Income State and Statement of Stockholders' Equity Chapter-3

How is Common-Size Income Statement prepared?

Each income statement item is expressed as a percentage of Net Sales

How should companies with more than one revenue source report Revenue and Cost of Goods Sold?

Each revenue line item should be shown separately with a corresponding Cost of Goods Sold line for each revenue source

Which of the items below would be included under "Other Income and Expense?"

Equity Earnings, Gains from Sale of Assets, Interest Income

Which of the following statements are True?

Fixed Cost do not vary proportionately with volume changes but remain the same within a relevant range of activity

Which item is not a special item that must be disclosed separately on the Income Statement?

Foreign currency translation adjustments

Which of the following is an acceptable method to report total Comprehensive Income?

In the Statement of Stockholders' Equity

How does the Equity Method distort earnings?

Income is recognized even though cash may never be received

Which item would not be classified as an Operating Expense?

Interest Expense

Which format of the Income Statement should be used for analysis purposes?

Multiple Steps

How is earnings per Common Share calculated?

Net Profit divided by the average number of Common Stock Shares Outstanding

Which of the following statement is True?

Operating Expenses can be easily analyzed by preparing a Common-Size Income Statement

Which of the following items could be found on a Statement of Shareholder's Equity?

Reason's for retained Retained Earnings Increases or Decreases

Which equations represents an Income Statement?

Revenues-Expenses=Net Income

Selling and Administrative Expenses include which of the following Income Statement items?

Salaries, Rent and Advertising

How are sales reported on the Income Statement?

Sales are shown for three-years Net of Returns and Allowances

How is it possible for a U.S. firm to have increasing earnings but a lower effective tax rate?

Tax rates in foreign countries where the firm operates are lower

Why is it important to assess Operating Profit?

The figure for Operating Profit provides a basis for assessing the success of the firm apart from financing and investing activities and separate from tax considerations

What is Amortization?

The process used to allocate the cost of Capital Leases, Leasehold Improvements and Intangible Assets