Question 1

The financial results of a discontinued segment must be reported separately on the income statement.

Accepted Answer

A) True 
 B)False

Question 2

Changes to the valuation of all assets must be reported in comprehensive income under IFRS.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following types of losses is excluded from the determination of net income on the statement of income?

Accepted Answer

A)  Material losses resulting from transactions in the company's investments account. 
B)  Material losses resulting from unusual sales of assets not acquired for resale. 
C)  Material losses resulting from the write-off of intangibles. 
D)  Material losses resulting from correction of errors related to prior periods. 
A)  Material losses resulting from transactions in the company's investments account. 
B)  Material losses resulting from unusual sales of assets not acquired for resale. 
C)  Material losses resulting from the write-off of intangibles. 
D)  Material losses resulting from correction of errors related to prior periods.

Question 4

Under IFRS, to qualify as a discontinued operation or disposal group, the proceeds of a sale must:

Accepted Answer

A)  be recovered through a sale transaction. 
B)  be recovered through continuing use. 
C)  be recovered through a sale transaction or through continuing use. 
D)  be made in cash. 
A)  be recovered through a sale transaction. 
B)  be recovered through continuing use. 
C)  be recovered through a sale transaction or through continuing use. 
D)  be made in cash.

Question 5

Interperiod tax allocation refers to the deferral and allocation of income tax expense to future periods while intraperiod tax allocation refers to the process of splitting up income tax expense across the different income statement categories.

Accepted Answer

A) True 
 B)False

Question 6

Depreciation is not taken on assets that are temporarily idle but have not been abandoned.

Accepted Answer

A) True 
 B)False

Question 7

A company had 30,000 shares of common stock outstanding on January 1, 2010. An additional 10,000 shares were sold and issued on June 1 and 20,000 more were sold and issued on December 1. Pre-tax income for the year was $320,000. The income tax rate was 40 percent. Earnings per share were:

Accepted Answer

A)  $3.33. 
B)  $6.67. 
C)  $4.00. 
D)  $3.20. 
A)  $3.33. 
B)  $6.67. 
C)  $4.00. 
D)  $3.20.

Question 8

Given the following amounts from an income statement: $$\begin{array} { | l | l | } 
\hline \text { Sales (net of returns and allowances of } \$ 10 \text { ) } & \$ 690 \
\hline \text { Distribution expense } & 32 \
\hline \text { Cost of goods olds } & 264 \
\hline \text { Income tax on operations } & 56 \
\hline \text { Interest revenue } & 2 \
\hline \text { Loss trom Dis continued Operations, net of tax } & 10 \
\hline \text { Interest expense } & 8 \
\hline \text { General and administrative expenses } & 92 \
\hline \text { Loss of sale of investments } & 6 \
\hline
\end{array}$$ The amount shown on a multiple-step format income statement for operating income from continuing operations would be:

Accepted Answer

A)  $232. 
B)  $246. 
C)  $290. 
D)  $302. 
A)  $232. 
B)  $246. 
C)  $290. 
D)  $302.

Question 9

King Corporation decided to sell its sporting goods business segment for $900,000, on September 1, Year 1, which is also the disposal date. The book value of the segment's net assets is $700,000 on this date. The pre-tax income for the segment for the period January 1 - September 1, Year 1, was $20,000. Assuming a tax rate of 40%, choose the correct reporting for discontinued operations in the income statement of King Corporation, for the year ended December 31, Year 1. $$\begin{array} { | l | l | } 
\hline &\text { Income (loss) from Discontinued operations } & \text { Gain (loss) from disposal of ciscontinued operations } \
\hline 1& \$ 20,000 & \$ 200,000 \
\hline 2& \$ 132,000 & \$ 0 \
\hline 3& \$ 12,000 & \$ 120,000 \
\hline 4 &\$ 0 & \$ 132,000 \
\hline
\end{array}$$

Accepted Answer

A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4

Question 10

Munitions Inc. committed to sell its trade magazine division for $700,000 on October 1, Year 1. The book value of the division's net assets was $800,000. The disposal date is expected to be April 1, Year 2. Year 1 income of the division to October 1, Year 1 was a $30,000 loss, and income for the remainder of the year was $10,000. However, Munitions estimates that the division will lose $25,000 during the remainder of the phase-out period in Year 2. Ignoring taxes choose the correct reporting for discontinued operations in the income statement of Munitions, Inc., for the year ended December 31, Year 1. $$\begin{array} { | l | l | l | } 
\hline &\text { Income (loss) from Discontinued operations } & \text { Gain (loss) from disposal of discontinued operations } \
\hline 1 &( \$ 30,000 ) & ( \$ 115,000 ) \
\hline 2 &( \$ 30,000 ) & \$ \$ 100,000 ) \
\hline 3 &( \$ 30,000 ) & ( \$ 90,000 ) \
\hline 4 &( \$ 45,000 ) & \$ \$ 100,000 ) \
\hline
\end{array}$$

Accepted Answer

A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4

Question 11

Historical cost is more useful for measuring economic income than fair values.

Accepted Answer

A) True 
 B)False

Question 12

During Year 3, Stratton Inc. decided to change the useful life and residual value on equipment costing $400,000, based on new information about the equipment's operating capacity and market value. The equipment was purchased January 1, Year 2. The original estimated useful life and residual value were 10 years and $40,000 respectively; the new estimates are 8 years total useful life rather than 10 years, and $20,000 residual value. What is depreciation expense for the year ended December 31, Year 3 (rounded to the nearest dollar)?

Accepted Answer

A)  $49,143 
B)  $43,000 
C)  $47,344 
D)  $54,286 
A)  $49,143 
B)  $43,000 
C)  $47,344 
D)  $54,286

Question 13

Other comprehensive income includes only unrealized gains and losses. When a previously unrecognized gain or loss is recognized later, this gain or loss will always be included in the company's net income in the year recognized.

Accepted Answer

A) True 
 B)False

Question 14

Jax 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.
However, the segment earned $30,000 pre-tax income for the remainder of Year 1 and was expected to earn $25,000 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 $130,000. During Year 2, the segment actually earned $40,000 pre-tax.
For both years, prepare the bottom portion of the income statement including a section for discontinued operations for this firm.

Accepted Answer

None

Question 15

Constructive obligations:

Accepted Answer

A)  Arise from a reasonable expectation that a company will honour certain obligations based on past practices or events. 
B)  May result from legal requirements. 
C)  May or may not be legally enforceable. 
D)  Arise from a reasonable expectation that a company will honour certain obligations based on past practices or events and may or may not be legally enforceable. 
A)  Arise from a reasonable expectation that a company will honour certain obligations based on past practices or events. 
B)  May result from legal requirements. 
C)  May or may not be legally enforceable. 
D)  Arise from a reasonable expectation that a company will honour certain obligations based on past practices or events and may or may not be legally enforceable.

Question 16

Earnings per share reporting:

Accepted Answer

A)  is mandatory for corporations following IFRS and requires two presentations (basic and fully diluted EPS) when a firm has a complex capital structure. 
B)  is required for all corporations with common stock outstanding. 
C)  reveals the relationship between retained earnings available to holders of common stock and the number of shares of common stock outstanding. 
D)  how the maximum dividend which may be paid. 
A)  is mandatory for corporations following IFRS and requires two presentations (basic and fully diluted EPS) when a firm has a complex capital structure. 
B)  is required for all corporations with common stock outstanding. 
C)  reveals the relationship between retained earnings available to holders of common stock and the number of shares of common stock outstanding. 
D)  how the maximum dividend which may be paid.

Question 17

A transaction that is material in amount, unusual in nature, and infrequent in occurrence, should be presented in the statement of income separately as a component of income:

Accepted Answer

A)  from continuing operations. 
B)  from discontinued operations. 
C)  net of applicable income taxes. 
D)  as a correction of prior years' error. 
A)  from continuing operations. 
B)  from discontinued operations. 
C)  net of applicable income taxes. 
D)  as a correction of prior years' error.

Question 18

Which of the following statements is/are correct?

Accepted Answer

A)  Each asset and liability forming part of a disposal group must be remeasured individually. 
B)  All assets and liabilities forming part of a disposal group are remeasured as a whole. 
C)  Assets held for sale must be shown distinctly from Liabilities held for sale on the balance sheet. Both of these would be classified as non-current assets. 
D)  Assets and Liabilities held for sale may be netted against each other. 
A)  Each asset and liability forming part of a disposal group must be remeasured individually. 
B)  All assets and liabilities forming part of a disposal group are remeasured as a whole. 
C)  Assets held for sale must be shown distinctly from Liabilities held for sale on the balance sheet. Both of these would be classified as non-current assets. 
D)  Assets and Liabilities held for sale may be netted against each other.

Question 19

The single-step income statement emphasizes:

Accepted Answer

A)  the gross profit figure. 
B)  total revenues and total expenses. 
C)  Unusual or infrequent items. 
D)  the various components of income from continuing operations. 
A)  the gross profit figure. 
B)  total revenues and total expenses. 
C)  Unusual or infrequent items. 
D)  the various components of income from continuing operations.

Question 20

When individual assets and liabilities within a disposal group change in value, these changes are:

Accepted Answer

A)  ignored, since the disposal group will be sold as a whole. 
B)  charged to Retained Earnings. 
C)  charged to Other Comprehensive Income. 
D)  reflected on the income statement. 
A)  ignored, since the disposal group will be sold as a whole. 
B)  charged to Retained Earnings. 
C)  charged to Other Comprehensive Income. 
D)  reflected on the income statement.

The financial results of a discontinued segment must be reported separately on the income statement.

Changes to the valuation of all assets must be reported in comprehensive income under IFRS.

Which one of the following types of losses is excluded from the determination of net income on the statement of income?

Under IFRS, to qualify as a discontinued operation or disposal group, the proceeds of a sale must:

Interperiod tax allocation refers to the deferral and allocation of income tax expense to future periods while intraperiod tax allocation refers to the process of splitting up income tax expense across the different income statement categories.

Depreciation is not taken on assets that are temporarily idle but have not been abandoned.

A company had 30,000 shares of common stock outstanding on January 1, 2010. An additional 10,000 shares were sold and issued on June 1 and 20,000 more were sold and issued on December 1. Pre-tax income for the year was $320,000. The income tax rate was 40 percent. Earnings per share were:

Historical cost is more useful for measuring economic income than fair values.

Other comprehensive income includes only unrealized gains and losses. When a previously unrecognized gain or loss is recognized later, this gain or loss will always be included in the company's net income in the year recognized.

Constructive obligations:

Earnings per share reporting:

A transaction that is material in amount, unusual in nature, and infrequent in occurrence, should be presented in the statement of income separately as a component of income:

Which of the following statements is/are correct?

The single-step income statement emphasizes:

When individual assets and liabilities within a disposal group change in value, these changes are:

The Framework for Financial Reporting

Accounting Judgements

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 3: Statements of Income and Comprehensive Income

The financial results of a discontinued segment must be reported separately on the income statement.

Changes to the valuation of all assets must be reported in comprehensive income under IFRS.

Which one of the following types of losses is excluded from the determination of net income on the statement of income?

Under IFRS, to qualify as a discontinued operation or disposal group, the proceeds of a sale must:

Interperiod tax allocation refers to the deferral and allocation of income tax expense to future periods while intraperiod tax allocation refers to the process of splitting up income tax expense across the different income statement categories.

Depreciation is not taken on assets that are temporarily idle but have not been abandoned.

A company had 30,000 shares of common stock outstanding on January 1, 2010. An additional 10,000 shares were sold and issued on June 1 and 20,000 more were sold and issued on December 1. Pre-tax income for the year was $320,000. The income tax rate was 40 percent. Earnings per share were:

Historical cost is more useful for measuring economic income than fair values.

Other comprehensive income includes only unrealized gains and losses. When a previously unrecognized gain or loss is recognized later, this gain or loss will always be included in the company's net income in the year recognized.

Constructive obligations:

Earnings per share reporting:

A transaction that is material in amount, unusual in nature, and infrequent in occurrence, should be presented in the statement of income separately as a component of income:

Which of the following statements is/are correct?

The single-step income statement emphasizes:

When individual assets and liabilities within a disposal group change in value, these changes are:

The Framework for Financial Reporting

Accounting Judgements

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters