Chapter 4

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

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

An income statement prepared in accordance with IFRS allows expenses to be classified by

-function -nature

A multiple-step income statement includes which of the following?

-gross profit -income before taxes -operating income

The advantages of a multiple-step income statement is

-it provides more information than a single-step income statement -it reports the relationships between various items -it reports expenses by function

gains and losses are increases or decreases in equity from which type of transactions?

-peripheral -incidental

if a casual relationship cannot be established between revenues and expenses , which of the following occurs

-record the expense as incurred -allocate the expense over several periods -relate the expense to a particular period

identify which items on an income statement are included in calculating income from continuing operations

-revenue -income tax -loss

The two approaches for preparing an income statement are the ________ step and _______ step approaches

-single -multi

Which of the following terms are used to describe an income statement?

-statement of operations -statement of earnings

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

As a separate line item

Which standards require certain minimum information to be reported on the face of the income statement?

IFRS

________ requires certain minimum information be reported on the face of the income statement, while _____ does not have minimum requirements

IFRS; US GAAP

Revenues, expenses, gains, and losses that will likely continue in future periods make up what?

Income from continuing operations

GAAP requires that restructuring costs are recognized when?

Only in the period incurred

The ______-______ Act established a requirement that a if a company includes non-GAAP earnings in any report filed with the SEC or any public disclosure or press release, it must also provide a _____ with earnings according to GAAP

Sarbanes Oxley; reconciliation

Expenses reported on an income statement can be classified by nature or by function under these accounting standards

U.S. GAAP

the purpose of a statement of cash flows is to provide information about the

cash receipts and cash disbursements during a period

Any long-lived asset, whether tangible or intangible, should have its balance reduced if there has been a significant _____ of value

decline, decrease, or reduction

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

the outflows of resources while generating revenue are referred to as

expenses

what represents the costs of providing goods and services to customers?

expenses

What basis is used for estimated restructuring costs?

fair value

True or false: Under both U.S. GAAP and IFRS, the "bottom line" of the income statement is typically referred to as net income or net loss.

false

The income statement is considered most useful for predicting

future profitability

which of the following is an increase in equity from a peripheral or incidental transaction that is included in income from continuing operations?

gain

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

income statement

the statement used to predict future profitability and a company's future cash-generating ability is the

income statement

Categorizing operating expenses as nonoperating expenses is an example of

income statement classification shifting

When a company uses a special charge such as restructuring costs and shows a loss on the income statement, income may be manipulated through

income statement classification shifting

Income smoothing describes the concept that

managers manipulate the pattern of income to not vary much between years

An income statement that classifies items and uses subtotals for gross profit, operating income, and income from continuing operations is called a(n) ______ -step income statement

multi

under U.S. GAAP, the bottom line of the income statement is either:

net income or net loss

The more frequently a company incurs restructuring costs, the more appropriate it is for financial statement users to include those costs in estimates of _____ earnings when forecasting future performance

permanent

The initial measurement of restructuring liabilities is at fair value, which often is estimated as the _____ _____ of estimated future cash flows

present; value

under IFRS, the bottom line of the income statement is either:

profit or loss

Although U.S. GAAP uses the term net income on the income statement, IFRS uses the terms ______ and ______.

profit; loss

The ability of reported earnings to predict a company's future earnings is referred to as earnings ______

quality

_____ costs include costs associated with shutdown or relocation of facilities

restructuring

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

revenue

Operating and nonoperating items are not separately classified in a ______ -step income statement

single

A company prepares its income statement by listing all sources of revenues and gains at the top, followed by a list of all expenses and losses. Which income statement approach does this describe?

single-step

which of the following terms is also used as a heading for an income statement

statement of operations

the purpose of the income statement is to

summarize the profit-generating activities that occurred during a particular reporting period

earnings quality refers to

the ability of reported earnings to predict future earnings

Net income using the multiple-step income statement presentation is ____ net income using the single-step income statement presentation (greater than, the same as, or less than)

the same as

True or false: If a causal relationship can be established, expenses are reported in the same period that the related revenue is recognized

true


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