Question 1

Earnings per share should always be shown separately for

Accepted Answer

A) net income and gross margin. 
B) net income and pretax income. 
C) income before extraordinary items. 
D) extraordinary items and prior period adjustments. 
A) net income and gross margin. 
B) net income and pretax income. 
C) income before extraordinary items. 
D) extraordinary items and prior period adjustments.

Question 2

Intraperiod tax allocation relates the income tax expense of the period to the specific items that give rise to the amount of the tax provision.

Accepted Answer

A) True 
 B)False

Question 3

The primary advantage of the multiple-step format lies in the simplicity of presentation and the absence of any implication that one type of revenue or expense item has priority over another.

Accepted Answer

A) True 
 B)False

Question 4

Discontinued operations, extraordinary items, and unusual gains and losses are all reported net of tax in the income statement.

Accepted Answer

A) True 
 B)False

Question 5

Gross profit and income from operations are reported on a multiple-step but not a single-step income statement.

Accepted Answer

A) True 
 B)False

Question 6

Both revenues and gains increase both net income and owners' equity.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is never classified as an extraordinary item?

Accepted Answer

A) Losses from a major casualty. 
B) Losses from an expropriation of assets. 
C) Gain on a sale of the only security investment a company has ever owned. 
D) Losses from exchange or translation of foreign currencies. 
A) Losses from a major casualty. 
B) Losses from an expropriation of assets. 
C) Gain on a sale of the only security investment a company has ever owned. 
D) Losses from exchange or translation of foreign currencies.

Question 8

A correction of an error in prior periods' income will be reported $$\begin{array} { l l c } 
& \text { In the income statement } & \text { Net of tax } \
\text { a. } & \text { Yes } & \text { Yes } \
\text { b. } & \text { No } & \text { No } \
\text { c. } & \text { Yes } & \text { No } \
\text { d. } & \text { No } & \text { Yes }
\end{array}$$

Accepted Answer

The answer of A correction of an error in prior...

Question 9

The approach most companies use to provide information related to the components of other comprehensive income is a

Accepted Answer

A) second separate income statement. 
B) combined income statement of comprehensive income. 
C) separate column in the statement of changes in stockholders' equity. 
D) footnote disclosure. 
A) second separate income statement. 
B) combined income statement of comprehensive income. 
C) separate column in the statement of changes in stockholders' equity. 
D) footnote disclosure.

Question 10

The single-step income statement emphasizes

Accepted Answer

A) the gross profit figure. 
B) total revenues and total expenses. 
C) extraordinary items and accounting changes more than these are emphasized in the multiple-step income statement. 
D) the various components of income from continuing operations. 
A) the gross profit figure. 
B) total revenues and total expenses. 
C) extraordinary items and accounting changes more than these are emphasized in the multiple-step income statement. 
D) the various components of income from continuing operations.

Question 11

An income statement shows "income before income taxes and extraordinary items" in the amount of $2,055,000.The income taxes payable for the year are $1,080,000, including $360,000 that is applicable to an extraordinary gain.Thus, the "income before extraordinary items" is

Accepted Answer

A) $1,335,000. 
B) $615,000. 
C) $1,395,000. 
D) $675,000. 
A) $1,335,000. 
B) $615,000. 
C) $1,395,000. 
D) $675,000.

Question 12

Sam Hurd Company has the following items: write-down of inventories, $120,000; loss on disposal of Sports Division, $185,000; and loss due to strike, $113,000.Ignoring income taxes, what total amount should Sam Hurd Company report as extraordinary losses?

Accepted Answer

A) $ -0-. 
B) $185,000. 
C) $233,000. 
D) $298,000. 
A) $ -0-. 
B) $185,000. 
C) $233,000. 
D) $298,000.

Question 13

The occurrence that most likely would have no effect on 2007 net income is the

Accepted Answer

A) sale in 2007 of an office building contributed by a stockholder in 1961. 
B) collection in 2007 of a dividend from an investment. 
C) correction of an error in the financial statements of a prior period discovered subsequent to their issuance. 
D) stock purchased in 1993 deemed worthless in 2007. 
A) sale in 2007 of an office building contributed by a stockholder in 1961. 
B) collection in 2007 of a dividend from an investment. 
C) correction of an error in the financial statements of a prior period discovered subsequent to their issuance. 
D) stock purchased in 1993 deemed worthless in 2007.

Question 14

Use of a multiple-step income statement will result in the company reporting a higher net income than if they used a single-step income statement.

Accepted Answer

A) True 
 B)False

Question 15

Penn Company reported the following information for 2007: $$\begin{array} { l r } 
\text { Sales revenue } & \$ 510,000 \
\text { Cost of goods sold } & 350,000 \
\text { Operating expenses } & 55,000 \
\text { Unrealized holding gain on available-for-sale securities } & 40,000 \
\text { Cash dividends received on the securities } & 2,000
\end{array}$$ For 2007, Penn would report other comprehensive income of

Accepted Answer

A) $137,000. 
B) $135,000. 
C) $42,000. 
D) $40,000. 
A) $137,000. 
B) $135,000. 
C) $42,000. 
D) $40,000.

Question 16

How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?

Accepted Answer

A) Shown as a separate item in operating revenues or expenses if material and supple-mented by a footnote if deemed appropriate. 
B) Shown in operating revenues or expenses if material but not shown as a separate item. 
C) Shown net of income tax after ordinary net earnings but before extraordinary items. 
D) Shown net of income tax after extraordinary items but before net earnings. 
A) Shown as a separate item in operating revenues or expenses if material and supple-mented by a footnote if deemed appropriate. 
B) Shown in operating revenues or expenses if material but not shown as a separate item. 
C) Shown net of income tax after ordinary net earnings but before extraordinary items. 
D) Shown net of income tax after extraordinary items but before net earnings.

Question 17

A strength of the income statement as compared to the balance sheet is that items that cannot be measured reliably can be reported in the income statement.

Accepted Answer

A) True 
 B)False

Question 18

The components of other comprehensive income can be reported in a statement of stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 19

Shank Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation.The error caused the net income to be reported at almost double the proper amount.Correction of the error when discovered in the next year should be treated as

Accepted Answer

A) an increase in depreciation expense for the year in which the error is discovered. 
B) a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. 
C) an extraordinary item for the year in which the error was made. 
D) a prior period adjustment. 
A) an increase in depreciation expense for the year in which the error is discovered. 
B) a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. 
C) an extraordinary item for the year in which the error was made. 
D) a prior period adjustment.

Question 20

Snead, Inc.incurred the following infrequent losses during 2007: A $70,000 write-down of equipment leased to others.
A $40,000 adjustment of accruals on long-term contracts.
A $60,000 write-off of obsolete inventory.
In its 2007 income statement, what amount should Snead report as total infrequent losses that are not considered extraordinary?

Accepted Answer

A) $170,000. 
B) $130,000. 
C) $110,000. 
D) $100,000. 
A) $170,000. 
B) $130,000. 
C) $110,000. 
D) $100,000.

Earnings per share should always be shown separately for

Intraperiod tax allocation relates the income tax expense of the period to the specific items that give rise to the amount of the tax provision.

The primary advantage of the multiple-step format lies in the simplicity of presentation and the absence of any implication that one type of revenue or expense item has priority over another.

Discontinued operations, extraordinary items, and unusual gains and losses are all reported net of tax in the income statement.

Gross profit and income from operations are reported on a multiple-step but not a single-step income statement.

Both revenues and gains increase both net income and owners' equity.

Which of the following is never classified as an extraordinary item?

A correction of an error in prior periods' income will be reported In the income statement Net of tax a. Yes Yes b. No No c. Yes No d. No Yes

The approach most companies use to provide information related to the components of other comprehensive income is a

The single-step income statement emphasizes

An income statement shows "income before income taxes and extraordinary items" in the amount of $2,055,000.The income taxes payable for the year are $1,080,000, including $360,000 that is applicable to an extraordinary gain.Thus, the "income before extraordinary items" is

Sam Hurd Company has the following items: write-down of inventories, $120,000; loss on disposal of Sports Division, $185,000; and loss due to strike, $113,000.Ignoring income taxes, what total amount should Sam Hurd Company report as extraordinary losses?

The occurrence that most likely would have no effect on 2007 net income is the

Use of a multiple-step income statement will result in the company reporting a higher net income than if they used a single-step income statement.

How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?

A strength of the income statement as compared to the balance sheet is that items that cannot be measured reliably can be reported in the income statement.

The components of other comprehensive income can be reported in a statement of stockholders' equity.

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

Earnings per share should always be shown separately for

Intraperiod tax allocation relates the income tax expense of the period to the specific items that give rise to the amount of the tax provision.

The primary advantage of the multiple-step format lies in the simplicity of presentation and the absence of any implication that one type of revenue or expense item has priority over another.

Discontinued operations, extraordinary items, and unusual gains and losses are all reported net of tax in the income statement.

Gross profit and income from operations are reported on a multiple-step but not a single-step income statement.

Both revenues and gains increase both net income and owners' equity.

Which of the following is never classified as an extraordinary item?

A correction of an error in prior periods' income will be reported In the income statement Net of tax a. Yes Yes b. No No c. Yes No d. No Yes

The approach most companies use to provide information related to the components of other comprehensive income is a

The single-step income statement emphasizes

An income statement shows "income before income taxes and extraordinary items" in the amount of $2,055,000.The income taxes payable for the year are $1,080,000, including $360,000 that is applicable to an extraordinary gain.Thus, the "income before extraordinary items" is

Sam Hurd Company has the following items: write-down of inventories, $120,000; loss on disposal of Sports Division, $185,000; and loss due to strike, $113,000.Ignoring income taxes, what total amount should Sam Hurd Company report as extraordinary losses?

The occurrence that most likely would have no effect on 2007 net income is the

Use of a multiple-step income statement will result in the company reporting a higher net income than if they used a single-step income statement.

How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?

A strength of the income statement as compared to the balance sheet is that items that cannot be measured reliably can be reported in the income statement.

The components of other comprehensive income can be reported in a statement of stockholders' equity.

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