Chapter 4: Int. Accounting

1. For Mortenson Company, the following information is available: Cost of goods sold $390,000 Dividend revenue 15,000 Income tax expense 36,000 Operating expenses 138,000 Sales revenue 600,000 In Mortenson's multiple-step income statement, gross profit

should be reported at $210,000.

Income taxes are allocated to all of the following except for:

the allowance for doubtful accounts.

A separation of operating and non operating activities of a company exists in

a multiple-step but not a single-step income statement.

The gain or loss from disposal of a component of a business is shown as a (an):

part of discontinued operations.

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

unrealized holding gain on available-for-sale securities.

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

Income tax expense.

Which of the following would not represent an accounting error?

Change in the method of inventory pricing form FIFO to average-cost.

Which of the following is true of accounting for changes in estimates?

Changes in estimates are not carried back to adjust prior years.

Which of the following occur from peripheral or incidental transactions?

Gain on the sale of equipment.

Comprehensive income can be disclosed in various formats. Which of the following is an acceptable format for disclosing comprehensive income? I.At the bottom of the income statement, continue from net income and add other comprehensive income to arrive at comprehensive income for the year. II.In a separate statement, start with net income and add other comprehensive income to arrive at comprehensive income for the year. III.In the statement of stockholders' equity, net income is adjusted for other comprehensive income to arrive at comprehensive income for the year. IV.After retained earnings in the stockholders' equity section of the statement of financial position, start with net income and add other comprehensive income to arrive at comprehensive income for the year.

I and II I.At the bottom of the income statement, continue from net income and add other comprehensive income to arrive at comprehensive income for the year. II.In a separate statement, start with net income and add other comprehensive income to arrive at comprehensive income for the year.

A component of Ace, Inc. was discontinued during year 2. Ace's loss on disposal should

Include associated employee termination costs.

Noncontrolling interest

Is reported as a separate item below net income or loss.

Which of the following is not true about the information provided in the income statement?

It helps in evaluating working capital.

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

It provides a basis for predicting future performance.

Which one of the following types of losses is excluded from the determination of net income in income statements?

Material losses resulting from correction of errors related to prior periods.

How should a material unusual or infrequent gain or loss be disclosed in the financial statements?

Reported in "Other revenues and gains" or "Other expenses and losses" section of Income Statement and supplemented by a footnote.

Comprehensive income is defined as

Net income plus other comprehensive income.

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles?

On the face of the income statement.

On January 1, year 1, Brecon Co. installed cabinets to display its merchandise in customers' stores. Brecon expects to use these cabinets for five years. Brecon's year 1 multistep income statement should include

One-fifth of the cabinet costs in selling, general, and administrative expenses.

Companies can change principles, but they must demonstrate that the newly adopted principle is preferable to the old one.

True

One of the primary advantages of the single-step income statement is the absence of any implication that one type of revenue or expense has priority over another.

True

Krista Company prepares a consolidated income statement that includes its subsidiary, Edward Co. Krista's income statement shows $23,500 of net income attributable to the noncontrolling interest which is presented as

an allocation of net income.

1. 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

an amount after continuing operations.

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to:

beginning retained earnings of the earliest period presented.

The major elements of the income statement are

c. revenues, expenses, gains, and losses.

1. The occurrence that most likely would have no effect on 2020 net income is the

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

Expenses include all of the following except:

dividends.

Classification as an unusual item on the income statement would be appropriate for all of the following except:

gain or loss on disposal of a component of the business.

A multiple-step income statement

highlights certain intermediate components of income that analysts use to compute ratios for assessing the performance of the company. separates operating transactions from nonoperating transactions. matches costs and expenses with related revenues. all of these answer choices are correct.

1. Earnings per share data are required on the face of the

income statement.

1. Comprehensive income includes all of the following except

investments by owners.

In the single-step income statement:

just two groupings exist - revenues and expenses

The income statement reveals

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