chapter 4 review

Which of the following would be classified as an extraordinary item on the income statement?

-loss from prohibition of a product -a loss from a flood in a location that would not be expected to flood

Comprehensive income is net income plus the periods change in accumulated other comprehensive income.

T

It is the date of the declaration of dividends, not the date of dividend payment, that affects retained earnings and creates the liability.

T

Other income and other expense are categories under which secondary activities of the firm not directly related to the operations are classified.

T

Presenting an item after tax, with the related tax deducted, is called net-of-tax presentation.

T

Since the number of shares changes under both a stock dividend and a stock split, any ratio based on the number of shares must be restated

T

The term primary analysis is used to describe consistent and conservative analysis.

T

Which of the following is not true about a stock dividend?

The accounting for a stock dividend, assuming the distribution is relatively small, requires that the par value of the stock be removed from retained earnings.

When a company discontinues and disposes of a component segment of its operations, the gain or loss from disposal should be reported as:

a special item after continuing operations and before extraordinary items

Which of the following is a recurring item?

equity in earnings of nonconsolidated subsidiaries

If a firm consolidates subsidiaries that are not wholly owned, an income statement item is created that is termed

minority share of earnings

Which of the following will not affect retained earnings?

payment of a cash dividend previously disclosed

Which of the following would be included in operating income?

rent income for a leasing subsidiary

Gross profit is the difference between

sales and cost of goods sold

If the disposal of a segment meets the criteria of a disposal of a segment, then:

the results of operations of the segment will be reported in conjunction with the gain or loss on disposal

Which of the following items on the income statement is not disclosed net of tax?

unusual or infrequent item disclosed separately

Extraordinary items are always presented gross of applicable income taxes.

F

Gross profit will be a prominent figure on a single-step income statement

F

In analysis of income, for purposes of determining a trend, extraordinary items should be included.

F

The legality of distributions to stockholders is governed by federal law

F

With a stock dividend, total market value considering all outstanding shares should decline

F

Which of the following will be disclosed in the reconciliation of retained earnings?

all of the answers are correct