Preparing an Income Statement

Other comprehensive income

is non-owner changes in equity that bypass the income statement.

The nature-of-expense method

is simple to apply.

In the single-step income statement:

just two groupings exist - revenues and expenses.

Earnings per share

measures the number of dollars earned by each share of common stock.

Gains and losses that bypass net income but affect stockholders' equity are referred to as:

other comprehensive income.

The non-controlling interest section of the income statement is:

required under IFRS and GAAP.

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.

The ________ approach focuses on the income-related activities that have occurred during the period.

transaction

Earnings per share (EPS) is

(net income minus preferred dividends) / weighted average of common shares outstanding

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

A condensed income statement.

Which statement is correct regarding IFRS?

An advantage of the nature-of-expense method is that it is simple to apply because allocations of expense to different functions are not necessary.

Companies are required to highlight certain items in the financial statements so that users can better determine the long-run earning power of the company. Which of the following is not one of those items?

Changes in accounting principle. (unusual gains and losses, noncontrolling interest, and discontinued operations are)

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. gain from condemnation settlement.

D

Intraperiod tax allocation is used for all of the following except: A. changes in accounting principle. B. discontinued operations. C. extraordinary items. D. unusual gains/losses.

D

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

EPS for income from continuing operations.

Which of the following is not reported in an income statement under IFRS?

Extraordinary items. (discontinued operations, cost of goods sold, income tax are)

Which of the following occur from peripheral or incidental transactions?

Gain on the sale of equipment.

Which of the following statements is correct regarding income reporting under IFRS?

IFRS provides the same options for reporting comprehensive income as GAAP.

Which statement is correct regarding IFRS?

IFRS uses the same process for recording transactions as GAAP.

Which of the following is not considered an irregular item on the income statement?

Income tax expense. (Extraordinary gains., Discontinued operations., Extraordinary losses all considered irregular)

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

Income tax expense. (cost of goods sold, administrative expense, and sales are)

Noncontrolling interest

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

Which of the following should be reported as a prior period adjustment?

Mistakes in the Application of Accounting Principles

Income reporting follows which of the following approaches?

Modified all-inclusive.

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

Net of tax

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

On the face of the income statement.

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 nonoperating revenues or expenses if material and supplemented by a footnote if deemed appropriate.

Which of the following is prohibited under IFRS?

The presentation of extraordinary items.

Which of the following is included in comprehensive income?

Unrealized gains on available-for-sale securities

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

Within the statement of retained earnings. (Second income statement., Combined statement of comprehensive income are acceptable)

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.

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.

A change in the method of inventory pricing from FIFO to LIFO would be accounted for as a (an):

change in accounting principle.

Earnings per share should always be shown separately for

income before extraordinary items.