Exam 3: Statements of Income and Comprehensive Income

When reporting net income for a fiscal year, companies must use a 12-month period.

Pax Inc. earned $90,000 and $110,000 of income from continuing operations after taxes in Years 1 and 2, respectively. The tax rate is 40%. The firm decided to sell one of its business segments on November 1, Year 1. The expected disposal date is February 1, Year 2. The segment's income was a pre-tax loss of $20,000 (not included in income from continuing operations) for Year 1 through November 1, Year 1. The segment lost an additional $25,000 pre-tax income for the remainder of Year 1 and was expected to lose $10,000 more pre-tax in Year 2 to the disposal date. The selling price of the segment is $100,000 and the book value of net assets is $60,000. During Year 2, the segment actually earned $10,000 pre-tax. For both years, prepare the bottom portion of the income statement including a section for discontinued operations for this firm.

Other comprehensive income includes unrealized gains and losses on Available-for-sale securities.

Future costs associated with a restructuring can only be recognized if they:

The results from operation of a discontinued segment under IFRS and any gain or loss on disposal or adjustment to fair value of the disposed segment should appear:

Losses and provisions for losses with respect to bad debts and inventories should not be reported as unusual or infrequent.

A company had 90,000 shares of common stock outstanding throughout the year. Income before taxes was $166,000. The tax rate was 40 percent. EPS for net income is (rounded to the nearest cent):

Which of the following is true about intra-period tax allocation?

Under IFRS, companies must use a single continuous statement to report comprehensive income.

Basic and diluted Earnings per share figures must be disclosed under both ASPE and IFRS.

Other comprehensive income includes unrealized gains on losses of foreign exchange hedges.

Queen Corporation decided to sell its furniture business segment for $400,000, on September 1, Year 1, which is also the disposal date. The book value of the segment's net assets is $500,000 on this date. The pre-tax income for the segment for the period January 1 - September 1, Year 1, was $150,000. Assuming a tax rate of 40%, choose the correct reporting for discontinued operations in the income statement of Queen Corporation, for the year ended December 31, Year 1. Income (loss) from Discontinued operations Gain (loss) from disposal of ciscontinued operations 1 \ 90,000 \ \ 60,000) 2 \ 150,000 \ 100,000) 3 \ 30,000 \ 0 4 \ 0 \ 30,000

Given the following amounts from an income statement: Sales (net of returns and allowances of \ 10) \ 336 Distribution expenses 76 Rent revenue 2 General and administrative expenses 36 interest revenue 1 Cost of goods sold 152 Interest expense 4 Loss on sale of irw estment 3 Income tax expense on operations 27 Exceptional item - Loss due to earthquake, pre-tax 5 The amount shown on a single-step format income statement for income from continuing operations items would be:

Under ASPE, foreign exchange translation gains or losses are charged to:

In the current year, a firm has decided to dispose of a segment. Disposal will take place in the next (subsequent) year. Use the following symbols to answer this question on reporting for discontinued operations: P = income on discontinued segment from beginning of current year to date of disposal decision Q = income on discontinued segment from date of disposal decision to end of current year R = estimated loss of discontinued segment sale of assets in subsequent year to date of disposal of segment When determining the amount to disclose as the gain or loss on disposal of the segment for the current period, which of the following should be considered:

The date on which a gain or loss from the disposal of a segment of a business is measured is the:

When a segment of a business has been discontinued during the year and is sold at the end of that same year, the income or loss from the discontinued operations, one of the three amounts typically reported in the income statement, would not include:

A corporation reported 19X1 net income of $156,000. On January 1, 19X1, 60,000 shares of common stock were outstanding. An additional 10,000 shares were sold and issued on April 1 and, 5,000 shares were purchased and retired on October 1. Earnings per share (rounded to the nearest cent) are:

The following information has been obtained from the records of Smyth Corporation at December 31, 2006: Total reported income since incorporation \ 1,100,000 Total cash dividends paid 700,000 Cumulative effect of changes in accounting polic ies, (in prior y ears a debit) 150,000 Total stock dividends distributed 150,000 Correction of a prior period error, recorded 75,000 January 15, 2001 (a credit) Calculate the balance of the Retained Earnings at December 31, 2006.

The operating losses and gain or loss from a discontinued operation must be shown net of tax in a distinct section on the statement of income.