Chapter 4 Accounting 300 Exam Review

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

An item that should be classified as an extraordinary item is a. write-off of goodwill. b. gains from transactions involving foreign currencies. c. losses from moving a plant to another city. d. gains from a company selling the only investment it has ever owned.

d. none 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.

c. changes in accounting estimates

Companies use intraperiod tax allocation for all of the following items except a. Discontinued operations. b. Extraordinary items. c. Changes in accounting estimates. d. Income from continuing operations.

c. an amount after continuing operations and before extraordinary items

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 extraordinary item. c. an amount after continuing operations and before extraordinary items. d. a bulk sale of plant assets included in income from continuing operations.

c. on the face of the income statement

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles? a. On the face of the statement of retained earnings (or, statement of stockholders' equity.) b. In the footnotes to the financial statements. c. On the face of the income statement. d. Either (a) or (c).

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

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 extraordinary items and 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. no yes

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

c. no yes

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 a. No No b. Yes Yes c. No Yes d. Yes No

c. income from before extraordinary items

Earnings per share should always be shown separately for a. net income and gross margin. b. net income and pretax income. c. income before extraordinary items. d. extraordinary items and prior period adjustments.

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

How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements? a. Shown as a separate item in operating revenues or expenses if material and supplemented by a footnote if deemed appropriate. b. Shown in operating revenues or expenses if material but not shown as a separate item. c. Shown net of income tax after ordinary net earnings but before extraordinary items. d. Shown net of income tax after extraordinary items but before net earnings.

b. 2.25

In 2012, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2012, Esther had a weighted average of 200,000 common shares outstanding. Compute Esther's 2012 earnings per share. a. $1.95 b. $2.25 c. $3.00 d. $3.75

d. 2.50

In 2012, Linz Corporation reported an extraordinary loss of $1,000,000, net of tax. It declared and paid preferred stock dividends of $100,000 and common stock dividends of $300,000. During 2012, Linz had a weighted average of 400,000 common shares outstanding. Compute the effect of the extraordinary loss, net of tax, on earnings per share. a. $1.50 b. $1.75 c. $2.25 d. $2.50

d. all of these

Income taxes are allocated to a. extraordinary items. b. discontinued operations. c. prior period adjustments. d. all of these.

a. 2355000

Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $ 645,000 Dividends declared 480,000 Net income 1,500,000 Retained earnings, 1/1/12, as reported 3,000,000 Moorman should report retained earnings, 1/1/12, as adjusted at a. $2,355,000. b. $3,000,000. c. $3,645,000. d. $4,665,000.

b. 3375000

Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax $ 645,000 Dividends declared 480,000 Net income 1,500,000 Retained earnings, 1/1/12, as reported 3,000,000 Moorman should report retained earnings, 12/31/12, as adjusted at a. $2,355,000. b. $3,375,000. c. $4,020,000. d. $4,665,000.

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

Under which of the following conditions would material flood damage be considered an extraordinary item for financial reporting purposes? a. Only if floods in the geographical area are unusual in nature and occur infrequently. b. Only if the flood damage is material in amount and could have been reduced by prudent management. c. Under any circumstances as an extraordinary item. d. Flood damage should never be classified as an extraordinary item.

d. EPS for income from continuing operations

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. all of the above

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

d. a change from FIFO to LIFO an a change from straight line to double declining balance

Which of the following is a change in accounting principle? a. A change in the estimated service life of machinery b. A change from FIFO to LIFO c. A change from straight-line to double-declining-balance d. A change from FIFO to LIFO and a change from straight-line to double-declining- balance

c. earnings per share form both continuing operations and net income should be disclosed on the face of the income statement

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 extraordinary item. b. Results of operations of a discontinued component should be disclosed immediately below extraordinary items. 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.

d. losses from exchange or transactions of foreign currencies

Which of the following is never classified as an extraordinary item? a. Losses from a major casualty. b. Losses from an expropriation of assets. c. Gain on a sale of the only security investment a company has ever owned. d. Losses from exchange or translation of foreign currencies.

d. unusual gain

Which of the following items would be reported at its gross amount on the face of the income statement? a. Extraordinary loss b. Prior period adjustment c. Cumulative effect of a change in an accounting principle d. Unusual gain

d. discontinued operations

Which of the following items would be reported net of tax on the face of the income statement? a. Prior period adjustment b. Unusual gain c. Cumulative effect of a change in an accounting principle d. Discontinued operations

d. gain resutling from the state exercising its right of eminent domain on a piece of land used as a parking lot

Which of these is generally an example of an extraordinary item? a. Loss incurred because of a strike by employees. b. Write-off of deferred marketing costs believed to have no future benefit. c. Gain resulting from the devaluation of the U.S. dollar. d. Gain resulting from the state exercising its right of eminent domain on a piece of land used as a parking lot.

d. 4.00

in 2012, Benfer Corporation reported net income of $280,000. It declared and paid common stock dividends of $32,000 and had a weighted average of 70,000 common shares outstanding. Compute the earnings per share to the nearest cent. a. $3.54 b. $2.80 c. $3.60 d. $4.00