Chapter 3 & 17

Prior period adjustments are reported in current-year financial statements as:

an addition to (or deduction from) the ending balance of retained earnings.

When a company discontinues an operation and disposes of the discontinued operation (i.e. component), the transaction should be included in the income statement as a gain or loss on disposal reported as

an amount after continuing operations.

The fourth step in the process for revenue recognition is to

allocate transaction price to the separate performance obligations.

In 2025, Benfer Corporation reported net income of $210,000. It declared and paid common stock dividends of $24,000 and had a weighted average of 100,000 common shares outstanding. Compute the earnings per share to the nearest cent

$2.10

Which type of transaction generally results in revenue being recognized with the passage of time?

Customer controls the asset as it is created or the company does not have an alternative use for the asset.

Which of the following items would be reported net of tax on the face of the income statement?

Discontinued operations

Which limitation of an income statement occurs when one company uses an accelerated depreciation method while another company uses straight-line depreciation?

Income numbers are affected by the accounting methods employed

Which of the following is not included in the operating section of a multiple-step income statement?

Income tax expense.

Intraperiod tax allocation

Is a process of allocating income tax expense among income from continuing operations

Limitations of the income statement include all of the following except:

It provides a basis for predicting future performance.

Which of the following is true about intraperiod tax allocation?

Its purpose is to relate the income tax expense to the items that give rise to the amount of income tax provision

Which of the following is not an acceptable way of displaying the types of other comprehensive income (OCI)?

Using the combined statement of stockholders' equity

The standard, Revenue from Contracts with Customers,

adopts an asset-liability approach for revenue recognition.

Companies use intraperiod tax allocation for all of the following items except

changes in accounting estimates.

A change in the method of inventory pricing from FIFO to average-cost would be accounted for as a (an):

change in accounting principle.

The Billings on Construction in Progress account is a(n)

contra-inventory account

The third step in the process for revenue recognition is to

determine transaction price

A contract should be treated as having multiple performance obligations if

each performance obligation is not highly dependent on other promises in the contract.

The first step in the process for revenue recognition is to

identify the contract with customers.

The second step in the process for revenue recognition is to

identify the separate performance obligations in the contract.

Unusual and infrequent gains and losses include.

include restructuring charges.

Net Income Formula

income before tax -(income before tax* Tax rate)

possible NI formula

income from operations + gains ( sale on assset) - interest expense - loss (on discontinued operation )

Earnings per share

measures the number of dollars earned by each share of common stock.

comphensive income formula

net income + unrealized gains

retained earing formula

net income - cash divideds

earing per share formula

net income - prefered divideds / weighted average of common shares

is gross profit on single step income statement

no

The last step in the process for revenue recognition is to

recognize revenue when each performance obligation is satisfied.

When using the percentage-of-completion method, the company

recognizes revenues and gross profit each period during the contract.

Under the cost-recovery (i.e. zero-profit) method

revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until all costs are incurred.

formula for gross profit

sales revnue - cost of goods sold

income from operation formula

sales revune - COGS- S+A expenses

The income statement provides investors and creditors with information to predict all of the following except the

sources of future cash flows.

An indication that the customer has not taken control of the good or service is

the customer has no significant risks or rewards of ownership.

In calculating earnings per share, companies deduct preferred dividends from net income if

the dividends are declared.

An indication that the customer has taken control of the good or service is that

the selling company has transferred legal title to the asset.

In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract multiplied by the costs incurred during the year divided by...

total estimated cost of the contract.

The single-step income statement emphasizes

total revenues and total expenses.

Which of the following would be reported as "other comprehensive income"?

unrealized holding gain on available-for-sale securities.

other comprehensive income is

unrealized revnues expenese gains / losses

Intraperiod tax allocation is used for all of the following except:

unusual gains/losses.

In determining the transaction price, the company must consider:

variable consideration, non-cash consideration, time value of money, and consideration payable.