Exam 4: Income Statement and Related Information

Which of the following is true about intraperiod tax allocation?

The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

Use the following information for questions Hogan Corp.'s trial balance of income statement accounts for the year ended December 31, 2007 included the following: Debit Credit Sales \1 40,000 Cost of sales \ 50,000 Administrative expenses 25,000 Loss on sale of equipment 9,000 Commissions to salespersons 8,000 Interest revenue 5,000 Freight-out 3,000 Loss due to earthquake damage 12,000 Bad debt expense 3,000 Totals \ 110.000 \ 145.000 Other information: Hogan's income tax rate is 30%.Finished goods inventory: January 1,2007 \ 80,000 December 31,2007 70,000 On Hogan's multiple-step income statement for 2007, -Income before extraordinary item is

Limitations of the income statement include all of the following except

The income statement reveals

The following items were among those that were reported on Nen Co.'s income statement for the year ended December 31, 2007: Legal and audit fees \ 130,000 Rent for office space 180,000 Interest on inventory floor plan 210,000 Loss on abandoned equipment used in operations 35,000 The office space is used equally by Nen's sales and accounting departments.What amount of the above-listed items should be classified as general and administrative expenses in Nen's multiple-step income statement?

A company that reports a discontinued operation or an extraordinary item has the option of reporting per share amounts for these items.

Bowen 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 and loss accounts: Accounting and legal fees 140,000 Advertising 180,000 Freight-out 80,000 Interest 70,000 Loss on sale of long-term investment 30,000 Officers' salaries 225,000 Rent for office space 220,000 Sales salaries and commissions 170,000 One-half of the rented premises is occupied by the sales department.Bowen's total selling expenses for 2007 are

Use the following information for questions Hogan Corp.'s trial balance of income statement accounts for the year ended December 31, 2007 included the following: Debit Credit Sales \1 40,000 Cost of sales \ 50,000 Administrative expenses 25,000 Loss on sale of equipment 9,000 Commissions to salespersons 8,000 Interest revenue 5,000 Freight-out 3,000 Loss due to earthquake damage 12,000 Bad debt expense 3,000 Totals \ 110.000 \ 145.000 Other information: Hogan's income tax rate is 30%.Finished goods inventory: January 1,2007 \ 80,000 December 31,2007 70,000 On Hogan's multiple-step income statement for 2007, -Extraordinary loss is

A material item which is unusual in nature or infrequent in occurrence, but not both should be shown in the income statement Net of Tax Disclosed Separately a. No No b. Yes Yes c. No Yes d. Yes No

Which of the following would represent the least likely use of an income statement prepared for a business enterprise?

The income statement is useful for helping to assess the risk or uncertainty of achieving future cash flows.

Silas Company reported the following information for 2007: Sales revenue \ 500,000 Cost of goods sold 350,000 Operating expenses 55,000 Unrealized holding gain on available-for-sale securities 20,000 Cash dividends received on the securities 2,000 For 2007, Silas would report comprehensive income of

Fleming Company has the following items: write-down of inventories, $240,000; loss on disposal of Sports Division, $370,000; and loss due to an expropriation, $226,000.Ignoring income taxes, what total amount should Fleming Company report as extraordinary losses?

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, 1/1/07, as adjusted at

Which of the following is a change in accounting principle?

Gains or losses from exchange or translation of foreign currencies are reported as extraordinary items.

Carpino Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate of 40%.At what amount should Carpino report each item? $\begin{array}{cc}&\text { Extraordinary loss } & \text { Unusual gain } \\\hline a.& \$(200,000) & \$ 140,000 \\b.&(200,000) & 84,000 \\c.&(120,000) & 140,000 \\d.&(120,000) & 84,000\end{array}$

Which of the following is not a generally practiced method of presenting the income statement?

Companies only restrict retained earnings to comply with contractual requirements or current necessity.