Chapter 4 quiz Test#2

The major elements of the income statement are A. revenues, expenses, gains, and losses. B. revenue, cost of goods sold, selling expenses, and general expense. C. revenues, irregular items, and general expenses. D. operating section, nonoperating section, discontinued operations, extraordinary items, and cumulative effect.

a

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business? A. Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement. B. The gain or loss on disposal should be reported as an ordinary item. C. Results of operations of a discontinued component should be disclosed immediately below other gains/losses. D. The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.

a

Which of the following is an advantage of the single-step income statement over the multiple-step income statement? A. It does not imply that one type of revenue or expense has priority over another. B. It matches costs and expenses with related revenues. C. Expenses are classified by function. D. It reports gross profit for the year.

a

Which of the following is not a generally practiced method of presenting the income statement? A. Including prior period adjustments in determining net income B. The single-step income statement C. Including gains and losses from discontinued operations of a component of a business in determining net income D. The consolidated statement of income

a

Chase Corp. had the following infrequent transactions during 2014: A $375,000 gain from selling the only investment Chase has ever owned. A $525,000 gain on the sale of equipment. A $175,000 loss on the write-down of inventories. In its 2014 income statement, what amount should Chase report as total infrequent net gains that are not considered extraordinary? A. $350,000. B. $900,000. C. $725,000. D. $200,000.

a 525,000- 175,000= 350,000

Leonard Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax $ 430,000 Dividends declared 320,000 Net income 1,000,000 Retained earnings, 1/1/14, as reported 4,000,000 Leonard should report retained earnings, 1/1/14, as adjusted at A. $4,430,000. B. $4,000,000. C. $3,570,000. D. $5,110,000.

a Retained earnings + prior year expense 4,000,000 + 430,000= 4,430,000

A correction of an error in prior periods' income will be reported In the income statement Net of tax A. Yes No B. No Yes C. No No D. Yes Yes

b

Earnings per share data are required on the face of the A. statement of stockholders' equity B. income statement C. statement of retained earnings D. balance sheet

b

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles? A. On the face of the balance sheet. B. On the face of the income statement. C. On the face of the statement of retained earnings (or, statement of stockholders' equity.) D. In the footnotes to the financial statements.

b

Which of the following is true of accounting for changes in estimates? A. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements B. Changes in estimates are not carried back to adjust prior years C. Changes in estimates are considered as errors D. A company accounts for changes in estimates only in the period of change, even though it affects the future periods

b

Leonard Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax $ 430,000 Dividends declared 320,000 Net income 1,000,000 Retained earnings, 1/1/14, as reported 4,000,000 Leonard should report retained earnings, 12/31/14, at A. $4,250,000. B. $5,110,000. C. $3,570,000. D. $4,680,000.

b 4,000,000+430,000+1,000,000-320,000= 5,110,000

The income statement reveals A. resources and equities of a firm at a point in time. B. net earnings (net income) of a firm at a point in time. C. net earnings (net income) of a firm for a period of time. D. resources and equities of a firm for a period of time.

c

Which of the following is not a selling expense? A. Store supplies consumed B. Advertising expense C. Office salaries expense D. Freight-out

c

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to: A. stockholders' equity of the period in which the change occurred. B. comprehensive income for the earliest period presented. C. net income of the period in which the change occurred. D. beginning retained earnings of the earliest period presented.

d

In calculating earnings per share, companies deduct preferred dividends from net income if: A. they are convertible preferred shares. B. they are callable preferred shares. C. they are noncumulative though not declared. D. the dividends are declared.

d

Which of the following is included in comprehensive income? A. Investments by owners. B. Distributions to owners. C. Changes in accounting principles. D. Unrealized gains on available-for-sale securities.

d

Which of the following is true about intraperiod tax allocation? A. It is required for cumulative effect of accounting changes but not for prior period adjustments. B. It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return. C. Its purpose is to allocate income tax expense evenly over a number of accounting periods. D. Its purpose is to relate the income tax expense to the items which affect the amount of tax.

d

Which of the following items would be reported net of tax on the face of the income statement? A. Change in realizability of receivables B. Prior period adjustment C. Unusual gain D. Discontinued operations

d

Which of the following should be reported as a prior period adjustment? Change in Estimated Mistakes in the Application of lives of Depreciable Accounting Principles assets A. Yes Yes B. No No C. Yes No D. No Yes

d

James, Inc. incurred the following infrequent losses during 2014: A $210,000 write-down of equipment leased to others. A $120,000 adjustment of accruals on long-term contracts. A $180,000 write-off of obsolete inventory. In its 2014 income statement, what amount should James report as total infrequent losses that are not considered extraordinary? A. $330,000. B. $300,000. C. $390,000. D. $510,000.

d 180,000+120,000+210,000= 510,000