Question 1

If a company reports both basic and diluted EPS, diluted EPS will always be lower than basic EPS.

Accepted Answer

A) True 
 B)False

Question 2

An unqualified opinion by independent auditors indicates the fairness of the company's financial statements and the effectiveness of its internal controls.

Accepted Answer

A) True 
 B)False

Question 3

Comprehensive income is the company's change in total stockholders' equity from all sources other than from the owners of the business.

Accepted Answer

A) True 
 B)False

Question 4

All of the following are true regarding changes in accounting principles EXCEPT:

Accepted Answer

A)  Accounting changes are allowed when new principles are preferred over previous ones. 
B)  The company retrospectively restates all prior-period amounts as though the new accounting method had been in effect all along. 
C)  The majority of the changes in accounting principles are reported in the current period when the change in principle occurred. 
D)  If an accounting change impacts periods prior to the earliest one presented in the current income statement, an adjustment to retained earnings must be made.

Question 5

U.S. GAAP and IFRS do not have the same revenue recognition criteria.

Accepted Answer

A) True 
 B)False

Question 6

When a company discontinues a segment of its business, the income statement should report income (loss) from continuing operations and income (loss) from discontinued operations.

Accepted Answer

A) True 
 B)False

Question 7

It is management's responsibility to issue a report on internal control.

Accepted Answer

A) True 
 B)False

Question 8

If an item is unusual but not infrequent it is:

Accepted Answer

A)  reported net of tax as Other Gains and Losses. 
B)  reported at its gross amount as Other Gains and Losses. 
C)  disclosed as a note to the financial statements. 
D)  reported as an extraordinary item.

Question 9

The following items are extraordinary items EXCEPT:

Accepted Answer

A)  newly enacted laws. 
B)  natural disasters. 
C)  expropriation of company assets by a foreign government. 
D)  losses on a failing product line.

Question 10

The financial statement that reports the changes in all categories of equity during the period is called the:

Accepted Answer

A)  statement of changes in financial position. 
B)  statement of stockholders' equity. 
C)  net income statement. 
D)  statement of change in total equity.

Question 11

If net sales are $1,200,000 and cost of goods sold are $300,000, gross profit is $900,000.

Accepted Answer

A) True 
 B)False

Question 12

Operating income includes income from discontinued operations.

Accepted Answer

A) True 
 B)False

Question 13

The degree to which earnings are an accurate reflection of underlying economic events for both revenues and expenses, and the extent to which earnings from a company's core operations are improving over time, is:

Accepted Answer

A)  earnings quality. 
B)  comprehensive income. 
C)  revenue recognition. 
D)  discontinued operations.

Question 14

Income tax payable appears on the:

Accepted Answer

A)  tax return. 
B)  statement of stockholders' equity. 
C)  income statement. 
D)  balance sheet.

Question 15

Income tax expense helps measure income from operations.

Accepted Answer

A) True 
 B)False

Question 16

Earnings per share is calculated:

Accepted Answer

A)  only for preferred stock. 
B)  only for common stock. 
C)  for common and preferred stock. 
D)  only for treasury stock.

Question 17

All foreign transactions will result in a foreign-currency exchange rate gain or loss.

Accepted Answer

A) True 
 B)False

Question 18

The operating expense section of an income statement would NOT include:

Accepted Answer

A)  salaries expense. 
B)  utilities expense. 
C)  supplies expense. 
D)  interest expense.

Question 19

The amount of a company's net income per share of its outstanding common stock is:

Accepted Answer

A)  net income per share. 
B)  gross profit per share. 
C)  earnings per share. 
D)  taxable income per share.

Question 20

Comprehensive income does not include foreign-currency translation adjustments.

Accepted Answer

A) True 
 B)False

Exam 11: The Income Statement, the Statement of Comprehensive Income, the Statement of Stockholders Equity

If a company reports both basic and diluted EPS, diluted EPS will always be lower than basic EPS.

An unqualified opinion by independent auditors indicates the fairness of the company's financial statements and the effectiveness of its internal controls.

Comprehensive income is the company's change in total stockholders' equity from all sources other than from the owners of the business.

All of the following are true regarding changes in accounting principles EXCEPT:

U.S. GAAP and IFRS do not have the same revenue recognition criteria.

When a company discontinues a segment of its business, the income statement should report income (loss) from continuing operations and income (loss) from discontinued operations.

It is management's responsibility to issue a report on internal control.

If an item is unusual but not infrequent it is:

The following items are extraordinary items EXCEPT:

The financial statement that reports the changes in all categories of equity during the period is called the:

If net sales are $1,200,000 and cost of goods sold are $300,000, gross profit is $900,000.

Operating income includes income from discontinued operations.

The degree to which earnings are an accurate reflection of underlying economic events for both revenues and expenses, and the extent to which earnings from a company's core operations are improving over time, is:

Income tax payable appears on the:

Income tax expense helps measure income from operations.

Earnings per share is calculated:

All foreign transactions will result in a foreign-currency exchange rate gain or loss.

The operating expense section of an income statement would NOT include:

The amount of a company's net income per share of its outstanding common stock is:

Comprehensive income does not include foreign-currency translation adjustments.