ACTG CHAPTER 4

Which of the following items will not appear in the retained earnings statement? a. Discontinued operations b. Prior period adjustment c. Dividends d. Net loss

a. Discontinued operations

Which of the following is true about intraperiod tax allocation? a. Its purpose is to relate the income tax expense to the items which affect the amount of tax. b. Its purpose is to allocate income tax expense evenly over a number of accounting periods. c. It is required for extraordinary items and cumulative effect of accounting changes but not for prior period adjustments. d. It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return.

a. Its purpose is to relate the income tax expense to the items which affect the amount of tax.

The occurrence which most likely would have no effect on 2017 net income (assuming that all amounts involved are material) is the a. collection in 2017 of a receivable from a customer whose account was written off in 2016 by a charge to the allowance account. b. settlement based on litigation in 2017 of previously unrecognized damages from a serious accident that occurred in 2015. c. worthlessness determined in 2017 of stock purchased on a speculative basis in 2013. d. sale in 2017 of an office building contributed by a stockholder in 1986.

a. collection in 2017 of a receivable from a customer whose account was written off in 2016 by a charge to the allowance account.

Comprehensive income includes all of the following except a. investments by owners. b. unrealized holding gains. c. dividend revenue. d. losses on disposal of assets.

a. investments by owners.

The accountant for the Lintz Sales Company is preparing the income statement for 2017 and the balance sheet at December 31, 2017. The January 1, 2017 merchandise inventory balance will appear a. only in the cost of goods sold section of the income statement. b. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. c. only as an asset on the balance sheet. d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

a. only in the cost of goods sold section of the income statement.

The major elements of the income statement are a. revenues, expenses, gains, and losses. b. operating section, nonoperating section, discontinued operations, and cumulative effect. c. revenues, irregular items, and general expenses. d. revenue, cost of goods sold, selling expenses, and general expense.

a. revenues, expenses, gains, and losses.

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business? a. The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations. b. Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement. c. The gain or loss on disposal should be reported as an unusual gain or loss. d. Results of operations of a discontinued component should be disclosed immediately before income from continuing operations.

b. Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement.

Which of the following is false about an income statement? a. Income numbers are affected by the accounting methods employed b. It is used to measure the solvency of a company. c. Income measurement involves judgment. d. Items that cannot be measured reliably are not reported in the income statement.

b. It is used to measure the solvency of a company.

Which of the following is an example of managing earnings up? a. Writing off obsolete inventory b. Underestimating warranty claims. c. Accruing a contingent liability for an ongoing lawsuit d. Decreasing estimated salvage value of equipment.

b. Underestimating warranty claims.

The income statement reveals a. resources and equities of a firm at a point in time. b. net earnings (net income) of a firm for a period of time. c. resources and equities of a firm for a period of time. d. net earnings (net income) of a firm at a point in time.

b. net earnings (net income) of a firm for a period of time.

A statement of stockholders' equity includes a column for each of the following except a. retained earnings. b. net income. c. accumulated other comprehensive income. d. common stock.

b. net income.

The single-step income statement emphasizes a. the gross profit figure. b. total revenues and total expenses. c. operating and non-operating expenses. d. the various components of income from continuing operations.

b. total revenues and total expenses.

What might a manager do during the last quarter of a fiscal year if she wanted to decrease current annual net income? a. Delay purchases from suppliers until after the end of the fiscal year. b. Pay suppliers all amounts owed. c. Delay shipments and sales to customers until after the end of the fiscal year. d. Relax credit policies for customers.

c. Delay shipments and sales to customers until after the end of the fiscal year.

Which of the following is an advantage of the single-step income statement over the multiple-step income statement? a. It reports gross profit for the year. b. Expenses are classified by function. c. It does not imply that one type of revenue or expense has priority over another d. It matches costs and expenses with related revenues.

c. It does not imply that one type of revenue or expense has priority over another

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles? a. On the face of the balance sheet. b. In the footnotes to the financial statements. c. On the face of the income statement d. On the face of the statement of retained earnings (or, statement of stockholders' equity.)

c. On the face of the income statement

A company is not required to report a per share amount on the face of the income statement for which one of the following items? a. Continuing operations b. Discontinued operations c. Prior period adjustment d. Net income

c. Prior period adjustment

Which of the following is an example of managing earnings down? a. Reducing research and development expenditures. b. Changing estimated bad debts from 3 percent to 2.5 percent of sales. c. Revising the estimated life of equipment from 10 years to 8 years d. not writing off obsolete inventory.

c. Revising the estimated life of equipment from 10 years to 8 years

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as a. a prior period adjustment. b. a bulk sale of plant assets included in income from continuing operations. c. an amount after continuing operations. d. an extraordinary item.

c. an amount after continuing operations.

The occurrence that most likely would have no effect on 2017 net income is the a. collection in 2017 of a dividend from an investment. b. sale in 2017 of an office building contributed by a stockholder in 1964. c. correction of an error in the financial statements of a prior period discovered subsequent to their issuance. d. stock purchased in 1999 deemed worthless in 2017.

c. correction of an error in the financial statements of a prior period discovered subsequent to their issuance.

In calculating earnings per share, companies deduct preferred dividends from net income if: a. they are convertible preferred shares. b. they are callable preferred shares. c. the dividends are declared. d. they are noncumulative though not declared.

c. the dividends are declared

Which of the following items would be reported net of tax on the face of the income statement? a. Unusual gain b. Prior period adjustment c. Change in realizability of receivables d. Discontinued operations

d. Discontinued operations

Which of the following earnings per share figures must be disclosed on the face of the income statement? a. EPS for gross profit. b. The effect on EPS from unusual items. c. EPS for income before taxes. d. EPS for income from continuing operations.

d. EPS for income from continuing operations.

Which of the following is included in comprehensive income? a. Changes in accounting principles. b. Distributions to owners. c. Investments by owners. d. Unrealized gains on available-for-sale securities.

d. Unrealized gains on available-for-sale securities.

Earnings per share should always be shown separately for a. net income and gross margin. b. discontinued operations items and prior period adjustments. c. net income and pretax income. d. income from continuing operations.

d. income from continuing operations.

A correction of an error in prior periods' income will be reported.

income statement- no net of tax- yes