A201 Chapter 5

14. Which of the following would be classified as discontinued operations? (Check all that apply.)

Abandoning a product line Closing the largest of the company's three stores

Comparative financial statements.

Balance sheet usually reported for 2 years. Other three statements usually reported for 3 years

17. ______ income is reported on an additional statement or combined with the income statement and is calculated as Net Income plus other gains/losses on items such as foreign currency translation and derivatives. (Enter one word per blank.)

Comprehensive

26. true or false: GAAP permits only one accounting method to choose from in computing amounts on the financial statements.

False

15. Earnings per share (EPS) appear ______.

On the income statement

7. Identify which of the following are nonoperating items on the income statement.

Provision for income taxes Gains on sale of fixed assets Income tax expense

16. Income before income tax expense is an important measure of financial performance as it allows investors ______.

compare companies' pretax levels of income

2. Financial statement formats and disclosures ______.

differ slightly among companies

Return on assets:

how well has management used the companys total investments in assets financed by both debt holders and stockholders Net income/ average total assets = return on assets *you want large number

10. If a company reports Amortization Expense for the period, it must have ______.

intangible assets on its balance sheet

24. The best place to determine revenues by geographic region is the ______.

notes to the financial statements

18. Which financial statement shows the changes in equity accounts during the accounting period?

Statement of stockholders' equity

5. The income statement for ABC Company shows Gross profit of $144,000; Operating expenses of $130,000; and Cost of goods sold of $216,000. What is net sales revenue?

$360,000 Net sales revenue - Cost of goods sold = Gross profit. To solve for sales, rearrange the equation as Gross profit + Cost of goods sold = Net sales revenue (= $144,000 + 216,000 = $360,000).

Statement of comprehensive income AOCI

(FASB AND IASB) Additional statement entitled the statement of comprehensive income, which can be presented separately or in combination with the income statement

21. the gross profit percentage equals Gross Profit divided by Net sales

...

25. The notes in the annual report should be reviewed to determine the significant accounting rules used.

....

23. which of the following appears on the statement of stockholders' equity? (Check all that apply.)

Common stock Net income Dividends Additional paid-in capital Beginning balance of retained earnings

27. True or false: The statement of stockholders' equity indicates the changes in the various equity accounts.

True

1. True or false: Comparative financial statements include separate columns for more than one period's results.

True Rationale: Two or more years of results are reported in comparative financial statements so that comparisons can be made.

3. Accumulated amortization is ______. (Select all that apply.)

a contra-asset account similar to accumulated depreciation similar to depreciation except it is netted against intangible assets instead of tangible assets

9. Up Against The Wall, Inc. discontinued its wallpaper operations in the Southeast. Up Against The Wall will report the loss on the sale of operations and the related net operating loss from the beginning of the year through to the final sale ______.

below Gross Profit on the income statement

13. Nonoperating items are found _______ on a classified income statement

below Operating Income

Additional disclosures/notes

descriptions of key accounting rules applied in the company statement additional detail of supporting reported numbers relevant information not disclosed on statements

8. The format of financial statements and the volume of disclosures reported ______.

may vary from one company to another

19. Comprehensive income may be shown on ______.

the income statement by adding or subtracting special items, such as changes in foreign currency exchange rates and certain investments

22. One of the main purposes of the first note to the financial statements is to disclose ______.

which of the alternative accounting methods was used to measure the effects of transactions

6. Comparative financial statements report financial statement values for the current period and one or more other prior periods

....

Gross profit percentage:

how effective is management in selling goods and services for more than the cost to purchase or produce them? Gross profit /net sales = gross profit percentage *Gross profit = net sales -cost of sales (cogs)

11. Deferred revenue is a(n) ______.

liability resulting from the collection of revenue in advance

4. Deferred revenue that is not expected to be earned within the year is classified as a ______ on the balance sheet.

noncurrent liability

29. The notes to financial statements may include information about ______ that are not included in the financial statements.

possible legal obligations purchase commitments

12. A classified income statement is useful to financial statement users because it ______. (Check all that apply.)

presents income statement items in meaningful categories separates cost of goods sold from other operating expenses, which allows the calculation of gross profit

20. The notes to financial statements may include ______. (Check all that apply.)

revenues broken out by geographic region relevant information, not disclosed on the statements accounting policies applied segment information

28. The notes to the financial statements typically provide detail support of ______.

revenues by geographic region business segments makeup of property, plant and equipment