Question 1

Companies report the results of operations of a component of a business that will be disposed of separately from continuing operations.

Accepted Answer

A) True 
 B)False  True

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following equations expresses the definition of "income"?

Accepted Answer

A) Income = Revenues - Expenses 
B) Income = (Revenues + Gains) - (Expenses + Losses) 
C) Income = Revenues + Gains 
D) Income = Gains - Losses 
A) Income = Revenues - Expenses 
B) Income = (Revenues + Gains) - (Expenses + Losses) 
C) Income = Revenues + Gains 
D) Income = Gains - Losses C

Question 4

Which method of income measurement is used in the preparation of the income statement?

Accepted Answer

A) Capital maintenance approach. 
B) Transaction approach. 
C) Cash-flow approach. 
D) Income components approach. 
A) Capital maintenance approach. 
B) Transaction approach. 
C) Cash-flow approach. 
D) Income components approach.

Question 5

Earnings per share relate to

Accepted Answer

A) preference shares only. 
B) ordinary shares only. 
C) both preference and ordinary shares. 
D) neither preference nor ordinary shares. 
A) preference shares only. 
B) ordinary shares only. 
C) both preference and ordinary shares. 
D) neither preference nor ordinary shares.

Question 6

In 2011, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2010.In 2011, which of the following accounts will have to be credited to correct this error?

Accepted Answer

A) Salaries Payable. 
B) Salaries Expense. 
C) Retained Earnings. 
D) Income Summary. 
A) Salaries Payable. 
B) Salaries Expense. 
C) Retained Earnings. 
D) Income Summary.

Question 7

Given the following income statement line items:
Income from operations
Income before income taxes
Income from continuing operations
Income from discontinued operations
Net income
How many earnings per share amounts are required to be disclosed?

Accepted Answer

A) 5 
B) 4 
C) 3 
D) 2 
A) 5 
B) 4 
C) 3 
D) 2

Question 8

Income from operations represents a company's results before any gain or loss on discontinued operations.

Accepted Answer

A) True 
 B)False

Question 9

Income taxes are allocated to

Accepted Answer

A) continuing operations. 
B) discontinued operations. 
C) prior period adjustments. 
D) All of these. 
A) continuing operations. 
B) discontinued operations. 
C) prior period adjustments. 
D) All of these.

Question 10

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 11

The earnings per share computation is not required for

Accepted Answer

A) Net income. 
B) Gain on disposal of discontinued operation, net of tax. 
C) Income from continuing operations. 
D) Income from operations. 
A) Net income. 
B) Gain on disposal of discontinued operation, net of tax. 
C) Income from continuing operations. 
D) Income from operations.

Question 12

Companies use intraperiod tax allocation for all of the following items except

Accepted Answer

A) discontinued operations. 
B) prior period adjustments. 
C) changes in accounting estimates. 
D) income from continuing operations. 
A) discontinued operations. 
B) prior period adjustments. 
C) changes in accounting estimates. 
D) income from continuing operations.

Question 13

Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?

Accepted Answer

A) Non-cumulative only. 
B) Cumulative only. 
C) Neither non-cumulative nor cumulative. 
D) Both non-cumulative and cumulative. 
A) Non-cumulative only. 
B) Cumulative only. 
C) Neither non-cumulative nor cumulative. 
D) Both non-cumulative and cumulative.

Question 14

Which of the following situations involving different accounting methods or accounting estimates results in comparison difficulties between companies?

Accepted Answer

A) Estimated useful lives for depreciable assets. 
B) Inventory methods. 
C) Estimates of bad debts. 
D) All of the above. 
A) Estimated useful lives for depreciable assets. 
B) Inventory methods. 
C) Estimates of bad debts. 
D) All of the above.

Question 15

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of

Accepted Answer

A) quality of earnings. 
B) earnings management. 
C) smoothing of earnings. 
D) earnings averaging. 
A) quality of earnings. 
B) earnings management. 
C) smoothing of earnings. 
D) earnings averaging.

Question 16

Which of the following is true about intraperiod tax allocation?

Accepted Answer

A) It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return. 
B) It is required for the cumulative effect of accounting changes but not for prior period adjustments. 
C) Its purpose is to allocate income tax expense evenly over a number of accounting periods. 
D) Its purpose is to relate the income tax expense to the items which affect the amount of tax. 
A) It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return. 
B) It is required for the cumulative effect of accounting changes but not for prior period adjustments. 
C) Its purpose is to allocate income tax expense evenly over a number of accounting periods. 
D) Its purpose is to relate the income tax expense to the items which affect the amount of tax.

Question 17

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

Accepted Answer

A) Increase research and development activities. 
B) Relax credit policies for customers. 
C) Delay shipments to customers until after the end of the fiscal year. 
D) Delay purchases from suppliers until after the end of the fiscal year. 
A) Increase research and development activities. 
B) Relax credit policies for customers. 
C) Delay shipments to customers until after the end of the fiscal year. 
D) Delay purchases from suppliers until after the end of the fiscal year.

Question 18

The major elements of the income statement are

Accepted Answer

A) revenue, cost of goods sold, selling expenses, and general expense. 
B) operating section, nonoperating section, discontinued operations and cumulative effect. 
C) revenues, expenses, gains, and losses. 
D) All of these. 
A) revenue, cost of goods sold, selling expenses, and general expense. 
B) operating section, nonoperating section, discontinued operations and cumulative effect. 
C) revenues, expenses, gains, and losses. 
D) All of these.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The income statement provides investors and creditors information that helps them predict

Accepted Answer

A) the amounts of future cash flows. 
B) the timing of future cash flows. 
C) the uncertainty of future cash flows. 
D) All of the above. 
A) the amounts of future cash flows. 
B) the timing of future cash flows. 
C) the uncertainty of future cash flows. 
D) All of the above.

Exam 4: Income Statement and Related Information

Companies report the results of operations of a component of a business that will be disposed of separately from continuing operations.

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

Which of the following equations expresses the definition of "income"?

Which method of income measurement is used in the preparation of the income statement?

Earnings per share relate to

In 2011, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2010.In 2011, which of the following accounts will have to be credited to correct this error?

Given the following income statement line items: Income from operations Income before income taxes Income from continuing operations Income from discontinued operations Net income How many earnings per share amounts are required to be disclosed?

Income from operations represents a company's results before any gain or loss on discontinued operations.

Income taxes are allocated to

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 earnings per share computation is not required for

Companies use intraperiod tax allocation for all of the following items except

Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?

Which of the following situations involving different accounting methods or accounting estimates results in comparison difficulties between companies?

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of

Which of the following is true about intraperiod tax allocation?

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

The major elements of the income statement are

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

The income statement provides investors and creditors information that helps them predict

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Statement of Financial Position 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, Provisions, and Contingencies

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financial Reporting

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