Question 1

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 2

Revenues and gains increase both net income and owners' equity.

Accepted Answer

A) True 
 B)False

Question 3

A review of the December 31, 2014, financial statements of Somer Corporation revealed that under the caption "extraordinary losses," Somer reported a total of $1,130,000. Further analysis revealed that the $1,130,000 in losses was comprised of the following items:(1) Somer recorded a loss of $300,000 incurred in the abandonment of equipment formerly used in the business.(2) In an unusual and infrequent occurrence, a loss of $600,000 was sustained as a result of hurricane damage to a warehouse.(3) During 2014, several factories were shut down during a major strike by employees, resulting in a loss of $170,000.(4) Uncollectible accounts receivable of $60,000 were written off as uncollectible.Ignoring income taxes, what amount of loss should Somer report as extraordinary on its 2014 income statement?

Accepted Answer

A)  $300,000. 
B)  $600,000. 
C)  $900,000. 
D)  $1,130,000. 
A)  $300,000. 
B)  $600,000. 
C)  $900,000. 
D)  $1,130,000.

Question 4

Which of the following is not an acceptable way of displaying the components of other comprehensive income?

Accepted Answer

A)  Combined statement of retained earnings 
B)  One statement approach 
C)  Two statement approach 
D)  All of these are acceptable ways 
A)  Combined statement of retained earnings 
B)  One statement approach 
C)  Two statement approach 
D)  All of these are acceptable ways

Question 5

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 6

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 7

Which of the following is an example of managing earnings up?

Accepted Answer

A)  Decreasing estimated salvage value of equipment. 
B)  Writing off obsolete inventory. 
C)  Underestimating warranty claims. 
D)  Accruing a contingent liability for an ongoing lawsuit. 
A)  Decreasing estimated salvage value of equipment. 
B)  Writing off obsolete inventory. 
C)  Underestimating warranty claims. 
D)  Accruing a contingent liability for an ongoing lawsuit.

Question 8

Both IFRS and U.S. GAAP allow for comprehensive income to be reported in either aStatement of Stockholders' Equity or a Statement of Recognized Income and Expense.

Accepted Answer

A) True 
 B)False

Question 9

The following information was extracted from the 2014 financial statements of Max Company:   The amount reported for other expenses and losses is

Accepted Answer

A)  $141,000 
B)  $39,000. 
C)  $110,000. 
D)  $150,000. 
A)  $141,000 
B)  $39,000. 
C)  $110,000. 
D)  $150,000.

Question 10

Both U.S. GAAP and IFRS discuss income statement presentation using either asingle-step or multi-step approach.

Accepted Answer

A) True 
 B)False

Question 11

Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2014 included the following:   Other information:Logan's income tax rate is 30%. Finished goods inventory:   On Logan's multiple-step income statement for 2014,Cost of goods manufactured is

Accepted Answer

A)  $176,000. 
B)  $170,000. 
C)  $136,000. 
D)  $130,000. 
A)  $176,000. 
B)  $170,000. 
C)  $136,000. 
D)  $130,000.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

What might a manager do during the last quarter of a fiscal year if she wanted to decrease current annual net income?

Accepted Answer

A)  Delay shipments and sales to customers until after the end of the fiscal year. 
B)  Relax credit policies for customers. 
C)  Pay suppliers all amounts owed. 
D)  Delay purchases from suppliers until after the end of the fiscal year. 
A)  Delay shipments and sales to customers until after the end of the fiscal year. 
B)  Relax credit policies for customers. 
C)  Pay suppliers all amounts owed. 
D)  Delay purchases from suppliers until after the end of the fiscal year.

Question 14

Single-step income statement.Presented below is an income statement for Kinder Company for the year ended December 31, 2014.   Additional information:1. "Selling, general, and administrative expenses" included a usual but infrequent charge of $7,000 due to a loss on the sale of investments.2. "Other, net" consisted of interest expense, $10,000, and an extraordinary loss of $20,000 before taxes due to earthquake damage. If the extraordinary loss had not occurred, income taxes for 2014 would have been $48,000 instead of $42,000."4. Kinder had 20,000 shares of common stock outstanding during 2014.
InstructionsUsing the single-step format, prepare a corrected income statement, including the appropriate per share disclosures."

Accepted Answer

The answer of Single-step income statement.Presented below is an income...

Question 15

Which of the following is true of accounting for changes in estimates?

Accepted Answer

A)  A company recognizes a change in estimate by making a retrospective adjustment to the financial statements 
B)  A company accounts for changes in estimates only in the period of change, even though it affects the future periods 
C)  Changes in estimates are not carried back to adjust prior years 
D)  Changes in estimates are considered as errors or extraordinary items 
A)  A company recognizes a change in estimate by making a retrospective adjustment to the financial statements 
B)  A company accounts for changes in estimates only in the period of change, even though it affects the future periods 
C)  Changes in estimates are not carried back to adjust prior years 
D)  Changes in estimates are considered as errors or extraordinary items

Question 16

Income statement form.Wilcox Corporation had income from continuing operations of $750,000 (after taxes) in 2014. In addition, the following information, which has not been considered, is as follows.1. In 2014, Wilcox experienced an uninsured earthquake loss in the amount of $290,000.2. A machine was sold for $140,000 cash during the year at a time when its book value was $110,000. (Depreciation has been properly recorded.) The company often sells machinery of this type."3. Wilcox decided to discontinue its stereo division in 2014. During the current year, the loss on the disposal of this component of the business was $180,000 less applicable taxes.
InstructionsPresent in good form the income statement of Wilcox Corporation for 2014 starting with ""income from continuing operations."" Assume that Wilcox's tax rate is 30% and 200,000 shares of common stock were outstanding during the year."

Accepted Answer

The answer of Income statement form.Wilcox Corporation had income from...

Question 17

Sandstrom Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate of 40%. At what amount should Sandstrom report each item?Extraordinary loss Unusual gain

Accepted Answer

A)  $(200,000) $140,000 
B)  (200,000) 84,000 
C)  (120,000) 140,000 
D)  (120,000) 84,000 
A)  $(200,000) $140,000 
B)  (200,000) 84,000 
C)  (120,000) 140,000 
D)  (120,000) 84,000

Question 18

Dole Company, with an applicable income tax rate of 30%, reported net income of $350,000. Included in income for the period was an extraordinary loss from flood damage of $80,000 before deducting the related tax effect. The company's income before income taxes and extraordinary items was

Accepted Answer

A)  $430,000. 
B)  $500,000. 
C)  $580,000. 
D)  $406,000. 
A)  $430,000. 
B)  $500,000. 
C)  $580,000. 
D)  $406,000.

Question 19

In order to be classified as an extraordinary item in the income statement, an event or transaction should be

Accepted Answer

A)  unusual in nature, infrequent, and material in amount. 
B)  unusual in nature and infrequent, but it need not be material. 
C)  infrequent and material in amount, but it need not be unusual in nature. 
D)  unusual in nature and material, but it need not be infrequent. 
A)  unusual in nature, infrequent, and material in amount. 
B)  unusual in nature and infrequent, but it need not be material. 
C)  infrequent and material in amount, but it need not be unusual in nature. 
D)  unusual in nature and material, but it need not be infrequent.

Question 20

Which of the following is an acceptable method of presenting the income statement?

Accepted Answer

A)  A single-step income statement 
B)  A multiple-step income statement 
C)  A consolidated statement of income 
D)  All of these answer choices are correct. 
A)  A single-step income statement 
B)  A multiple-step income statement 
C)  A consolidated statement of income 
D)  All of these answer choices are correct.

Exam 4: Income Statement and Related Information

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

Revenues and gains increase both net income and owners' equity.

Which of the following is not an acceptable way of displaying the components of other comprehensive income?

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

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

Which of the following is an example of managing earnings up?

Both IFRS and U.S. GAAP allow for comprehensive income to be reported in either aStatement of Stockholders' Equity or a Statement of Recognized Income and Expense.

The following information was extracted from the 2014 financial statements of Max Company: The amount reported for other expenses and losses is

Both U.S. GAAP and IFRS discuss income statement presentation using either asingle-step or multi-step approach.

Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2014 included the following: Other information:Logan's income tax rate is 30%. Finished goods inventory: On Logan's multiple-step income statement for 2014,Cost of goods manufactured is

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

What might a manager do during the last quarter of a fiscal year if she wanted to decrease current annual net income?

Which of the following is true of accounting for changes in estimates?

Sandstrom Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate of 40%. At what amount should Sandstrom report each item?Extraordinary loss Unusual gain

Dole Company, with an applicable income tax rate of 30%, reported net income of $350,000. Included in income for the period was an extraordinary loss from flood damage of $80,000 before deducting the related tax effect. The company's income before income taxes and extraordinary items was

In order to be classified as an extraordinary item in the income statement, an event or transaction should be

Which of the following is an acceptable method of presenting the income statement?

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

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

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue Recognition

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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