acct test 3
ABC Company has an after-tax net income of $20,000 and the income tax rate is 40%. During the year, ABC Company records a $6000 unrealized gain on its available-for-sale securities. What is ABC Company's Comprehensive Income for the year?
$23,600
ABC Company reported total revenues of $100,000, a gross profit of $40,000, and operating expenses of $20,000. What are ABC Company's common size operating expenses?
20
Which of the following is not required to be disclosed, pursuant to U.S. GAAP? Operating income or loss from discontinued components reported on the income statement. A description of facts and circumstances leading up to the sale of an ongoing component within the notes of the financial statements. All gains or losses from sale of the component reported on the income statement or in the footnotes. The book values of major component assets and liabilities reported on the balance sheet or in the footnotes.
A description of facts and circumstances leading up to the sale of an ongoing component within the notes of the financial statements.
Which of the following statements is false?
After a company writes down a held for sale component to fair value, there may be no subsequent changes in fair value.
Concept Statements are general proclamations that establish all of the following except: objectives of financial reporting. definitions of basic elements like assets and liabilities. how transactions, events, and arrangements should be presented and classified in financial statements. All of these choices are correct.
All of these choices are correct.
Which is the correct computation for basic earnings per share?
Basic EPS = Net income available to common shareholders / weighted average number of common shares outstanding
Which of the following is a correct formula regarding comprehensive income?
Beginning AOCI +(-) Other Comprehensive Income = Ending AOCI
Which of the following is a false statement? Concepts statements and principles are broad and definitional. Standards are applications of concepts and principles to different types of transactions, events, and arrangements. Concepts statements are narrow and open to interpretation. Rules are specific implementation procedures.
Concepts statements are narrow and open to interpretation.
which of the following is false
IFRS and U.S. GAAP have identical approaches to measuring and reporting net income.
Which of the following is not a disclosure requirement for segment reporting?
Information about liabilities
_____________________ involves apportioning a corporation's total income tax expense for the period to various components of net income and other comprehensive items (if any).
Intraperiod tax allocation
Which of the following investments would not require a company to report diluted earnings per share? Convertible preferred stock Convertible bonds Stock options Investments in common stock
Investments in common stock
Which of the following is not a step when deciding whether a company should recognize revenue?
Obtain the contract in writing.
Which of the following is not required to be disclosed, pursuant to GAAP? Operating income or loss from discontinued components reported on the balance sheet. A description of facts and circumstances leading up to the sale of a discontinued component within the notes of the financial statements. All gains or losses from sale of the component reported on the income statement or in the footnotes. The book values of major component assets and liabilities reported on the balance sheet or in the footnotes.
Operating income or loss from discontinued components reported on the balance sheet
Which is not a reason that stakeholders use ratios?
Ratios guarantee future success of a company.
Which is not a reason that stakeholders use ratios? Ratios are useful indicators of financial position and performance. Ratios serve as metrics to evaluate a company's results of operations over time. Ratios serve as a means to evaluate a company's results of operations as compared to its competition and industry. Ratios guarantee future success of a company.
Ratios guarantee future success of a company.
In an accrual approach, net income is typically defined as
Revenues - Expenses + Gains - Losses
Which of the following is false? Revenues and expenses relate to a company's major operating activities. Revenues and expenses are reported as net amounts because they reflect the effects of ongoing business activities that determine earnings. Revenues are recognized as a company satisfies performance obligations by transferring goods or services to customers. Expenses are recognized as assets are used up or liabilities are incurred.
Revenues and expenses are reported as net amounts because they reflect the effects of ongoing business activities that determine earnings.
The income statement provides information to help current and potential investors evaluate the performance of the
company's management
All of the following are purposes of the income statement except
evaluating the management of prior period cash flows.
The ability of a company to manipulate reported earnings within U.S. GAAP is
known as earnings management
______________ are decreases in equity (net assets) of a company from peripheral or incidental transactions and other events and circumstances during the period.
losses
The subtotal, gross profit, will be disclosed on
multi step income
Financial statement users evaluate profit margins at various levels, reflecting different aspects of the company's financial performance. All of the following are common margins used to evaluate a company except:
rate of change margin
Which of the following qualitative characteristics is related to predictive value?
relevance
In 2014, the Dart Company had sales of $600,000; cost of goods sold of $430,000; interest expense of $12,000; and a gain on the sale of a discontinued component of $12,000. Dart uses the single-step format for its income statement. What was Dart's reported pretax income from continuing operations?
$158,000
At the end of the year, the net assets of Marsh Manufacturing amounted to $40,000. Net income calculated by using the capital maintenance concept amounted to $12,000. During the year, additional common stock was issued for $8,000, and $5,000 of dividends were paid. The net assets at the beginning of the year were
$25,000
ABC Company had a change in assets for the year of $36,000. During the year, additional common stock was issued for $20,000, and $12,000 of dividends were paid. What is total net income using the capital maintenance concept?
$28,000
ABC Company reported net income of $50,000 and was required to pay preferred stock dividends of $10,000. Net income available to common shareholders is
40,000
Operating expenses are those primary recurring costs (other than cost of goods sold) incurred to generate sales revenue and conduct business operations. How are these expenses typically classified?
According to functional categories
Which of the following components of income would likely not be reported separately because it is important for assessing some aspect of the company's financial performance and predicting its future income and cash flows?
Advertising Expense
Which of the following components of income would likely not be reported separately because it is important for assessing some aspect of the company's financial performance and predicting its future income and cash flows? Income from ongoing operations Income from discontinued operations Taxes Advertising Expense
Advertising Expense
Which of the following statements is false? The FASB is currently working on revising its earnings per share standard to eliminate any major remaining difference with regard to earnings per share. U.S. GAAP allows either a single-step or multiple-step presentation for the income statement. IFRS and U.S. GAAP have identical approaches to measuring and reporting net income. IFRS requires expenses to be classified by their nature and function.
IFRS and U.S. GAAP have identical approaches to measuring and reporting net income.
Which of the following statements is true?
IFRS does not have a prescribed income statement format.
Which of the following is not required to be disclosed, pursuant to GAAP? Operating income or loss from discontinued components reported on the balance sheet. A description of facts and circumstances leading up to the sale of a discontinued component within the notes of the financial statements. All gains or losses from sale of the component reported on the income statement or in the footnotes. The book values of major component assets and liabilities reported on the balance sheet or in the footnotes.
Operating income or loss from discontinued components reported on the balance sheet.
Which of the following sections will not appear in the statement of cash flows? Operating activities Investing activities Financing activities Selling activities
Selling activities
Which of the following statements regarding a statement of cash flows is not true?
The most common method for reporting operating activities is the direct method.
Which of the following statements regarding a statement of cash flows is not true? The most common method for reporting operating activities is the direct method. Operating activities include all transactions and other events related to the earnings process. It requires a reconciliation of beginning and ending cash balances. It helps users to assess a company's need for external financing.
The most common method for reporting operating activities is the direct method.
Which of the following statements is false?
Under U.S. GAAP, if a company has revalued its equipment upward, then it must adjust its related depreciation expense accordingly.
Which of the following is not part of other comprehensive income?
Unrealized changes in the value of trading securities.
To provide relevant and faithfully represented information about financial performance and income to investors, lenders, and other creditors, the company must determine all of the following about the elements of the income statement except:
Why: Disclose the logic behind recognition of income elements.
The comparison of the beginning and ending capital (net assets) after adjusting for any additional investments or distributions during the period, and indicating the difference to be corporate income, is termed the
capital maintenance concept.
Which of the following is not an expense recognition approach recognized by the FASB as an expense recognition principle to properly match expenses against revenues?
cash payment
Comprehensive income is an important concept in accounting because it represents
changes in equity from nonowner sources.
A _____ of a company involves operations and cash flows that can be distinguished, operationally and for financial reporting purposes, from the rest of the company.
component
FASB states the intent of the _______________________ is to establish objectives and fundamental concepts that are the basis for development of financial accounting and reporting guidance.
conceptual framework
____________________ provide insights about a company's risk and financial flexibility because they measure the ability to cover interest charges associated with debt.
coverage ratios
Which of the following is not part of other comprehensive income?
currency translation adjustments
Comprehensive income includes the following changes in equity of a company during a period except
distribution to owners
The conceptual framework is expected to accomplish all of the following except guide the FASB in establishing accounting standards. provide a frame of reference for financial statements preparers for resolving accounting questions in situations where a standard does not exist. establish guidelines that form the bounds for judgment in the preparation of financial statements. enhance financial statement comparability only for companies in the financial services industry.
enhance financial statement comparability only for companies in the financial services industry.
Which section of the statement of cash flows is buying equipment reported in?
investing
Information that is complete, neutral, and reasonably free from error and bias
is faithfully represented
A component of a company is not an operating segment if
it has no discrete financial information available.
If a company's operating activities generate earnings amounts that are persistent and growing, investors and lenders can predict that the company is likely to continue to do so in the future. This typically means all of the following except: higher share values. more favorable borrowing terms. continued interest from current and future shareholders. lower share values.
lower share values
The purpose of the income statement is to inform all of the following about a company's financial performance except: investors. lenders. creditors. management
managment
One of the major components within the company's single-step income statement is income from continuing operations. Which is not a part of computing income from continuing operations?
net income
A company is required to report earnings per share on
net income and income from continuing operations
A company is required to report earnings per share on net income and income from continuing operations. neither net income nor income from continuing operations. net income. income from continuing operations.
net income and income from continuing operations.
According to the FASB hierarchy of decision-useful financial information, the two primary qualities making accounting information useful are
relevance and faithful rep
Net income is closed to _____________ and other comprehensive income is closed ______________.
retained earnings; accumulated other comprehensive income
All of the following conditions must be met to classifies a discontinued operation as held for sale at the end of the current accounting period except
the sale is probable in 3 months from balance sheet date.
All of the following conditions must be met to classifies a discontinued operation as held for sale at the end of the current accounting period except the sale is probable in 3 months from balance sheet date. management has begun an active program to locate a buyer. the discontinued operation is being offered for sale at a price that is reasonable in relation to current fair value. management has committed to a plan to sell and it is unlikely that management will make significant changes to the plan.
the sale is probable in 3 months from balance sheet date.
Common-size analysis of income statement information typically expresses all of the amounts in terms of percentages of
total revenues
Common-size analysis of income statement information typically expresses all of the amounts in terms of percentages of
total revenues.
The accounting projects portion of the FASB's recognized framework project does not include: which accounting elements should be recognized in financial statements. when the accounting elements should be reported. how the accounting elements should be measured. when the accounting elements should be measured.
when the accounting elements should be measured.
