors related to prior periods.

Question 17

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

Accepted Answer

A) Only if floods in the geographical area are unusual in nature and occur infrequently. 
B) Only if the flood damage is material in amount and could have been reduced by prudent management. 
C) Under any circumstances as an extraordinary item. 
D) Flood damage should never be classified as an extraordinary item. 
A) Only if floods in the geographical area are unusual in nature and occur infrequently. 
B) Only if the flood damage is material in amount and could have been reduced by prudent management. 
C) Under any circumstances as an extraordinary item. 
D) Flood damage should never be classified as an extraordinary item.

Question 18

Cole Company, with an applicable income tax rate of 30%, reported net income of $210,000.Included in income for the period was an extraordinary loss from flood damage of $30,000 before deducting the related tax effect.The company's income before income taxes and extraordinary items was

Accepted Answer

A) $240,000. 
B) $300,000. 
C) $330,000. 
D) $231,000. 
A) $240,000. 
B) $300,000. 
C) $330,000. 
D) $231,000.

Question 19

The accountant for the Orion Sales Company is preparing the income statement for 2007 and the balance sheet at December 31, 2007.The January 1, 2007 merchandise inventory balance will appear

Accepted Answer

A) only as an asset on the balance sheet. 
B) only in the cost of goods sold section of the income statement. 
C) as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. 
D) as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet. 
A) only as an asset on the balance sheet. 
B) only in the cost of goods sold section of the income statement. 
C) as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. 
D) as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

Question 20

Income taxes are allocated to

Accepted Answer

A) extraordinary items. 
B) discontinued operations. 
C) prior period adjustments. 
D) all of these. 
A) extraordinary items. 
B) discontinued operations. 
C) prior period adjustments. 
D) all of these.

Classification as an extraordinary item on the income statement would be appropriate for the

Which of the following items will not appear in the retained earnings statement?

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

Information in the income statement helps users to

Companies frequently report income tax expense as the last item before net income on a single-step income statement.

Earnings management generally makes income statement information more useful for predicting future earnings and cash flows.

Which of the following is not a selling expense?

Joe Novak Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax \ 215,000 Dividends declared 160,000 Net income 500,000 Retained earnings, 1/1/07 as reported 1,000,000 Joe Novak should report retained earnings, 12/31/07, at

Prior period adjustments can either be added or subtracted in the Retained Earnings Statement.

An item that should be classified as an extraordinary item is

For Garret Wolfe Company, the following information is available: Cost of goods sold \ 60,000 Dividend revenue 2,500 Income tax expense 6,000 Operating expenses 23,000 Sales 100,000 In Garret Wolfe's single-step income statement, gross profit

Which one of the following types of losses is excluded from the determination of net income in income statements?

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

Cole Company, with an applicable income tax rate of 30%, reported net income of $210,000.Included in income for the period was an extraordinary loss from flood damage of $30,000 before deducting the related tax effect.The company's income before income taxes and extraordinary items was

The accountant for the Orion Sales Company is preparing the income statement for 2007 and the balance sheet at December 31, 2007.The January 1, 2007 merchandise inventory balance will appear

Income taxes are allocated to

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Filters

Exam 4: Income Statement and Related Information

Classification as an extraordinary item on the income statement would be appropriate for the

Which of the following items will not appear in the retained earnings statement?

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

Information in the income statement helps users to

Companies frequently report income tax expense as the last item before net income on a single-step income statement.

Earnings management generally makes income statement information more useful for predicting future earnings and cash flows.

Which of the following is not a selling expense?

Joe Novak Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax \ 215,000 Dividends declared 160,000 Net income 500,000 Retained earnings, 1/1/07 as reported 1,000,000 Joe Novak should report retained earnings, 12/31/07, at

Prior period adjustments can either be added or subtracted in the Retained Earnings Statement.

An item that should be classified as an extraordinary item is

For Garret Wolfe Company, the following information is available: Cost of goods sold \ 60,000 Dividend revenue 2,500 Income tax expense 6,000 Operating expenses 23,000 Sales 100,000 In Garret Wolfe's single-step income statement, gross profit

Which one of the following types of losses is excluded from the determination of net income in income statements?

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

Cole Company, with an applicable income tax rate of 30%, reported net income of $210,000.Included in income for the period was an extraordinary loss from flood damage of $30,000 before deducting the related tax effect.The company's income before income taxes and extraordinary items was

The accountant for the Orion Sales Company is preparing the income statement for 2007 and the balance sheet at December 31, 2007.The January 1, 2007 merchandise inventory balance will appear

Income taxes are allocated to

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Filters