Intermediate Accounting Chapter 5 Quiz

From the following information, compute cost of goods sold Purchase returns - 1,200 inventory, 12/31 - 2,500 Freight in - 1,100 inventory 1/1 - 2,800 purchases - 15,000 A. 15,200 B. 15,100 C. 15,300 D. 15,000

A. 15,200

A company that discontinues and disposes of an operation (component) should include the gain or loss on sale in the income statement as a(n) A. an amount that is reported after income continuing operations but before net income B. bulk sale of fixed assets included in income from continuing operations C. prior-period adjustments D. a component of other comprehensive income

A. an amount that is reported after income from continuing operations but before net income

Comprehensive income is an important concept in accounting because it represents A. changes in equity from nonowner sources B. all changes in equity C. the impact on equity of all transactions D. changes in liabilities minus assets

A. changes in equity from nonowner sources

Earnings per share is an important disclosure because A. it provides information relevant to the common shareholders B. it forces common and preferred shareholders to read the financial statements C. it uses net income D. net income disclosed in the financial statements can fluctuate based upon management's intentions

A. it provides information relevant to the common shareholders

In accrual accounting, net income is defined as A. revenues - expenses + gains - losses B. revenues - expenses C. revenues - expenses + gains + losses D. increase net assets from nonowner transactions

A. revenues - expenses + gains - losses

The income statement reports A. revenues, expenses, gains and losses for a specified period of time B. revenues and expenses for a given point in time C. revenues, expenses, gains and losses for a specific date D. revenues and expenses for a specific date

A. revenues, expenses, gains and losses for a specified period of time

Which of the following events would be classified as an investing activity on a statement of cash flows? A. sale of an office building at a gain B. purchase of inventory C. payment of interest on a loan D. receipt of cash dividends on an available-for-sale investment

A. sale of an office building at a gain

The statement of cash flows is LEAST likely to help external users assess A. the amount of a company's future accrual-based sales revenue B. a company's ability to generate positive future cash flows C. a company's need for external financing D. a company's ability to meet its obligations and pay dividends

A. the amount of a company's future accrual-based sales revenues

IFRS content in the income statement is similar to U.S. GAAP in all of the following areas EXCEPT the disclosure of A. tax expense B. comprehensive income disclosure in a statement of shareholders' equity C. finance costs D. revenues

B. comprehensive income disclosure in a statement of shareholders' equity

Which of the following is required disclosure in the income statement when reporting the sale of a component of the business A. revenue and expenses applicable to the discontinued operations should be disclosed in the income statement B. earnings per share from both income from continuing operations and net income should be disclosed on the face of the income statement C. both results of operations of the discontinued component and also the gain or loss on the sale should be reported as components of other comprehensive income D. the gain or loss on sale should be reported as a component of their comprehensive income

B. earnins per share from both income from continuing operations and net income should be disclosed on the face of the income statement

In a statement of cash flows, the payment of a cash dividend on preferred stock outstanding should be classified as cash outflows for A. lending activities B. financing activities C. operating activities D. investing activities

B. financing activities

All of the following are included in the computation of cost of goods sold EXCEPT A. purchase returns and allowances B. freight out C. beginning finished goods inventory D. freight in

B. freight out

In a statement of cash flows, which of the following events would be classified as a financing activity? A. purchase of a trading security B. payment of cash dividends to shareholders C. payment of interest on a loan D. all of these answer choices are correct

B. payment of cash dividends to shareholders

Which of the following is NOT a purpose of the income statment? A. assesses the company's risk B. predicts the company's future assets and liabilities C. used to compare performance against other companies D. used to evaluate management's performance

B. predicts the company's future assets and liabilities

In distinguishing between revenues and gains, which of the following statements is FALSE? A. gains are associated more with peripheral, nonoperating activities than are revenues B. revenues are reported net (rather than gross) more often than gains C. more gains than revenues are beyond the entity's control D. GAAP does not provide precise distinctions between revenues and gains

B. revenues are reported net (rather than gross) more often than gains

Which is LEAST likely to be classified as a sale of a component? A. sale by a food distributor of its wholesale supermarket division while maintaining its wholesale fast-food restaurants division B. sale by an apparel manufacturer of a woolen suit manufacturing plant in order to concentrate on the manufacture of suits from synthetic products C. sale by a meat-packing company of its (entire) 20% interest in a professional football team D. sale by a communications company of its radio stations, but none of its television stations

B. sale by an apparel manufacturer of a woolen suit manufacturing plant in order to concentrate on the manufacture of suits from synthetic products

Which of the following sections will not appear in the statement of cash flows? A. operating activities B. selling activities C. financing activities D. investing activities

B. selling activities

How should the gain or loss that is considered infrequent be disclosed? A. as a contingency item in the footnotes B. separately in the income statement as a component of income from continuing operations C. on a net-of-tax basis in the income statement immediately after income from continuing operations D. separately in the income statement immediately after income from continuing operations

B. separately in the income statement as a component of income from continuing operatoins

Who is the income statement designed to inform? A. lenders B. the income statement is designed to inform all of these users C. creditors D. investors

B. the income statement is designed to inform all of these users

Which of the following is NOT a part of other comprehensive income? A. certain pension plan gains, losses, and prior service cost adjustments B. unrealized changes in the value of trading securities C. currency translation adjustments D. certain gains and losses in derivatives

B. unrealized changes in the value of trading securities

In general, revenues is recognized A. when cash is received B. when goods are sold or services are rendered C. during the production process D. upon competition of the production process

B. when goods are sold or services are rendered

Which of the following is NOT recognized by the FASB as an expense recognition principle that properly matches expenses against revenues? A. association of cause an effect B. immediate recognition C. cash payment D. systematic and rational allocation

C cash payment

The major components of the income statement are listed below: A= revenues B= income from continuing operations C= earnings per share D= results from discontinues operations E= operating income In what sequence do they normally appear on the income statement? A. B-A-E-D-C B. E-B-A-C-D C. A-E-B-D-C D. B-D-C-D-E

C. A-E-B-D-C

Operating capability refers to A. the ability of a company to adapt to unexpected needs and opportunities B. a measure of overall company performance C. a company's ability to maintain a given level of operations D. the uncertainty of unpredictability of the future results of a company

C. a company's ability to maintain a given level of operations

Which of the following is an acceptable way of reporting a company's comprehensive income? A. in the statement of changes in shareholders' equity only B. on the face of the income statement C. both "on the face of the income statement only" and " in a separate, consecutive, statement of comprehensive income only" are acceptable D. in a separate, consecutive, statement of comprehensive income only

C. both "on the face of the income statement only" and "in a separate, consecutive, statement of comprehensive income only" are acceptable

The primary purpose of a company's statement of cash flows is to provide information about the company's A. dividend policy B. financing and investing activities C. cash receipts and cash payments during the period D. operations

C. cash receipts and cash payments during the period

IFRS reporting requires all of the following items EXCEPT A. disclosure of the results of discontinued operations B. earning per share C. comprehensive income disclosure in a statement of shareholders' equity D. operating expenses disclosure

C. comprehensive income disclosure in a statment of shareholders' equity

Differences that currently exist between IFRS and U.S. GAAP with regard to the presentation of information on the income statement include all of the following EXCEPT A. depreciation measures differ when equipment has been revalued B. different performance measures such as EBITDA are permitted under IFRS C. differences resulting because IFRS does not require the use of accrual accounting under the historical cost framework D. different acceptable terminology relating to revenue items

C. differences resulting because IFRS does not require the use of accrual accounting under the historical cost frameowrk

Which of the following is NOT true about interim financial statements? A. GAAP must be applied to the interim financial statements B. interim financial statements are reports for periods of less than one year C. interim financial statements are not issued by all publicly held companies D. each interim period is viewd as an integral part of an annual period

C. interim financial statements are not issued by all publicly held companies

Intraperiod tax allocation A. involves temporary (timing) differences between financial and taxable incomes B. results from differences between tax regulations and the principles followed to determine financial income C. is used to allocate a company's total income tax expense to the components of net income and comprehensive income D. requires allocation of deferred taxes across accounting periods

C. is used to allocate a company's total income tax expesne to the components of net income and comprehensive income

Which of the following events would be classified as an operating activity in a statement of cash flows? A. sale of a long-term investment B. payment of cash dividends C. receipt of a cash dividend from an equity investment D. issuing notes payable

C. receipt of a cash dividend from an equity investment

Depreciation is an example of which expense recognition principle? A. cost recovery B. immediate recognition C. systematic and rational allocation D. association of cause and effect

C. systamtic and rational allocation

Revenue is recognized when: A. a seller collects cash from a customer B. a company bills the customer for the goods that have been delivered or the services performed C. it has been earned and is realized or realizable D. a company has satisfied its performance obligation to the customer

D. a company has satisfied its performance obligation to the customer

Which of the following is NOT a component of the income statement? A. income taxes B. unusual gains and losses C. net income D. accumulated other comprehensive income

D. accumulated other comprehensive income

The numerator in the earnings per share calculation is A. only the amount available to common shareholders B. net income minus declared preferred stock dividends C. net income attributable to common shareholders D. all of these answer choices are correct

D. all of these answer choices are correct

Which of the following is required to be disclosed, pursuant to GAAP? A. operating income or loss from discontinued component reported on the income statement B. all gains or losses from sale of the component reported on the income statement or in all the footnotes C. a description of facts and circumstances leading up to the sale of a discontinued component within the notes of the financial statements D. all of these answer choices are correct

D. all of these answer choices are correct

Which of the following is included in comprehensive income? A. unrealized gains or losses associated with fair value of available-for-sale securities B. translation adjustments from converting foreign statements into U.S. dollars C. gains and losses associated with derivative finance instruments that hedge future cash flows D. all of these answer choices are included in comprehensive income

D. all of these answer choices are included in comprehensive income

Expenses that affect the operating activities of more than one interim period are allocated among the periods based on an estimate of A. activity associated with the period B. benefit received C. time expired D. all of these answer choices are possible estimate bases

D. all of these answer choices are possible estimate based

The income statement helps users A. assess the company's risk B. compare and contrast performance against a competitor C. review the impact of economic factors afecting the company D. all of these answer choices are ways in which the income statement helps users

D. all of these answer choices are ways inwhich the income statment helps users

Which of the following is helpful to report separately? A. expenses that vary with volume of activity B. expenses that depend on other economic factors C. expenses that are discretionary D. all of these answer choice present elements that are helpful to report separately

D. all of these answer choices present elements that are helpful to report separately

Information reported or disclosed about the profit or loss of reportable segments consists of A. interest revenue and interest expense B. segment revenues (separated into sales to external customers and intersegment sales) C. a measure of operating profit or loss D. all of these choices are included as information disclosed about the profit or loss of a reportable segment

D. all of these choices are incldued as information disclosed about the profit or loss of a reportable segment

Under GAAP for segment reporting, a company must report A. the types of products and services from which each reporting segment derives its revenues B. factors used to identify its reportable segment C. a measure of profit or loss for each reportable segment D. all of these choices must be reported

D. all of these choices must be reported

Which ratios are the most commonly analyzed from the income statement? A. gross profit margin B. net profit margin C. operating profit margin D. all of these ratios are commonly analyzed from the income statement

D. all of these ratios are commonly analyzed from the income statement

When an entity reports on a sale of a component of the business A. all information related to the sold component should be reported solely in the footnotes accompanying the financial statements B. any gain or loss on the sale should always be presented as a component of other comprehensive income C. any income or loss from operations of the component should be reported in the income from continuing operations section, but any gain or loss on the sale of the component should be presented below the income from continuing operations section D. current operating income or loss of the component and any gain or loss on sale of the component should be presented in a separate section of the income statement

D. current operating income or loss of the component and any gain or loss on sale of the component should be presented in a separate section of the income statement

Examples of matching expenses against revenues using the association of cause and effect include all of the following EXCEPT A. transportation costs for delivery of goods to customers B. costs of products sold C. sales commissions D. insurance costs

D. insurance costs

Which of the following expenses is an example of expense recognition under the immediate recognition principle? A. depreciation B. sales commissions C. transportation-out D. management salaries

D. management salaries

The subtotal, gross profit, will be disclosed on A. a single step income statement B. neither multiple-step nor single step income statements C. both multiple step and single step income statements D. multiple step incomes statement

D. multiple step income statement

Which of the following would appear after the heading of operating income? A. other operating income items (gains or losses) B. operating expenses C. cost of goods sold D. unusual gains or losses

D. unusal gains or losses