ACC CH4 Multiple Choice

The single-step income statement emphasizes

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?

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

Which of the following items will not appear in the retained earnings statement?

Discontinued operations

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

Discontinued operations

Which of the following earnings per share figures must be disclosed on the face of the income statement?

EPS for income from continuing operations.

The major elements of the income statement are

revenues, expenses, gains, and losses.

The approach most companies use to provide information related to the components of other comprehensive income is a

separate column in the statement of changes in stockholders' equity.

In order to be classified as an extraordinary item in the income statement, an event or transaction should be

unusual in nature, infrequent, and material in amount.

Which of the following is a change in accounting principle?

A change from FIFO to LIFO and a change from straight-line to double-declining- balance

Which of the following is an acceptable method of presenting the income statement?

A single-step income statement b. A multiple-step income statement c. A consolidated statement of income d. ALL OF THESE

Which disclosure method do most companies use to display the components of other comprehensive income?

As part of the statement of stockholders' equity

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

Changes in accounting estimates.

Which of the following is not an acceptable way of displaying the components of other comprehensive income?

Combined statement of retained earnings

Which of the following earnings per share figures must be disclosed on the face of the income statement?

EPS on income from continuing operations. b. The effect on EPS from operations of a discontinued division, net of taxes. c. The effect on EPS from an extraordinary item, net of taxes. d. ALL OF THE ABOVE

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

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

The income statement information would help in which of the following tasks?

Estimate future cash flows

Which of these is generally an example of an extraordinary item?

Gain resulting from the state exercising its right of eminent domain on a piece of land used as a parking lot.

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

In the income statement Net of tax NO YES

Which of the following is not a generally practiced method of presenting the income statement?

Including prior period adjustments in determining net income

Earnings per share data are required on the face of which of the following financial statements?

Income statement

Which of the following is an advantage of the single-step income statement over the multiple-step income statement?

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

Which of the following is true about intraperiod tax allocation?

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

Which of the following is never classified as an extraordinary item?

Losses from exchange or translation of foreign currencies.

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.

A material item which is unusual in nature or infrequent in occurrence, but not both should be shown in the income statement

Net of Tax Disclosed Separately NO YES

Which of the following is not a selling expense?

Office salaries expense

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

On the face of the income statement.

Under which of the following conditions would material flood damage be considered an extraordinary item for financial reporting purposes?

Only if floods in the geographical area are unusual in nature and occur infrequently.

A company is not required to report a per share amount on the face of the income statement for which of the following items?

Prior period adjustment

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?

Relax credit policies for customers.

Which of the following is an example of managing earnings down?

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

How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?

Shown as a separate item in operating revenues or expenses if material and supplemented by a footnote if deemed appropriate.

Which of the following is an example of managing earnings up?

Underestimating warranty claims.

Which of the following is included in comprehensive income?

Unrealized gains on available-for-sale securities.

Which of the following items would be reported at its gross amount on the face of the income statement?

Unusual gain

Which of the following would represent the least likely use of an income statement prepared for a business enterprise?

Use by investors interested in the financial position of the entity.

Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as

a prior period adjustment.

Income taxes are allocated to

a. extraordinary items. b. discontinued operations. c. prior period adjustments. d. ALL OF THESE

Classification as an extraordinary item on the income statement would be appropriate for the

a. gain or loss on disposal of a component of the business. b. substantial write-off of obsolete inventories. c. loss from a strike. d. NONE OF THESE

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 and before extraordinary items.

The occurrence which most likely would have no effect on 2012 net income (assuming that all amounts involved are material) is the

collection in 2012 of a receivable from a customer whose account was written off in 2011 by a charge to the allowance account.

The occurrence that most likely would have no effect on 2012 net income is the

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

Information in the income statement helps users to

evaluate the past performance of the enterprise. b. provide a basis for predicting future performance. c. help assess the risk or uncertainty of achieving future cash flows. d ALL OF THESE

An item that should be classified as an extraordinary item is

gains from a company selling the only investment it has ever owned.

Earnings per share should always be shown separately for

income before extraordinary items.

Limitations of the income statement include all of the following except

income numbers are affected by the accounting methods employed.

Comprehensive income includes all of the following except

investments by owners

The income statement reveals

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

The accountant for the Lintz Sales Company is preparing the income statement for 2012 and the balance sheet at December 31, 2012. The January 1, 2012 merchandise inventory balance will appear

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