Question 1

The income statement is not also called the statement of

Accepted Answer

A) operations. 
B) operating activity. 
C) profit and loss. 
D) receipts and disbursements. 
E) All of the above are different names assigned to the income statement. 
A) operations. 
B) operating activity. 
C) profit and loss. 
D) receipts and disbursements. 
E) All of the above are different names assigned to the income statement. D

Question 2

Under the accrual method, the timing of revenue recognition is influenced by

Accepted Answer

A) where the purchaser gets funds to pay the seller. 
B) whether the buyer pays with cash or a promise. 
C) when the services or product are provided. 
D) when the seller has received a form of payment in settlement of a purchaser's promise. 
E) the nature of the services or product provided. 
A) where the purchaser gets funds to pay the seller. 
B) whether the buyer pays with cash or a promise. 
C) when the services or product are provided. 
D) when the seller has received a form of payment in settlement of a purchaser's promise. 
E) the nature of the services or product provided. C

Question 3

There are three formats available for both U.S.GAAP and IFRS reporting of the items that are included in Other Comprehensive Income.

Accepted Answer

A) True 
 B)False  False

Question 4

Subtraction of total operating expenses from sales yields:

Accepted Answer

A) net income. 
B) gross margin. 
C) operating profit. 
D) all of the above 
E) none of the above 
A) net income. 
B) gross margin. 
C) operating profit. 
D) all of the above 
E) none of the above

Question 5

The formats used to present the items that are included in Other Comprehensive Income include which of the following?

Accepted Answer

A) A two-statement presentation that includes a balance sheet and a separate statement of comprehensive income. 
B) A single statement that reconciles changes between the balance sheet and the statement of retained earnings. 
C) A single statement of comprehensive income that shows all the changes in net assets.This statement includes both Net Income and Other Comprehensive Income. 
D) A two-statement presentation that includes a statement of cash flows and a separate statement of comprehensive income. 
E) None of these answer choices is correct. 
A) A two-statement presentation that includes a balance sheet and a separate statement of comprehensive income. 
B) A single statement that reconciles changes between the balance sheet and the statement of retained earnings. 
C) A single statement of comprehensive income that shows all the changes in net assets.This statement includes both Net Income and Other Comprehensive Income. 
D) A two-statement presentation that includes a statement of cash flows and a separate statement of comprehensive income. 
E) None of these answer choices is correct.

Question 6

Which of the following statements regarding discontinued operations is true?

Accepted Answer

A) The assets and liabilities of a disposal group classified as held for sale by an entity may be offset and shown as a single item on the balance sheet of the entity. 
B) The assets and liabilities of a disposal group of an entity must be shown separately in the asset and liabilities sections of the balance sheet of the entity and cannot be offset. 
C) An adjustment in a subsequent period to the selling price of a component of an entity sold must be reported as a retroactive adjustment in the prior-period financial statements of the entity in which the discontinued operation was reported. 
D) The gain or loss on disposal of a component of an entity classified as a discontinued operation need not be disclosed separately from the loss from operations of the discontinued segment. 
E) None of these answers is correct. 
A) The assets and liabilities of a disposal group classified as held for sale by an entity may be offset and shown as a single item on the balance sheet of the entity. 
B) The assets and liabilities of a disposal group of an entity must be shown separately in the asset and liabilities sections of the balance sheet of the entity and cannot be offset. 
C) An adjustment in a subsequent period to the selling price of a component of an entity sold must be reported as a retroactive adjustment in the prior-period financial statements of the entity in which the discontinued operation was reported. 
D) The gain or loss on disposal of a component of an entity classified as a discontinued operation need not be disclosed separately from the loss from operations of the discontinued segment. 
E) None of these answers is correct.

Question 7

The _____ convention, links the timing of some expenses with revenue recognition.

Accepted Answer

A) going concern 
B) conservatism 
C) matching 
D) materiality 
E) objectivity 
A) going concern 
B) conservatism 
C) matching 
D) materiality 
E) objectivity

Question 8

Which of the following is/are true concerning accumulated other comprehensive income?

Accepted Answer

A) Firms measure marketable equity securities classified as available for sale at fair value and record the unrealized changes in fair value as an element of other comprehensive income. 
B) Firms remeasure derivatives designated as cash flow hedges to fair value at the end of each period and report the unrealized gain or loss in other comprehensive income. 
C) Firms translate the reported results of their foreign operations from local currencies into U.S.dollars in order to prepare consolidated financial statements. 
D) Firms must include gains and losses from changes in actuarial assumptions, actuarial performance, and prior service cost in other comprehensive income prior to their amortization as an adjustment to pension expense. 
E) all of the above 
A) Firms measure marketable equity securities classified as available for sale at fair value and record the unrealized changes in fair value as an element of other comprehensive income. 
B) Firms remeasure derivatives designated as cash flow hedges to fair value at the end of each period and report the unrealized gain or loss in other comprehensive income. 
C) Firms translate the reported results of their foreign operations from local currencies into U.S.dollars in order to prepare consolidated financial statements. 
D) Firms must include gains and losses from changes in actuarial assumptions, actuarial performance, and prior service cost in other comprehensive income prior to their amortization as an adjustment to pension expense. 
E) all of the above

Question 9

How are period expenses recognized and measured?

Accepted Answer

RECOGNITION OF PERIOD EXPENSES
Many expe

Question 10

Which of the following is/are true?

Accepted Answer

A) Interpreting the income statement involves studying the relations among revenues, expenses, and net income both over time and across firms. 
B) Comparisons are likely more valid for the same firm over time than across firms because of the difficulty in identifying truly similar firms. 
C) In evaluating over-time performance of a given firm, the user must understand both current economic conditions and how those conditions may have changed over the period of analysis. 
D) In evaluating across-firm performance, the user should control for the underlying business model by selecting peer firms that are similar, economically, to the firm being analyzed. 
E) All of the above are true. 
A) Interpreting the income statement involves studying the relations among revenues, expenses, and net income both over time and across firms. 
B) Comparisons are likely more valid for the same firm over time than across firms because of the difficulty in identifying truly similar firms. 
C) In evaluating over-time performance of a given firm, the user must understand both current economic conditions and how those conditions may have changed over the period of analysis. 
D) In evaluating across-firm performance, the user should control for the underlying business model by selecting peer firms that are similar, economically, to the firm being analyzed. 
E) All of the above are true.

Question 11

Over sufficiently long time periods, the amount of net income equals

Accepted Answer

A) cash inflows minus cash outflows from operating activities. 
B) cash inflows minus cash outflows from operating and investing activities. 
C) cash inflows minus cash outflows from operating, investing, and debt servicing activities. 
D) cash inflows minus cash outflows from operating and debt servicing activities. 
E) cash inflows minus cash outflows from investing and debt servicing activities. 
A) cash inflows minus cash outflows from operating activities. 
B) cash inflows minus cash outflows from operating and investing activities. 
C) cash inflows minus cash outflows from operating, investing, and debt servicing activities. 
D) cash inflows minus cash outflows from operating and debt servicing activities. 
E) cash inflows minus cash outflows from investing and debt servicing activities.

Question 12

The changes in the account balances and the following additional information are taken from the accounts of the Crush Co.
   Dividends for 2014 were $82,500.There were no transactions in 2014 affecting retained earnings other than the dividends and net income.Calculate the 2014 net income.

Accepted Answer

Debit changes in acc

Question 13

Revenue recognition is among the most complex issues in financial reporting. The quantity and complexity of the authoritative guidance for recognizing revenues result(s) from

Accepted Answer

A) misreporting of revenues, 
B) reporting revenues before the firm earns them, 
C) reporting nonexistent revenues, 
D) firms bundling products and services and selling them in multiple-element arrangements, 
E) all of the above 
A) misreporting of revenues, 
B) reporting revenues before the firm earns them, 
C) reporting nonexistent revenues, 
D) firms bundling products and services and selling them in multiple-element arrangements, 
E) all of the above

Question 14

Which of the following is/are false?

Accepted Answer

A) Firms do not necessarily recognize revenues when they receive cash 
B) Firms do not necessarily recognize expenses when they disburse cash. 
C) Net income will not necessarily equal cash flow from operations each period. 
D) A profitable firm will likely borrow funds in order to remain in business, but eventually operations must generate cash to repay the borrowing. 
E) None of the above are false 
A) Firms do not necessarily recognize revenues when they receive cash 
B) Firms do not necessarily recognize expenses when they disburse cash. 
C) Net income will not necessarily equal cash flow from operations each period. 
D) A profitable firm will likely borrow funds in order to remain in business, but eventually operations must generate cash to repay the borrowing. 
E) None of the above are false

Question 15

Selected information based on the comparative balance sheets for Neptune Company, a U.S.defense manufacturer, appears in the following display for the years ended December 31, Years 5, 6, and 7.
Neptune applies U.S.GAAP and reports its results in millions of dollars.
   Neptune’s other comprehensive income for Year 7 was $774, compared to ($31) in Year 6 and $275 in Year 5. In addition, in Year 7 Neptune made a one-time adjustment of ($1,338) to accumulated other comprehensive income. Comprehensive income for Year 7 was $2,057, compared to $840 in Year 6 and $692 in Year 5. Dividends declared and paid increased from $356 in Year 5, to $394 in Year 6, to $429 in Year 7.

Required: Compute the missing amounts for each of the three years.
(amounts in millions of US$)

Accepted Answer

Calculations:
(a) Total Shareholders' Eq

Question 16

Which of the following is/are true concerning accumulated other comprehensive income?

Accepted Answer

A) Firms measure marketable equity securities classified as available for sale at fair value and record the unrealized changes in fair value as an element of other comprehensive income. 
B) Firms remeasure derivatives designated as cash flow hedges to fair value at the end of each period and report the unrealized gain or loss in other comprehensive income. 
C) Firms translate the reported results of their foreign operations from local currencies into U.S.dollars in order to prepare consolidated financial statements. 
D) Firms must include gains and losses from changes in actuarial assumptions, actuarial performance, and prior service cost in other comprehensive income prior to their amortization as an adjustment to pension expense. 
E) all of the above 
A) Firms measure marketable equity securities classified as available for sale at fair value and record the unrealized changes in fair value as an element of other comprehensive income. 
B) Firms remeasure derivatives designated as cash flow hedges to fair value at the end of each period and report the unrealized gain or loss in other comprehensive income. 
C) Firms translate the reported results of their foreign operations from local currencies into U.S.dollars in order to prepare consolidated financial statements. 
D) Firms must include gains and losses from changes in actuarial assumptions, actuarial performance, and prior service cost in other comprehensive income prior to their amortization as an adjustment to pension expense. 
E) all of the above

Question 17

Which of the following is/are true?

Accepted Answer

A) Comprehensive income equals the net amount of revenues, expenses, gains, and losses during an accounting period. 
B) Authoritative guidance classifies revenues and expenses arising from a firm's core business as components of net income. 
C) Net income includes gains and losses from sales or exchanges of assets or settlements of liabilities related incidentally or peripherally to the firm's core business. 
D) Authoritative guidance classifies gains and losses from the remeasurement of certain assets and liabilities as either net income or other comprehensive income. 
E) All of the above answer choices are true. 
A) Comprehensive income equals the net amount of revenues, expenses, gains, and losses during an accounting period. 
B) Authoritative guidance classifies revenues and expenses arising from a firm's core business as components of net income. 
C) Net income includes gains and losses from sales or exchanges of assets or settlements of liabilities related incidentally or peripherally to the firm's core business. 
D) Authoritative guidance classifies gains and losses from the remeasurement of certain assets and liabilities as either net income or other comprehensive income. 
E) All of the above answer choices are true.

Question 18

The _____ uses only sales revenues and net income and an analyst nearly always can calculate, regardless of format and display differences in income statement presentations.

Accepted Answer

A) acid test or quick ratio 
B) current ratio 
C) asset turnover ratio 
D) profit margin percentage 
E) revenue turnover ratio 
A) acid test or quick ratio 
B) current ratio 
C) asset turnover ratio 
D) profit margin percentage 
E) revenue turnover ratio

Question 19

A seller of goods can easily associate (or match) the consumption of the benefits of the asset sold with revenues from its sale.At the time of sale and revenue recognition, the seller

Accepted Answer

A) removes the asset (inventory) from the seller's balance sheet. 
B) recognizes revenue. 
C) recognizes a reduction in an asset (inventory). 
D) records the cost of goods sold expense in the same amount by which inventory decreases. 
E) all of the above 
A) removes the asset (inventory) from the seller's balance sheet. 
B) recognizes revenue. 
C) recognizes a reduction in an asset (inventory). 
D) records the cost of goods sold expense in the same amount by which inventory decreases. 
E) all of the above

Question 20

Firms have considerable flexibility as to how they report other comprehensive income each period.Under U.S.GAAP, they can include

Accepted Answer

A) it with net income in a single statement of comprehensive income. 
B) it in a separate statement of other comprehensive income that is one of the notes to the financial statements. 
C) it in a statement of changes in shareholders' equity. 
D) all of the above. 
E) none of the above. 
A) it with net income in a single statement of comprehensive income. 
B) it in a separate statement of other comprehensive income that is one of the notes to the financial statements. 
C) it in a statement of changes in shareholders' equity. 
D) all of the above. 
E) none of the above.

The income statement is not also called the statement of

Under the accrual method, the timing of revenue recognition is influenced by

There are three formats available for both U.S.GAAP and IFRS reporting of the items that are included in Other Comprehensive Income.

Subtraction of total operating expenses from sales yields:

The formats used to present the items that are included in Other Comprehensive Income include which of the following?

Which of the following statements regarding discontinued operations is true?

The _____ convention, links the timing of some expenses with revenue recognition.

Which of the following is/are true concerning accumulated other comprehensive income?

How are period expenses recognized and measured?

Which of the following is/are true?

Over sufficiently long time periods, the amount of net income equals

The changes in the account balances and the following additional information are taken from the accounts of the Crush Co. Dividends for 2014 were $82,500.There were no transactions in 2014 affecting retained earnings other than the dividends and net income.Calculate the 2014 net income.

Revenue recognition is among the most complex issues in financial reporting. The quantity and complexity of the authoritative guidance for recognizing revenues result(s) from

Which of the following is/are false?

Which of the following is/are true concerning accumulated other comprehensive income?

Which of the following is/are true?

The _____ uses only sales revenues and net income and an analyst nearly always can calculate, regardless of format and display differences in income statement presentations.

A seller of goods can easily associate (or match) the consumption of the benefits of the asset sold with revenues from its sale.At the time of sale and revenue recognition, the seller

Firms have considerable flexibility as to how they report other comprehensive income each period.Under U.S.GAAP, they can include

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 5: Income Statement: Reporting Results of Operating Activities

The income statement is not also called the statement of

Under the accrual method, the timing of revenue recognition is influenced by

There are three formats available for both U.S.GAAP and IFRS reporting of the items that are included in Other Comprehensive Income.

Subtraction of total operating expenses from sales yields:

The formats used to present the items that are included in Other Comprehensive Income include which of the following?

Which of the following statements regarding discontinued operations is true?

The _____ convention, links the timing of some expenses with revenue recognition.

Which of the following is/are true concerning accumulated other comprehensive income?

How are period expenses recognized and measured?

Which of the following is/are true?

Over sufficiently long time periods, the amount of net income equals

The changes in the account balances and the following additional information are taken from the accounts of the Crush Co. Dividends for 2014 were $82,500.There were no transactions in 2014 affecting retained earnings other than the dividends and net income.Calculate the 2014 net income.

Revenue recognition is among the most complex issues in financial reporting. The quantity and complexity of the authoritative guidance for recognizing revenues result(s) from

Which of the following is/are false?

Which of the following is/are true concerning accumulated other comprehensive income?

Which of the following is/are true?

The _____ uses only sales revenues and net income and an analyst nearly always can calculate, regardless of format and display differences in income statement presentations.

A seller of goods can easily associate (or match) the consumption of the benefits of the asset sold with revenues from its sale.At the time of sale and revenue recognition, the seller

Firms have considerable flexibility as to how they report other comprehensive income each period.Under U.S.GAAP, they can include

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters