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100. Given the following: Net income $800,000 EPS 4.25 Dividend/ordinary shares 2.00 Weighted average ordinary shares outstanding 160,000 Determine the amount of the preference share dividend. a. $480,000 b. $320,000 c. $160,000 d. $120,000

100. d ($800,000 - X) ÷ 160,000 = $4.25. $800,000 - X = $680,000 = $120,000.

101. Use the following information: Gross profit ₤3,900,000 Loss on sale of investments 10,000 Interest expense 7,500 Gain on sale of discontinued operations 30,000 Income tax rate 20% Compute the amount of income tax applicable to continuing operations. a. ₤776,500 b. ₤820,000 c. ₤784,500 d. ₤784,000

101. a (₤3,900,000 - ₤10,000 - ₤7,500) × 0.20 = ₤776,500.

102. Use the following information: Gross profit ₤3,900,000 Loss on sale of investments 10,000 Interest expense 7,500 Gain on sale of discontinued operations 30,000 Income tax rate 20% Compute the amount of discontinued operations to be combined with income from continuing operations on the income statement. a. ₤30,000 b. ₤24,000 c. ₤6,000 d. None of the above.

102. b ₤30,000 - (₤30,000 ´ 0.20) = ₤24,000.

103. Use the following information: Gross profit ₤3,900,000 Loss on sale of investments 10,000 Interest expense 7,500 Gain on sale of discontinued operations 30,000 Income tax rate 20% Compute the total amount of income tax expense experienced by the company. a. ₤765,000 b. ₤800,000 c. ₤782,500 d. ₤1,005,000

103. c [(₤3,900,000 - ₤10,000 - ₤7,500) ´ 0.20] + (₤30,000 ´ 0.20) = ₤782,500.

104. Sandstrom Corporation has a discontinued operations loss of $100,000, an unusual gain of $70,000, and a tax rate of 40%. At what amount should Sandstrom report each item? Discontinued loss Unusual gain a. $(100,000) $70,000 b. (100,000) 42,000 c. (60,000) 70,000 d. (60,000) 42,000

104. c $100,000 × 0.60 = $60,000.

105. Prophet Corporation has a discontinued operations loss of $300,000, an unusual gain of $210,000, and a tax rate of 40%. At what amount should Prophet report each item? Discontinued loss Unusual gain a. $(300,000) $210,000 b. (300,000) 126,000 c. (180,000) 210,000 d. (180,000) 126,000

105. c $300,000 × 0.60 = $180,000.

106. Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $262,000. It also has the following items (gross amounts). Unusual loss $ 37,000 Discontinued operations loss 101,000 Gain on disposal of equipment 8,000 Change in accounting principle increasing prior year's income 53,000 What is the amount of income tax expense Arreaga would report on its income statement? a. $104,800 b. $93,200 c. $111,200 d. $74,000

106. b ($262,000 - $37,000 + $8,000) × 0.40 = $93,200.

107. Palomo Corp has a tax rate of 30 percent and income before considering the items below of $377,000. It also has the following items (gross amounts). Unusual gain $ 23,000 Loss from discontinued operations 183,000 Dividend revenue 6,000 Income increasing prior period adjustment 74,000 What is the amount of income tax Palomo would report on its income statement? a. $121,800 b. $ 66,900 c. $ 89,100 d. $114,900

107. a ($377,000 + $23,000 + $6,000) × 0.30 = $121,800.

108. Lantos Company had a 40 percent tax rate. Given the following pre-tax amounts, what would be the income tax expense reported on the face of the income statement? Sales revenue $ 110,000 Cost of goods sold 60,000 Salaries and wages expense 8,000 Depreciation expense 11,000 Dividend revenue 9,000 Utilities expense 1,000 Loss from discontinued operations 10,000 Interest expense 2,000 a. $14,800 b. $10,800 c. $11,200 d. $ 7,200

108. a ($110,000 - $60,000 - $8,000 - $11,000 + $9,000 - $1,000 - $2,000) x 0.40 = $14,800.

109. Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $ 430,000 Dividends declared, 2015 320,000 Net income for 2015 1,000,000 Retained earnings, 1/1/15, as reported 2,500,000 Moorman should report retained earnings, January 1, 2015, as adjusted at a. $2,070,000. b. $2,500,000. c. $2,930,000. d. $3,610,000.

109. a $2,500,000 - $430,000 = $2,070,000.

110. Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $ 430,000 Dividends declared, 2015 320,000 Net income for 2015 1,000,000 Retained earnings, 1/1/15, as reported 2,500,000 Moorman should report retained earnings, December 31, 2015, of a. $2,070,000. b. $2,750,000. c. $3,180,000. d. $3,610,000.

110. b $2,500,000 - $430,000 + $1,000,000 - $320,000 = $2,750,000.

111. Leonard Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax $ 215,000 Dividends declared, 2015 160,000 Net income for 2015 500,000 Retained earnings, 1/1/15, as reported 1,200,000 Leonard should report retained earnings, January 1, 2015, as adjusted at a. $985,000. b. $1,200,000. c. $1,415,000. d. $1,755,000.

111. c $1,200,000 + $215,000 = $1,415,000.

112. Leonard Corporation reports the following information: Correction of overstatement of depreciation expense in prior years, net of tax $ 215,000 Dividends declared, 2015 160,000 Net income for 2015 500,000 Retained earnings, 1/1/15, as reported 1,200,000 Leonard should report retained earnings, December 31, 2015, at a. $985,000. b. $1,325,000. c. $1,540,000. d. $1,755,000.

112. d $1,200,000 + $215,000 + $500,000 - $160,000 = $1,755,000

113. The following information was extracted from the accounts of Essex Corporation at December 31, 2015: CR(DR) Total reported income since incorporation $1,900,000 Total cash dividends paid (800,000) Unrealized holding loss (120,000) Total share dividends distributed (200,000) Prior period adjustment, recorded January 1, 2015 75,000 What should be the balance of retained earnings at December 31, 2015? a. $855,000 b. $900,000 c. $780,000 d. $975,000

113. d $1,900,000 - $800,000 - $200,000 + $75,000 = $975,000.

114. Pullman Corporation had retained earnings of $2,100,000 at January 1, 2015. During the year the company experienced a net loss of $900,000 and declared cash dividends of $240,000. Determine the retained earnings balance at December 31, 2015. a. $2,760,000 b. $1,200,000 c. $3,000,000 d. $960,000

114. d $2,100,000 - $900,000 - $240,000 = $960,000.

115. Pullman Corporation had retained earnings of $2,100,000 at January 1, 2015. During the year the company experienced a net loss of $900,000 and declared cash dividends of $240,000. It was discovered in 2015 that $150,000 of repair expense was debited to the Land account in 2014. The income tax rate is 20%. Determine the retained earnings balance at December 31, 2015. a. $810,000 b. $1,080,000 c. $1,050,000 d. $840,000

115. d $2,100,000 - $900,000 - $240,000 - ($150,000 ´ 0.80) = $840,000.

116. Rodriquez Corporation had retained earnings of $850,000 at January 1, 2015. During the year the company generated a net income of $150,000 and declared share dividends of $50,000. It was discovered during 2015 that $40,000 of closing costs on a 2014 purchase of land was debited to Maintenance Expense. The income tax rate is 30%. Determine the retained earnings balance at December 31, 2015. a. $978,000 b. $960,000 c. $910,000 d. $938,000

116. a $850,000 + $150,000 - $50,000 + ($40,000 ´ 0.70) = $978,000.

117. On January 1, 2015, Zhang Inc. had cash and share capital of ¥10,000,000. At that date, the company had no other asset, liability, or equity balances. On January 5, 2015, it purchased for cash ¥6,000,000 of equity securities that it classified as non-trading. It received cash dividends of ¥800,000 during the year on these securities. In addition, it has an unrealized loss on these securities of ¥600,000. The tax rate is 20%. Compute the amount of net income/(loss). a. ¥800,000 b. ¥640,000 c. ¥(200,000) d. ¥160,000

117. b ¥800,000 - (¥800,000 ´ 0.20) = ¥640,000.

118. On January 1, 2015, Zhang Inc. had cash and share capital of ¥10,000,000. At that date, the company had no other asset, liability, or equity balances. On January 5, 2015, it purchased for cash ¥6,000,000 of equity securities that it classified as non-trading. It received cash dividends of ¥800,000 during the year on these securities. In addition, it has an unrealized loss on these securities of ¥600,000. The tax rate is 20%. Compute the amount of comprehensive income. a. ¥200,000 b. ¥160,000 c. ¥640,000 d. ¥600,000

118. b (¥800,000 - ¥600,000) = ¥200,000 ´ 0.80 = ¥160,000.

119. On January 1, 2015, Zhang Inc. had cash and share capital of ¥10,000,000. At that date, the company had no other asset, liability, or equity balances. On January 5, 2015, it purchased for cash ¥6,000,000 of equity securities that it classified as non-trading. It received cash dividends of ¥800,000 during the year on these securities. In addition, it has an unrealized loss on these securities of ¥600,000. The tax rate is 20%. Compute the amount of other comprehensive income/(loss). a. ¥(480,000) b. ¥(600,000) c. ¥200,000 d. ¥160,000

119. a ¥600,000 - (¥600,000 ´ 0.20) = ¥480,000

120. On January 1, 2015, Zhang Inc. had cash and share capital of ¥10,000,000. At that date, the company had no other asset, liability, or equity balances. On January 5, 2015, it purchased for cash ¥6,000,000 of equity securities that it classified as non-trading. It received cash dividends of ¥800,000 during the year on these securities. In addition, it has an unrealized loss on these securities of ¥600,000. The tax rate is 20%. Compute the amount of accumulated other comprehensive income/(loss). a. ¥(600,000) b. ¥200,000 c. ¥160,000 d. (¥480,000)

120. d ¥600,000 - (¥600,000 ´ 0.20) = ¥480,000

121. Madsen Company reported the following information for 2015: Sales revenue $510,000 Cost of goods sold 350,000 Operating expenses 55,000 Unrealized holding gain on available-for-sale securities 30,000 Cash dividends received on the securities 2,000 For 2015, Madsen would report other comprehensive income of a. $137,000. b. $135,000. c. $32,000. d. $30,000.

121. d Other comprehensive income = $30,000.

122. Korte Company reported the following information for 2015: Sales revenue $500,000 Cost of goods sold 350,000 Operating expenses 55,000 Unrealized holding gain on available-for-sale securities 25,000 Cash dividends received on the securities 2,000 For 2015, Korte would report comprehensive income of a. $122,000. b. $120,000. c. $97,000. d. $25,000.

122. a $500,000 - $350,000 - $55,000 + $25,000 + $2,000 = $122,000.

123. For the year ended December 31, 2015, Transformers Inc. reported the following: Net income $120,000 Preference dividends declared 20,000 Ordinary share dividends declared 4,000 Unrealized holding loss, net of tax 2,000 Retained earnings 160,000 Share capital - ordinary 80,000 Accumulated other comprehensive income, Beginning balance 10,000 What would Transformers report as its ending balance of Accumulated Other Comprehensive Income? a. $12,000 b. $10,000 c. $8,000 d. $2,000

123. c $10,000 - $2,000 = $8,000.

124. For the year ended December 31, 2015, Transformers Inc. reported the following: Net income $120,000 Preference dividends declared 20,000 Ordinary share dividends declared 4,000 Unrealized holding loss, net of tax 2,000 Retained earnings, beginning balance 160,000 Share capital - ordinary 80,000 Accumulated other comprehensive income, Beginning balance 10,000 What would Transformers report as the ending balance of Retained Earnings? a. $278,000 b. $266,000 c. $256,000 d. $254,000

124. c $160,000 + $120,000 - $20,000 - $4,000 = $256,000.

125. For the year ended December 31, 2015, Transformers Inc. reported the following: Net income $120,000 Preference dividends declared 20,000 Ordinary share dividends declared 4,000 Unrealized holding loss, net of tax 2,000 Retained earnings, beginning balance 160,000 Share capital - ordinary 80,000 Accumulated other comprehensive income, Beginning balance 10,000 What would Transformers report as total stockholders' equity? a. $344,000 b. $336,000 c. $256,000 d. $240,000

125. a ($160,000 + $120,000 - $20,000 - $4,000) + $80,000 + ($10,000 - $2,000) = $344,000.

126. Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2015, included the following expense accounts: Accounting and legal fees $140,000 Advertising 100,000 Freight-out 75,000 Interest 60,000 Loss on sale of long-term investments 30,000 Officers' salaries 170,000 Rent for office space 180,000 Sales salaries and commissions 110,000 One-half of the rented premises is occupied by the sales department. How much of the expenses listed above should be included in Perry's selling expenses for 2015? a. $210,000 b. $285,000 c. $300,000 d. $375,000

126. d $100,000 + $75,000 + $110,000 + $90,000 = $375,000.

127. Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2015, included the following expense accounts: Accounting and legal fees $140,000 Advertising 100,000 Freight-out 75,000 Interest 60,000 Loss on sale of long-term investments 30,000 Officers' salaries 170,000 Rent for office space 180,000 Sales salaries and commissions 110,000 One-half of the rented premises is occupied by the sales department. How much of the expenses listed above should be included in Perry's general and administrative expenses for 2015? a. $400,000 b. $430,000 c. $460,000 d. $490,000

127. a $140,000 + $170,000 + $90,000 = $400,000.

128. Didde Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2015 included the following expense and loss accounts: Accounting and legal fees $140,000 Advertising 160,000 Freight-out 80,000 Interest 70,000 Loss on sale of long-term investment 30,000 Officers' salaries 225,000 Rent for office space 220,000 Sales salaries and commissions 170,000 One-half of the rented premises is occupied by the sales department. Didde's total selling expenses for 2015 are a. $520,000. b. $440,000. c. $410,000. d. $350,000.

128. a $160,000 + $80,000 + $110,000 + $170,000 = $520,000.

129. The following items were among those that were reported on Dye Co.'s income statement for the year ended December 31, 2015: Legal and audit fees $150,000 Rent for office space 180,000 Interest on bank loan 210,000 Loss on abandoned equipment used in operations 35,000 The office space is used equally by Dye's sales and accounting departments. What amount of the above-listed items should be classified as general and administrative expenses in Dye's income statement? a. $240,000 b. $275,000 c. $330,000 d. $450,000

129. a $150,000 + $90,000 = $240,000.

130. Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2015 included the following: Debit Credit Sales revenue $140,000 Cost of sales $ 60,000 Administrative expenses 25,000 Loss on sale of equipment 9,000 Commissions to salespersons 8,000 Interest revenue 5,000 Freight-out 3,000 Loss on disposition of wholesale division 17,000 Bad debt expense 3,000 Totals $125,000 $145,000 Other information: Logan's income tax rate is 30%. Merchandise inventory: January 1, 2015 $80,000 December 31, 2015 70,000 On Logan's income statement for 2015, merchandise purchases are a. $73,000. b. $70,000. c. $53,000. d. $50,000.

130. d $60,000 + $70,000 - $80,000 = $50,000.

131. Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2015 included the following: Debit Credit Sales revenue $140,000 Cost of sales $ 60,000 Administrative expenses 25,000 Loss on sale of equipment 9,000 Commissions to salespersons 8,000 Interest revenue 5,000 Freight-out 3,000 Loss on disposition of wholesale division 17,000 Bad debt expense 3,000 Totals $125,000 $145,000 Other information: Logan's income tax rate is 30%. Merchandise inventory: January 1, 2015 $80,000 December 31, 2015 70,000 On Logan's income statement for 2015, income from continuing operations is a. $54,000. b. $20,000. c. $37,000. d. $32,000.

131. c $140,000 - $60,000 - $25,000 - $9,000 - $8,000 + $5,000 - $3,000 - $3,000 = $37,000.

132. Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2015 included the following: Debit Credit Sales revenue $140,000 Cost of sales $ 60,000 Administrative expenses 25,000 Loss on sale of equipment 9,000 Commissions to salespersons 8,000 Interest revenue 5,000 Freight-out 3,000 Loss on disposition of wholesale division 17,000 Bad debt expense 3,000 Totals $125,000 $145,000 Other information: Logan's income tax rate is 30%. Merchandise inventory: January 1, 2015 $80,000 December 31, 2015 70,000 On Logan's income statement for 2015, discontinued operations loss is a. $11,900. b. $17,000. c. $18,200. d. $26,000.

132. a $17,000 × 0.70 = $11,900.

133. Chase Corp. had the following infrequent transactions during 2015: A $300,000 gain from selling its automotive division. A $420,000 gain on the sale of investments. A $140,000 loss on the write-down of inventories. In its 2015 income statement, what amount should Chase report as other income and expense? a. $160,000 b. $280,000 c. $580,000 d. $720,000

133. b $420,000 - $140,000 = $280,000.

134. James, Inc. incurred the following infrequent losses during 2015: A $105,000 impairment loss on intangible assets. A $60,000 litigation settlement (loss). A $90,000 write-off of obsolete inventory. In its 2015 income statement, what amount should James report as other income and expense? a. $255,000 b. $195,000 c. $165,000 d. $150,000

134. a $105,000 + $60,000 + $90,000 = $255,000.

135. Which of the following should be reported as a prior period adjustment? Change in Estimated Lives Change from Unaccepted of Depreciable Assets Principle to Accepted Principle a. Yes Yes b. No Yes c. Yes No d. No No

135. b Conceptual

75. Ortiz Co. had the following account balances: Sales revenue $ 120,000 Cost of goods sold 60,000 Salaries and wages expense 10,000 Depreciation expense 20,000 Dividend revenue 4,000 Utilities expense 8,000 Rent revenue 25,000 Interest expense 12,000 Sales returns 11,000 Advertising expense 13,000 What amount would Ortiz report as other income and expense in its income statement? a. $29,000 b. $17,000 c. $25,000 d. $13,000

75. a $25,000 + $4,000 = $29,000.

76. Ortiz Co. had the following account balances: Sales revenue $ 180,000 Cost of goods sold 90,000 Salaries and wages expense 15,000 Depreciation expense 30,000 Dividend revenue 6,000 Utilities expense 12,000 Rent revenue 30,000 Interest expense 18,000 Sales returns 16,500 Advertising expense 19,500 What amount would Ortiz report as income from operations in its income statement? a. $73,500 b. $45,000 c. $33,000 d. $15,000

76. c $51,000 - $12,000 + $30,000 - $16,500 - $19,500 = $33,000.

77. For Mortenson Company, the following information is available: Cost of goods sold $240,000 Sales discounts 8,000 Income tax expense 24,000 Operating expenses 92,000 Sales revenue 400,000 In Mortenson's income statement, gross profit a. should not be reported. b. should be reported at $36,000. c. should be reported at $152,000. d. should be reported at $160,000.

77. c $400,000 - $8,000 - $240,000 = $152,000.

78. For Rondelli Company, the following information is available: Cost of goods sold $270,000 Sales returns and allowances 12,000 Income tax expense 27,000 Operating expenses 105,000 Sales revenue 450,000 In Rondelli's income statement, gross profit a. should not be reported. b. should be reported at $36,000. c. should be reported at $168,000. d. should be reported at $180,000.

78. c $450,000 - $12,000 - $270,000 = $168,000.

79. Gross billings for merchandise sold by Lang Company to its customers last year amounted to $13,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Company were a. $13,720,000. b. $13,350,000. c. $13,175,000. d. $13,035,000.

79. c $13,720,000 - $370,000 - $175,000 = $13,175,000.

80. Use the following information (in thousands): Service Revenue ¥1,600,000 Income from continuing operations 200,000 Net Income 180,000 Income from operations 440,000 Selling & administrative expenses 1,000,000 Income before income tax 400,000 Determine the amount of other income and expense. a. ¥40,000 b. ¥160,000 c. ¥200,000 d. ¥20,000

80. b ¥1,600,000 - ¥1,000,000 - 440,000 = ¥160,000.

81. Use the following information (in thousands): Service Revenue ¥1,600,000 Income from continuing operations 200,000 Net Income 180,000 Income from operations 440,000 Selling & administrative expenses 1,000,000 Income before income tax 400,000 Determine the amount of financing costs. a. ¥40,000 b. ¥20,000 c. ¥200,000 d. ¥160,000

81. a ¥440,000 - ¥400,000 = ¥40,000.

82. Use the following information (in thousands): Service Revenue ¥1,600,000 Income from continuing operations 200,000 Net Income 180,000 Income from operations 440,000 Selling & administrative expenses 1,000,000 Income before income tax 400,000 Determine the amount of income tax. a. ¥40,000 b. ¥20,000 c. ¥200,000 d. ¥160,000

82. c ¥400,000 - ¥200,000 = ¥200,000.

83. Use the following information (in thousands): Revenues ¥1,600,000 Income from continuing operations 200,000 Net Income 180,000 Income from operations 440,000 Selling & administrative expenses 1,000,000 Income before income tax 400,000 Determine the amount of discontinued operations. a. ¥(40,000) b. ¥160,000 c. ¥200,000 d. ¥(20,000)

83. d ¥200,000 - ¥180,000 = ¥(20,000)

84. Use the following information (in thousands): Sales revenue ¥300,000 Gain on sale of equipment 90,000 Cost of goods sold 164,000 Interest expense 16,000 Selling & administrative expenses 30,000 Income tax rate 30% Determine the amount of income from operations. a. ¥76,000 b. ¥196,000 c. ¥60,000 d. ¥180,000

84. b ¥300,000 - ¥164,000 - ¥30,000 + ¥90,000 = ¥196,000.

85. Use the following information (in thousands): Sales revenue ¥300,000 Gain on sale of equipment 90,000 Cost of goods sold 164,000 Interest expense 16,000 Selling & administrative expenses 30,000 Income tax rate 30% Determine the amount of income before taxes. a. ¥76,000 b. ¥196,000 c. ¥60,000 d. ¥180,000

85. d ¥300,000 - ¥164,000 - ¥30,000 + ¥90,000 - ¥16,000 = ¥180,000.

86. Use the following information (in thousands): Sales revenue ¥300,000 Gain on sale of equipment 90,000 Cost of goods sold 164,000 Interest expense 16,000 Selling & administrative expenses 30,000 Income tax rate 30% Determine the amount of income taxes. a. ¥8,000 b. ¥18,000 c. ¥27,000 d. ¥54,000

86. d ¥300,000 - ¥164,000 - ¥30,000 + ¥90,000 - ¥16,000 = ¥180,000; ¥180,000 ´ 0.30 = ¥54,000.

87. Use the following information (in thousands): Sales revenue ¥300,000 Gain on sale of equipment 90,000 Cost of goods sold 164,000 Interest expense 16,000 Selling & administrative expenses 30,000 Income tax rate 30% Determine the amount of net income. a. ¥126,000 b. ¥21,000 c. ¥42,000 d. ¥63,000

87. a ¥300,000 - ¥164,000 - ¥30,000 + ¥90,000 - ¥16,000 = ¥180,000; ¥180,000 - ¥54,000 = ¥126,000

88. Majors Corporation had income from continuing operations of $1,800,000 in 2015. During 2015 it disposed of its repair division at a pre-tax gain of $27,000. Prior to disposal, the division operated at a pre-tax loss of $45,000. The tax rate was 30%. What is the net income for 2015? a. $1,782,000 b. $1,728,000 c. $1,749,600 d. $1,787,400

88. d $1,800,000 - [($45,000 - $27,000) - (($45,000 - $27,000) ´ 0.30)] = $1,787,400.

89. Manning Company has the following items: write-down of inventories, $240,000; loss on disposal of part of Sports Division, $370,000; and loss on restructurings, $226,000. Ignoring income taxes, what total amount should Manning Company report as other income and expense? a. $836,000 b. $370,000 c. $466,000 d. $596,000

89. a $240,000 + $$370,000 + $226,000 = $836,000.

90. Garwood Company has the following items: write-down of inventories, $480,000; loss on disposal of part of Sports Division, $740,000; and loss due to an asset impairment, $452,000. Ignoring income taxes, what total amount should Garwood Company report as other income and expense? a. $1,672,000 b. $740,000 c. $932,000 d. $1,192,000

90. a $480,000 + $740,000 + $452,000 = $1,672,000.

91. At Ruth Company, events and transactions during 2015 included the following. The tax rate for all items is 30%. (1) Depreciation for 2013 was found to be understated by $45,000. (2) A litigation settlement resulted in a loss of $37,500. (3) The inventory at December 31, 2013 was overstated by $60,000. (4) The company disposed of its recreational division at a loss of $750,000. The effect of these events and transactions on 2015 income from continuing operations net of tax would be a. $26,250. b. $57,750. c. $99,750. d. $624,750.

91. a $37,500 - $11,250 = $26,250.

92. At Ruth Company, events and transactions during 2015 included the following. The tax rate for all items is 30%. (1) Depreciation for 2013 was found to be understated by $45,000. (2) A litigation settlement resulted in a loss of $37,500. (3) The inventory at December 31, 2013 was overstated by $60,000. (4) The company disposed of its recreational division at a loss of $750,000. The effect of these events and transactions on 2015 net income net of tax would be a. $26,250. b. $551,250. c. $582,750. d. $624,750.

92. b $26,250 + ($750,000 × 0.70) = $551,250.

93. During 2015, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of $1,500,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of taxes, were $1,800,000 in 2015. How should these facts be reported in Lopez's income statement for 2015? Total Amount to be Included in Income from Results of Continuing Operations Discontinued Operations a. $1,800,000 loss $1,500,000 gain b. 300,000 loss 0 c. 0 300,000 loss d. 1,500,000 gain 1,800,000 loss

93. c $1,800,000 - $1,500,000 = $300,000.

94. In 2015, Esther Corporation reported net income of $1,000,000. It declared and paid preference dividends of $250,000 and ordinary share dividends of $100,000. During 2015, Esther had a weighted average of 250,000 ordinary shares outstanding. Compute Esther's 2015 earnings per share. a. $2.60 b. $3.00 c. $4.00 d. $5.00

94. b ($1,000,000 - $250,000) ÷ 250,000 sh. = $3.00.

95. In 2015, Linz Corporation reported a discontinued operations loss of $1,000,000, net of tax. It declared and paid preference dividends of $100,000 and ordinary share dividends of $300,000. During 2015, Linz had a weighted average of 400,000 ordinary shares outstanding. Compute the effect of the discontinued operations loss, net of tax, on earnings per share. a. $1.50 b. $1.75 c. $2.25 d. $2.50

95. d $1,000,000 ÷ 400,000 sh. = $2.50.

96. In 2015, Benfer Corporation reported net income of $350,000. It declared and paid ordinary share dividends of $40,000 and had a weighted average of 100,000 ordinary shares outstanding. Compute the earnings per share to the nearest cent. a. $3.10 b. $2.45 c. $3.15 d. $3.50

96. d $350,000 ÷ 100,000 sh. = $3.50.

97. Benedict Corporation reports the following information: Net income $500,000 Dividends on ordinary shares 140,000 Dividends on preference shares 60,000 Weighted average ordinary shares outstanding 125,000 Benedict should report earnings per share of a. $2.40. b. $2.88. c. $3.52. d. $4.00.

97. c ($500,000 - $60,000) ÷ 125,000 = $3.52.

98. Norling Corporation reports the following information: Net income $500,000 Dividends on ordinary shares 140,000 Dividends on preference shares 60,000 Weighted average ordinary shares outstanding 250,000 Norling should report earnings per share of a. $1.20. b. $1.44. c. $1.76. d. $2.00.

98. c ($500,000 - $60,000) ÷ 250,000 = $1.76.

99. In 2015, Timmons Company reported net income of £1,000,000. It declared and paid preference share dividends of £100,000 and ordinary share dividends of £125,000. During 2015, Timmons had a weighted average of 150,000 ordinary shares outstanding. The 2015 earning per share for Timmons Company is:. a. £6.67 b. £6.00 c. £5.83 d. £5.17

99. b (₤1,000,000 - ₤100,000) ÷ 150,000 = ₤6.00.

50. The earnings per share computation is not required for a. Net income. b. Gain on disposal of discontinued operation, net of tax. c. Income from continuing operations. d. Income from operations.

d

30. What might a manager do during the last quarter of a fiscal year if she wanted to decrease current annual net income? a. Delay shipments to customers until after the end of the fiscal year. b. Relax credit policies for customers. c. Pay suppliers all amounts owed. d. Delay purchases from suppliers until after the end of the fiscal year.

a

32. Investors and creditors use income statement information for each of the following except to a. evaluate the future performance of the company. b. provide a basis for predicting future performance. c. help assess the risk and uncertainty of achieving future cash flows. d. All of these answers are correct.

a

38. The non-controlling interest section of the income statement is shown a. below net income. b. below income from operations. c. above other income and expenses. d. above income tax.

a

41. 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 condensed income statement. c. The consolidated income statement. d. Including gains and losses from discontinued operations of a component of a business in determining net income.

a

61. A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to a. beginning retained earnings for the earliest period presented. b. net income for the period in which the change occurred. c. comprehensive income for the earliest period presented. d. stockholders' equity for the period in which the change occurred.

a

71. Which of the following is not an acceptable way of displaying the components of other comprehensive income? a. Combined statement of retained earnings. b. Second income statement. c. Combined statement of comprehensive income. d. All of the above are acceptable.

a

23. Limitations of the income statement include all of the following except a. items that cannot be measured reliably are not reported. b. only actual amounts are reported in determining net income. c. income measurement involves judgment. d. income numbers are affected by the accounting methods employed.

b

27. Which of the following is an example of managing earnings down? a. Changing estimated bad debts from 3 percent to 2.5 percent of sales. b. Revising the estimated life of equipment from 10 years to 8 years. c. Not writing off obsolete inventory. d. Reducing research and development expenditures.

b

29. What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income? a. Increase research and development activities. b. Relax credit policies for customers. c. Delay shipments to customers until after the end of the fiscal year. d. Delay purchases from suppliers until after the end of the fiscal year.

b

33. The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of a. quality of earnings. b. earnings management. c. smoothing of earnings. d. earnings averaging.

b

35. Which method of income measurement is used in the preparation of the income statement? a. Capital maintenance approach. b. Transaction approach. c. Cash-flow approach. d. Income components approach.

b

37. Which of the following is not required to be presented on the income statement under IFRS? a. Revenue. b. Other gains/losses. c. Finance costs. d. Tax expense.

b

39. The definition of expenses includes a. losses only. b. expenses and losses. c. expenses only. d. expenses, losses and unrealized losses on available-for-sale securities.

b

42. The occurrence which most likely would have no effect on 2015 net income (assuming that all amounts involved are material) is the a. sale in 2015 of an office building contributed by a stockholder in 1987. b. collection in 2015 of a receivable from a customer whose account was written off in 2014 by a charge to the allowance account. c. settlement based on litigation in 2015 of previously unrecognized damages from a serious accident which occurred in 2013. d. worthlessness determined in 2015 of stock purchased on a speculative basis in 2011.

b

44. Which of the following is not a selling expense? a. Advertising expense. b. Office salaries expense. c. Freight-out. d. Store supplies consumed.

b

45. The accountant for the Lintz Sales Company is preparing the income statement for 2015 and the statement of financial position at December 31, 2015. The January 1, 2015, merchandise inventory balance will appear a. only as an asset on the statement of financial position. b. only in the cost of goods sold section of the income statement. c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the statement of financial position. d. as an addition in the cost of goods sold section of the income statement and as a current asset on the statement of financial position.

b

48. Earnings per share relate to a. preference shares only. b. ordinary shares only. c. both preference and ordinary shares. d. neither preference nor ordinary shares.

b

49. Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares? a. Non-cumulative only. b. Cumulative only. c. Neither non-cumulative nor cumulative. d. Both non-cumulative and cumulative.

b

63. Prior years income statements are not restated for a. changes in accounting principle. b. changes in estimates. c. corrections of errors. d. All of these answer choices are correct.

b

66. Which of the following would appear first in a statement of retained earnings? a. Net income. b. Prior period adjustment. c. Cash dividends. d. Share dividends.

b

70. Which of the following is included in comprehensive income? a. Investments by owners. b. Unrealized gains on non-trading equity securities. c. Distributions to owners. d. Changes in accounting principles.

b

74. Under IFRS other comprehensive income must be displayed (reported) in a. the equity section of the statement of financial position. b. a second income statement. c. the comprehensive income statement or the income statement and comprehensive income statement d. the retained earnings the statement.

b

21. The major elements of the income statement are a. revenue, cost of goods sold, selling expenses, and general expense. b. operating section, non-operating section, discontinued operations and cumulative effect. c. revenues, expenses, gains, and losses. d. All of these.

c

26. The income statement information would help in which of the following tasks? a. Evaluate the liquidity of a company. b. Evaluate the solvency of a company. c. Estimate future cash flows. d. Estimate future financial flexibility.

c

28. Which of the following is an example of managing earnings up? a. Decreasing estimated salvage value of equipment. b. Writing off obsolete inventory. c. Underestimating warranty claims. d. Accruing a contingent liability for an ongoing lawsuit.

c

36. Which of the following equations expresses the definition of "income"? a. Income = Revenues - Expenses b. Income = (Revenues + Gains) - (Expenses + Losses) c. Income = Revenues + Gains d. Income = Gains - Losses

c

43. The occurrence that most likely would have no effect on 2015 net income is the a. sale in 2015 of an office building contributed by a stockholder in 1966. b. collection in 2015 of a dividend from an investment. c. correction of an error in the financial statements of a prior period discovered subsequent to their issuance. d. stock purchased in 2001 deemed worthless in 2015.

c

46. In which section of the income statement is interest expense reported? a. Gross profit. b. Income from operations. c. Income before income taxes. d. Non-controlling interest.

c

47. If a company prepares a consolidated income statement, IFRS requires that net income be reported for a. the majority interest only. b. the minority interest only. c. both the majority interest and the minority interest. d. as a single amount only.

c

51. Given the following income statement line items: Income from operations Income before income taxes Income from continuing operations Income from discontinued operations Net income How many earnings per share amounts are required to be disclosed? a. 5 b. 4 c. 3 d. 2

c

53. Earnings per share should always be shown separately for a. net income and gross profit. b. net income and pretax income. c. income from continuing operations. d. discontinued operations and prior period adjustments.

c

54. Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business? a. The gain or loss on disposal should be reported as an other income item. b. Results of operations of a discontinued component should be disclosed immediately below income from operations. c. Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement. d. The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.

c

55. 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 a. a prior period adjustment. b. an other income and expense item. c. an amount after continuing operations and before net income. d. a bulk sale of plant assets included in income from continuing operations.

c

56. Gains or losses on the disposal of investments should be shown in the income statement Net of Tax Disclosed Separately a. No No b. Yes Yes c. No Yes d. Yes No

c

59. Companies use intraperiod tax allocation for all of the following items except a. discontinued operations. b. prior period adjustments. c. changes in accounting estimates. d. income from continuing operations.

c

60. A change in accounting principle requires what kind of adjustment to the financial statements? a. Current period adjustment. b. Prospective adjustment. c. Retrospective adjustment. d. Current and prospective adjustment.

c

62. Changes in estimates affect reported amounts a. retrospectively only. b. prospectively only. c. currently and prospectively. d. currently and retrospectively.

c

64. In 2015, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2014. In 2015, which of the following accounts will have to be credited to correct this error? a. Salaries and Wages Payable. b. Salaries and Wages Expense. c. Retained Earnings. d. Income Summary.

c

68. Which of the following items will not appear in the retained earnings statement? a. Net loss. b. Prior period adjustment. c. Discontinued operations. d. Dividends.

c

72. Comprehensive income includes all of the following except a. dividend revenue. b. losses on disposal of assets. c. investments by owners. d. unrealized holding gains.

c

73. Comprehensive income includes all of the following, except a. revenues and gains. b. expenses and losses. c. preference share dividends. d. unrealized gains and losses on non-trading equity securities.

c

22. Information in the income statement helps users to a. 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.

d

24. Which of the following would represent the least likely use of an income statement prepared for a business enterprise? a. Use by customers to determine a company's ability to provide needed goods and services. b. Use by labor unions to examine earnings closely as a basis for salary discussions. c. Use by government agencies to formulate tax and economic policy. d. Use by investors interested in the financial position of the entity.

d

25. The income statement reveals a. resources and equities of a firm at a point in time. b. resources and equities of a firm for a period of time. c. net earnings (net income) of a firm at a point in time. d. net earnings (net income) of a firm for a period of time.

d

31. The income statement provides investors and creditors information that helps them predict a. the amounts of future cash flows. b. the timing of future cash flows. c. the uncertainty of future cash flows. d. All of these answers are correct.

d

34. Which of the following situations involving different accounting methods or accounting estimates results in comparison difficulties between companies? a. Estimated useful lives for depreciable assets. b. Inventory methods. c. Estimates of bad debts. d. All of the above.

d

40. IFRS requires that a single amount be disclosed within the income statement for a. the post-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal of discontinued operational assets. b. the pre-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal of discontinued operational assets. c. the pre-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal of discontinued operational assets. d. the post-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal of discontinued operational assets.

d

52. Which of the following earnings per share figures must be disclosed on the face of the income statement? a. EPS for income before taxes. b. The effect on EPS from unusual items. c. EPS for gross profit. d. EPS for income from continuing operations.

d

57. Income taxes are allocated to a. continuing operations. b. discontinued operations. c. prior period adjustments. d. All of these answers are correct.

d

58. Which of the following is true about intraperiod tax allocation? a. It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return. b. It is required for the cumulative effect of accounting changes but not for prior period adjustments. 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

65. Which of the following does not appear on a statement of retained earnings? a. Net loss. b. Prior period adjustments. c. Preference share dividends. d. Other comprehensive income.

d

67. A correction of an error in prior periods' income will be reported In the income statement Net of tax a. Yes Yes b. No No c. Yes No d. No Yes

d

69. 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. an increase in depreciation expense for the year in which the error is discovered. b. a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. c. an other expense item for the year in which the error was made. d. a prior period adjustment.

d

13. Discontinued operations and gains and losses are both reported net of tax in the income statement.

f

14. A company that reports a discontinued operation has the option of reporting per share amounts for this item.

f

16. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.

f

18. Companies only restrict retained earnings to comply with contractual requirements or current necessity.

f

19. Comprehensive income includes all changes in equity during a period except those resulting from distributions to owners.

f

2. A strength of the income statement as compared to the statement of financial position is that items that cannot be measured reliably can be reported in the income statement.

f

3. Earnings management generally makes income statement information more useful for predicting future earnings and cash flows.

f

5. Income from operations represents a company's results before any gain or loss on discontinued operations.

f

8. The income statement presents subtotals for gross profit, income before continuing operations, income before income tax, and net income.

f

9. The nature-of-expense method identifies the major cost drivers and helps users to assess whether these amounts are appropriate for the revenue generated.

f

1. The income statement is useful for helping to assess the risk or uncertainty of achieving future cash flows.

t

10. Income before income taxes is computed by deducting interest expense from income from operations.

t

11. The IASB takes the position that both revenues and expenses and other income and expense should be reported as part of income from operations.

t

12. Companies report the results of operations of a component of a business that will be disposed of separately from continuing operations.

t

15. Intraperiod tax allocation relates the income tax expense of the period to the specific items that give rise to the amount of the tax provision.

t

17. Prior period adjustments can either be added or subtracted in the Retained Earnings Statement.

t

20. Comprehensive income can be reported in a statement of changes in equity.

t

4. The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

t

6. Both revenues and gains increase both net income and equity.

t

7. Companies frequently report income tax as the last item before net income on the income statement.

t