ACC. 301 CH. 5

Earnings per share is presented for gross​ profit, continuing​ operations, discontinued​ operations, and net income.

False

Which of the following is considered to be a limitation of income​ statements?

Income statements depend on accounting methods selected

Which of the following is considered to be a characteristic of the usefulness of income​ statements

Income statements evaluate past performance

Which of the following is an advantage of the twominusstatement approach to reporting other comprehensive income​ (OCI)?

Net income retains its emphasis as the primary income measure.

Which of the following items does IFRS require to be disclosed but not necessarily presented on the income​ statement?

litigation settlements

Which of the following is typically included in the determination of income from continuing​ operations?

non-operating gains and losses

Companies use​ ________ income statements when a large number of line items distracts the user from identifying key measures and relationships.

ondensed

On the income​ statement, ________ is gross profit less all operating expenses.

operating income

Which of the following is a classification of expenses using the nature​ approach?

postage expense

Which of the following income statement elements is an economic inflow that occurs from primary​ operations?

revenue

Each of the following is a motivation to engage in earnings management except ​________.

seperate other comprehensive income from net income

Which of the following is typically included in the income tax​ provision?

state and local income tax

Which of the following statements about earnings quality is​ false?

Earnings quality is enhanced when managers are afforded discretion and judgment in applying accounting standards.

Which of the following is an earnings management technique that involves increasing a current loss to show a future increase in net​ income?

Big Bath

How is reporting for other comprehensive income​ (OCI) different between U.S. GAAP and​ IFRS?

Both U.S. GAAP and IFRS allow either a oneminusstatement approach or a twominusstatement approach while IFRS allow more items to be classified as OCI.

Other comprehensive income is comprised of elements explicitly excluded from net income.

True

Which of the following is false concerning the statement of​ stockholders' equity?

Other comprehensive income and retirement of repurchased shares close into Accumulated Other Comprehensive Income.

Which of the following is not a characteristic that must be considered when determining that a business activity is a component of an entity for purposes of classifying that activity as a discontinued​ operation?

The activity constitutes a strategic advantage

Earnings per share is presented for continuing​ operations, discontinued​ operations, and net income.

True

There is a noncontrolling interest when​ ________.

a company controls another company but owns less than​ 100% of that other company

Which of the following is a classification of expenses using the functional​ approach?

administration expense

Evaluating whether the disposal of a component of an entity constitutes a discontinued operation begins with​ ________.

assessing whether a strategic shift has occurred

The portion of income​ (loss) attributable to the noncontrolling interest is​ ________.

closed to noncontrolling interest in the equity section of the balance sheet

Which of the following is not an account type reported in the statement of​ stockholders' equity?

comprehensive income and controlling interest

Which of the following is the key performance measure reported on the income statement that is typically presented last in​ sequence?

earnings per share

Which of the following income statement elements is an economic outflow that occurs from primary​ operations?

expense

Which of the following items does IFRS require to be presented on the income statement that U.S. GAAP does not​ require?

finance costs

On May​ 1, Jonson Industries decided to discontinue its prepackaged business segment. At the end of the​ year, the company is still holding the business segment for​ disposal, which is expected early in the following year. On its year-end income​ statement, Jonson Industries will report as income from discontinued operations the profits generated by the prepackaged business segment​ ________.

for the entire year, net of taxes

Which of the following is not a subtotal on the multi-step income​ statement?

income from discontinued operations

Morton Company has the following transactions in the current year. Assuming that all of the transactions are​ material, which of them will most likely have no effect on current year net​ income?

increase in the fair value of certain available-for-sale securities held as an investment

The​ "cookie jar​ reserves" earnings management technique involves​ ________.

increasing losses in the current period to allow the firm to show increased net income in the future

Which of the following income statement items is considered to be​ permanent?

interest expense

Which of the following is not a drawback of the single-step income​ statement?

it misrepresents net income due to oversiplification

If a company writes down the net assets of a discontinued operation from original carrying value to a remeasurement of fair value in one​ year, then in the next year the fair value changes​ ________.

the company will recognize any subsequent loss but limited gains up to the original carrying value before remeasurement

The noncontrolling interest line item on the income statement represents​ ________.

the portion of the subsidiary owned by​ others, which is deducted to determine net income

Which of the following transactions is not reported as other comprehensive income by either U.S. GAAP or​ IFRS?

unrealized gains and losses from trading securities

Which of the following transactions is not reported as other comprehensive income according to U.S.​ GAAP?

unrealized gains on the upward valuation of property, planet, and equipment