Chapter 4 Part 1 Smartbook

Which of the following are acceptable methods of presenting the income statement?

-Single-step format -Multiple-step format

If a component of the business qualifies for discontinued operations treatment, which of the following statements are true? (Select all that apply.)

-The tax expense effect is removed from continuing operations.-All related revenues, expenses, gains, and losses must be removed from continuing operations.

Which of the following items are included in calculating operating income?

-revenues related to primary revenue-generating activities -expenses related to primary revenue-generating activities

If a component of the business qualifies for discontinued operations treatment, which of the following statements are true?

All related revenues, expenses, gains, and losses must be removed from continuing operations.The tax expense effect is removed from continuing operations.

Income tax expense is reported in what way on the income statement?

As a separate line item.

Which of the following is a routine change in estimate that does not require a disclosure note if the amount is not material?

Change in estimate for uncollectible accounts. Change in depreciable lives.

True or false: Income tax expense may be disclosed either on the income statement or in the notes to the financial statements.

False

Statement of operations and statement of earnings are additional titles for the

Income Statement

______ costs include costs associated with shutdown or relocation of facilities.

Reconstructing

Which of the following items are reported as components of operating income for most manufacturing and merchandising companies? (Select all that apply.)

administrative expenses revenues selling expenses

The evidence that a financial statement user or analyst might use as evidence to suggest that earnings have been smoothed is

earnings have a steady stream over time

Which of the following are acceptable methods for reporting comprehensive income?

in two consecutive statements - income statement and comprehensive income statementIn one single statement of comprehensive income

Non-GAAP earnings are

management's estimates and view of earnings.

The calculation of _________ income omits certain gains and losses that are instead included in the broader perspective of other _________ income.

net ; comprehensive

If a company reorganizes its operation to gain efficiency, the cost associated with this reorganization is classified as

restructuring costs.

The inflow of resources resulting from providing goods or services to customers is referred to as

revenue

Analyzing earnings quality requires an analyst to

separate a company's temporary and permanent earnings.

Nonoperating items that are not expected to continue into the future are considered a ______ component of earnings and should be __________ when forecasting future performance.

temporary; excluded

Earnings quality refers to

the ability of reported earnings to predict future earnings.

A prior period adjustment requires an adjustment to

the beginning balance of retained earnings.

Gains and losses from the sale of investments can affect earnings quality because

they are often nonrecurring.

Basic earnings per share is calculated as net income available to common shareholders divided by

weighted average common shares outstanding.