Question 1

Both revenues and gains increase both net income and equity.

Accepted Answer

A) True 
 B)False

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

Question 3

In which section of the income statement is interest expense reported?

Accepted Answer

A) Gross profit. 
B) Income from operations. 
C) Income before income taxes. 
D) Non-controlling interest. 
A) Gross profit. 
B) Income from operations. 
C) Income before income taxes. 
D) Non-controlling interest.

Question 4

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as

Accepted Answer

A) a prior period adjustment. 
B) an other income and expense item. 
C) an amount after continuing operations and before net income. 
D) a bulk sale of plant assets included in income from continuing operations. 
A) a prior period adjustment. 
B) an other income and expense item. 
C) an amount after continuing operations and before net income. 
D) a bulk sale of plant assets included in income from continuing operations.

Question 5

The nature-of-expense method identifies the major cost drivers and helps users to assess whether these amounts are appropriate for the revenue generated.

Accepted Answer

A) True 
 B)False

Question 6

Income taxes are allocated to

Accepted Answer

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

Question 7

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 8

Prior years income statements are not restated for

Accepted Answer

A) changes in accounting principle. 
B) changes in estimates. 
C) corrections of errors. 
D) All of these answer choices are correct. 
A) changes in accounting principle. 
B) changes in estimates. 
C) corrections of errors. 
D) All of these answer choices are correct.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) Use by customers to determine a company's ability to provide needed goods and services. 
B) Use by labor unions to examine earnings closely as a basis for salary discussions. 
C) Use by government agencies to formulate tax and economic policy. 
D) Use by investors interested in the financial position of the entity. 
A) Use by customers to determine a company's ability to provide needed goods and services. 
B) Use by labor unions to examine earnings closely as a basis for salary discussions. 
C) Use by government agencies to formulate tax and economic policy. 
D) Use by investors interested in the financial position of the entity.

Question 11

The occurrence which most likely would have no effect on 2015 net income (assuming that all amounts involved are material) is the

Accepted Answer

A) sale in 2015 of an office building contributed by a stockholder in 1987. 
B) collection in 2015 of a receivable from a customer whose account was written off in 2014 by a charge to the allowance account. 
C) settlement based on litigation in 2015 of previously unrecognized damages from a serious accident which occurred in 2013. 
D) worthlessness determined in 2015 of stock purchased on a speculative basis in 2011. 
A) sale in 2015 of an office building contributed by a stockholder in 1987. 
B) collection in 2015 of a receivable from a customer whose account was written off in 2014 by a charge to the allowance account. 
C) settlement based on litigation in 2015 of previously unrecognized damages from a serious accident which occurred in 2013. 
D) worthlessness determined in 2015 of stock purchased on a speculative basis in 2011.

Question 12

A company that reports a discontinued operation has the option of reporting per share amounts for this item.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Limitations of the income statement include all of the following except

Accepted Answer

A) items that cannot be measured reliably are not reported. 
B) only actual amounts are reported in determining net income. 
C) income measurement involves judgment. 
D) income numbers are affected by the accounting methods employed. 
A) items that cannot be measured reliably are not reported. 
B) only actual amounts are reported in determining net income. 
C) income measurement involves judgment. 
D) income numbers are affected by the accounting methods employed.

Question 15

Comprehensive income includes all of the following except

Accepted Answer

A) dividend revenue. 
B) losses on disposal of assets. 
C) investments by owners. 
D) unrealized holding gains. 
A) dividend revenue. 
B) losses on disposal of assets. 
C) investments by owners. 
D) unrealized holding gains.

Question 16

Companies frequently report income tax as the last item before net income on the income statement.

Accepted Answer

A) True 
 B)False

Question 17

The income statement reveals

Accepted Answer

A) resources and equities of a firm at a point in time. 
B) resources and equities of a firm for a period of time. 
C) net earnings (net income) of a firm at a point in time. 
D) net earnings (net income) of a firm for a period of time. 
A) resources and equities of a firm at a point in time. 
B) resources and equities of a firm for a period of time. 
C) net earnings (net income) of a firm at a point in time. 
D) net earnings (net income) of a firm for a period of time.

Question 18

The IASB takes the position that both revenues and expenses and other income and expense should be reported as part of income from operations.

Accepted Answer

A) True 
 B)False

Question 19

Earnings per share should always be shown separately for

Accepted Answer

A) net income and gross profit. 
B) net income and pretax income. 
C) income from continuing operations. 
D) discontinued operations and prior period adjustments. 
A) net income and gross profit. 
B) net income and pretax income. 
C) income from continuing operations. 
D) discontinued operations and prior period adjustments.

Question 20

Which of the following earnings per share figures must be disclosed on the face of the income statement?

Accepted Answer

A) EPS for income before taxes. 
B) The effect on EPS from unusual items. 
C) EPS for gross profit. 
D) EPS for income from continuing operations. 
A) EPS for income before taxes. 
B) The effect on EPS from unusual items. 
C) EPS for gross profit. 
D) EPS for income from continuing operations.

Exam 4: Income Statement and Related Information

Both revenues and gains increase both net income and equity.

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

In which section of the income statement is interest expense reported?

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as

The nature-of-expense method identifies the major cost drivers and helps users to assess whether these amounts are appropriate for the revenue generated.

Income taxes are allocated to

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

Prior years income statements are not restated for

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

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

The occurrence which most likely would have no effect on 2015 net income (assuming that all amounts involved are material) is the

A company that reports a discontinued operation has the option of reporting per share amounts for this item.

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

Limitations of the income statement include all of the following except

Comprehensive income includes all of the following except

Companies frequently report income tax as the last item before net income on the income statement.

The income statement reveals

The IASB takes the position that both revenues and expenses and other income and expense should be reported as part of income from operations.

Earnings per share should always be shown separately for

Which of the following earnings per share figures must be disclosed on the face of the income statement?

Financial Reporting and Accounting Standards

Conceptual Framework for Financial Reporting

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 Recognition

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 Financialreporting

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