Exam 4: Income Statement and Related Information

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.

Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $928,000. It also has the following items (gross amounts). What is the amount of income tax expense Arreaga would report on its income statement?

Dividends declared on common and preferred stock are subtracted from net income in the computation of earnings per share.

An item that should be classified as an extraordinary item is

A statement of stockholders' equity includes a column for each of the following except

Norling Corporation reports the following information: Norling should report earnings per share of

Irregular items and financial statements.The accountant preparing the income statement for Bakersfield, Inc. had some doubts about the appropriate accounting treatment of the seven items listed below during the fiscal year ending December 31, 2014. Assume a tax rate of 40 percent.1. The corporation experienced an uninsured flood loss of $70,000 before taxes. While this loss meets the criteria of an extraordinary item, it has not been recorded.2. The corporation disposed of its sporting goods division during 2014. This disposal meets the criteria for discontinued operations. The division correctly calculated income from operating this division of $110,000 before taxes and a loss of $12,000 before taxes on the disposal of the division. All of these events occurred in 2014 and have not been recorded.3. The company recorded advances of $10,000 to employees made December 31, 2014 as Salaries and Wages Expense.4. Dividends of $10,000 during 2014 were recorded as an operating expense.5. In 2014, Bakersfield changed its method of accounting for inventory from the first-in-first-out method to the average cost method. Inventory in 2014 was correctly recorded using the average cost method. The new inventory method would have resulted in an additional $125,000 of cost of goods sold (before taxes) being reported on prior years' income statement.6. Office equipment purchased January 1, 2014 for $60,000 was incorrectly charged to Supplies Expense at the time of purchase. The office equipment has an estimated three-year service life with no expected salvage value. Bakersfield uses the straight-line method to depreciate office equipment for financial reporting purposes. This error has not been recorded."7. On January 1, 2010, Bakersfield bought a building that cost $85,000, had an estimated useful life of ten years, and had a salvage value of $5,000. Bakersfield uses thestraight-line depreciation method to depreciate the building. In 2014, it was estimated that the remaining useful life was eight years and the salvage value was zero. Depreciation expense reported on the 2014 income statement was correctly calculated based on the new estimates. No adjustment for prior years' depreciation estimates was made.Part A. For each item, record corrections to income from continuing operations before taxes, if any. Denote any negative numbers by using brackets < >."

Chase Corp. had the following infrequent transactions during 2014:A $375,000 gain from selling the only investment Chase has ever owned.A $525,000 gain on the sale of equipment.A $175,000 loss on the write-down of inventories.In its 2014 income statement, what amount should Chase report as total infrequent net gains that are not considered extraordinary?

Which of the following is not a selling expense?

Income taxes are allocated to

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:January 1, 2014 $160,000December 31, 2014 140,000On Logan's multiple-step income statement for 2014,Income before extraordinary item is

Palomo Corp has a tax rate of 30 percent and income before non-operating items of $1,071,000. It also has the following items (gross amounts). What is the amount of income tax expense Palomo would report on its income statement?

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

For Mortenson Company, the following information is available: In Mortenson's single-step income statement, gross profit

Watts 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

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

Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2014, included the following expense accounts: One-half of the rented premises is occupied by the sales department.How much of the expenses listed above should be included in Perry's general and administrative expenses for 2014?

In 2014, Linz Corporation reported an extraordinary loss of $1,000,000, net of tax. It declared and paid preferred stock dividends of $100,000 and common stock dividends of $300,000. During 2014, Linz had a weighted average of 500,000 common shares outstanding. As a result of the extraordinary loss, net of tax, the earnings per share would decrease by

Didde Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2014 included the following expense and loss accounts: One-half of the rented premises is occupied by the sales department. Didde's total selling expenses for 2014 are

An IFRS statement might include all of the following except