Advertisement Upgrade to remove ads

The Single Step Income Statement Emphasizes:
a. the gross profit figure
b. total revenues and total expenses
c. extraordinary items more than it is emphasized in the multiple-step income statement
d. the various components of income from continuing operations

total revenues and total expenses

a separation of operating and non operating activities of a company exists in
a. both a multiple-step and single-step income statement
b. a multiple-step but not a single-step income statement
c. a single-step but not a multiple-step income statement
d. neither a single-step nor a multiple-step income statement

a multiple-step but not a single-step income statement

irregular transactions such as discontinued operations and extraordinary items should be reported separately in
a. both a single-step and multiple-step income statement
b. a single-step income statement only
c. a multiple-step income statement only
d. neither a single-step nor a multiple-step income statement

both a single-step and multiple-step income statement

gains and losses that bypass net income but affect stockholders' equity are referred to as
a. comprehensive income
b. other comprehensive income
c. prior period income
d. unusual gains and losses

other comprehensive income

the FASB decided that the components of other comprehensive income must be displayed
a. in a second separate income statement
b. in a combined income statement of comprehensive income
c. as a part of the statement of stockholders' equity
d. any of these options is permissible

any of these options is permissible

which of the following is not reported in an income statement under IFRS?
a. discontinued operations
b. extraordinary items
c. cost of goods sold
d. income tax

extraordinary items

which of the following is not an acceptable way of displaying the components of other comprehensive income under IFRS?
a. within the statement of retained earnings
b. second income statement
c. combined statement of comprehensive income
d. all of the above are acceptable

within the statement of retained earnings

which of the following statements is correct regarding income reporting under IFRS?
a. IFRS does not permit revaluation of property, plant, and equipment, and intangible assets
b. IFRS provides the same options for reporting comprehensive income as GAAP
c. companies must classify expenses either by nature or function
d. IFRS provides a definition for all items presented in the income statement

companies must classify expenses either by nature or function

the correct order to present current assets is
a. cash, accounts receivable, prepaid items, inventories
b. cash, accounts receivable, inventories, prepaid items
c. cash, inventories, accounts receivable, prepaid items
d. cash, inventories, prepaid items, accounts receivable

cash, accounts receivable, inventories, prepaid items

in preparing a statement of cash flows, which of the following transactions would be considered an investing activity?
a. sale of equipment at book value
b. sale of merchandise on credit
c. declaration of a cash dividend
d. issuance of bonds payable at a discount receivable

sale of merchandise on credit

the current cash debt ratio is often used to assess
a. financial flexibility
b. liquidity
c. profitability
d. solvency

liquidity

current assets under IFRS are listed generally
a. by importance
b. in the reverse order of their expected conversion to cash
c. by longevity
d. alphabetically

in the reverse order of their expected conversion to cash

companies that use IFRS
a. may report all their assets on the statement of financial position at fair value
b. are not allowed to net assets (assets 2 liabilities) on their statement of financial positions
c. may report noncurrent assets before current assets on the statement of financial position
d. do not have any guidelines as to what should be reported on the statement of financial position

may report noncurrent assets before current assets on the statement of financial position

a company has purchased a tract of land and expects to build a production plant on the land in approximately 5 years. during the 5 years before construction the land will be idle. Under IFRS the land should be reported as:
a. land expense
b. property, plant and equipment
c. an intangible asset
d. a long-term investment

a long-term investment

which of the following is an example of managing earnings up?
a. decreasing estimated salvage value of equipment
b. writing of obsolete inventory
c. underestimating warranty claims
d. accruing a contingent liability for an ongoing lawsuit

underestimating warranty claims

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

relax credit policies for customers

which of the following is an acceptable method of presenting the income statement?
a. a single-step income statement
b. a multi-step income statement
c. a consolidated statement of income
d. all of these

all of these

the accountant for the Lintz Sales Company is preparing the income statement for 2012 and the balance sheet at December 31, 2012. The January 1, 2012 merchandise inventory balance will appear
a. only as an asset on the balance sheet
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 balance sheet
d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet

only as an asset on the balance sheet

in order to be classified as an extraordinary item in the income statement, an event or transaction should be
a. unusual in nature, infrequent and material in amount
b. unusual in nature and infrequent, but it need not be material
c. infrequent and material in amount, but it need not be unusual in nature
d. unusual in nature and material, but it need not be infrequent

unusual in nature, infrequent and material in amount

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

losses from exchange or translation of foreign currencies

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

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

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

unusual gain

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

discontinued operations

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

changes in accounting estimates

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

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

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

an amount after continuing operations and before extraordinary items

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

on the face of the income statement

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

all of the above

for Mortenson Company, the following information is available:
Cost of goods sold: 120,000
dividend revenue: 5,000
income tax expense: 12,000
operating expenses: 46,000
sales: 200,000
In Mortenson's multiple-step income statement, gross profit
a. should not be reported
b. should be reported at 27,000
c. should be reported at 80,000
d. should be reported at 85,000

should be reported at 80,000

gross billings for merchandise sold by Lang Company to its customers last year amounted to 12,720,000; 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. 12,720,000
b. 12,350,000
c. 12,175,000
d. 12,035,000

12,175,000

if plant assets of a manufacturing company are sold at a gain of 1,640,000 less related taxes of 500,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose these effects as
a. a gain of 1,640,000 and an increase in income tax expense of 500,000
b. operating income net of applicable taxes 1,140,000
c. a prior period adjustment net of applicable taxes 1,140,000
d. an extraordinary item net of applicable taxes 1,140,000

a gain of 1,640,000 and an increase in income tax expense of 500,000

during 2012 Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of 1,800,000 net of taxes on the sale of Pine's assets. Pine's operating losses net of tax were 2,100,000 in 2012. How should these facts be reported in Lopez's income statement for 2012?
Income from continuing operations , results of discontinued operations
a. 2,100,000 loss , 1,800,000 gain
b. 300,000 loss , 0
c. 0 , 300,000 loss
d. 1,800,000 gain , 2,100,000 loss

0 , 300,000 loss

Sandstorm Corporation has an extraordinary loss of 150,000, an unusual gain of 105,000, and a tax rate of 40%. At what amount should Sandstorm report each item?
Extraordinary loss, Unusual gain
a. (150,000) , 105,000
b. (150,000) , 63,000
c. (90,000) , (105,000)
d. (90,000) , 63,000

(90,000) , 105,000

Benedict Corporation reports the following information:
net income 750,000
dividends on common stock 210,000
dividends on preferred stock 90,000
weighted average common shares outstanding 100,000
Benedict should report earnings per share of
a. 4.50
b. 5.40
c. 6.60
d. 7.50

6.60

which of the following is a limitation of the balance sheet?
a. many items that are of financial value are omitted
b. judgements and estimates are used
c. current fair value is not reported
d. all of these

all of these

the balance sheet is useful for analyzing all of the following except
a. liquidity
b. solvency
c. profitability
d. financial flexibility

profitability

balance sheet information is useful for all of the following except to
a. compute rates of return
b. analyze cash inflows and outflows for the period
c. evaluate capital structure
d. assess future cash flows

analyze cash inflows and outflows for the period

balance sheet information is useful for all of the following except
a. assessing a company's risk
b. evaluating a company's liquidity
c. evaluating a company's financial flexibility
d. determining free cash flows

determining free cash flows

a limitation of the balance sheet that is not also a limitation of the income statement is
a. the use of judgements and estimates
b. omitted items
c. the numbers are affected by the accounting methods employed
d. valuation of items at historical cost

valuation of items at historical cost

the balance sheet contributes to financial reporting by providing a basis for all of the following except
a. computing rates of return
b. evaluating the capital structure of the enterprise
c. determining the increase inc ash due to operations
d. assessing the liquidity and financial flexibility of the enterprise

determining the increase in cash due to operations

one criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is
a. failure to reflect current value information
b. the extensive use of separate classifications
c. an extensive use of estimates
d. failure to include items of financial value that cannot be recorded objectively

the extensive use of separate classifications

the amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as
a. solvency
b. financial flexibility
c. liquidity
d. exchangeability

liquidity

the net assets of a business are equal to
a. current assets minus current liabilities
b. total assets plus total liabilities
c. total assets minus total stockholders' equity
d. none of these

none of these

the basis for classifying assets as current or noncurrent is conversion to cash within
a. the accounting cycle or one year, whichever is shorter
b. the operating cycle or one year, whichever is longer
c. the accounting cycle or one year, whichever is longer
d. the operating cycle or one year, whichever is shorter

the operating cycle or one year, whichever is longer

the basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in
a. inventory back into cash or 12 months, whichever is shorter
b. receivables back into cash or 12 months, whichever is longer
c. tangible fixed assets back into cash or 12 months, whichever is longer
d. inventory back into cash or 12 months, whichever is longer

inventory back into cash or 12 months, whichever is longer

the current assets section of the balance sheet should include
a. machinery
b. patents
c. goodwill
d. inventory

inventory

which of the following is a current asset?
a. cash surrendered value of a life insurance policy of which the company is the beneficiary
b. investment in equity securities for the purpose of controlling the issuing company
c. cash designated for the purchase of tangible fixed assets
d. trade installment receivables normally collectible in 18 months

trade installment receivables normally collectible in 18 months

which of the following should not be considered as a current asset in the balance sheet?
a. installment notes receivable due over 18 months in accordance with normal trade practice
b. prepaid taxes which cover assessments of the following operating cycle of the business
c. equity or debt securities purchased with cash available for current operations
d. the cash surrender value of a life insurance policy carried by a corporation, the beneficiary, on its president

the cash surrender value of a life insurance policy carried by a corporation, the beneficiary, on its president

equity or debt securities held to finance future construction of additional plants should be classified on a balance sheet as
a. current assets
b. property, plant, and equipment
c. intangible assets
d. long-term investments

long term investments

when a portion of inventories has been pledged as securities on a loan,
a. the value of the portion pledged should be subtracted from the debt
b. an equal amount of retained earnings should be appropriated
c. the fact should be disclosed but the amount of current assets should not be affected
d. the cost of the pledged inventories should be transformed from current assets to noncurrent assets

the fact should be disclosed but the amount of current assets should not be affected

which of the following is not a long-term investment?
a. cash surrender value of life insurance
b. franchise
c. land held for speculation
d. a sinking fund

franchise

which item below is not a current liability?
a. unearned revenue
b. stock dividends distributable
c. the currently maturing portion of long-term debt
d. trade accounts payable

stock dividends distributable

working capital is
a. capital which has been reinvested in the business
b. unappropriated retained earnings
c. cash and receivables less current liabilities
d. none of these

none of these

an example of an item which is not an element of working capital is
a. accrued interest on notes receivable
b. goodwill
c. goods in process
d. temporary investments

goodwill

long-term liabilities include
a. obligations not expected to be liquidated within the operating cycle
b. obligations payable at some date beyond the operating cycle
c. deferred income taxes and most lease obligations
d. all of these

all of these

which of the following should be excluded from long-term liabilities?
a. obligations payable at some date beyond the operating cycle
b. most pension obligations
c. long-term liabilities that mature within the operating cycle and will not be paid from a sinking fund
d. none of these

none of these

treasury stock should be reported as a(n)
a. current asset
b. investment
c. other asset
d. reduction of stockholders' equity

reduction of stockholders' equity

which of the following should be reported for capital stock?
a. the shares authorized
b. the shares issued
c. the shares outstanding
d. all of these

all of these

which of the following would be classified in a different major section of a balance sheet from the others?
a. capital stock
b. common stock subscribed
c. stock dividend distributable
d. stock investment in affiliate

stock investment in affiliate

the stockholders' equity section is usually divided into what three parts?
a. preferred stock, common stock, treasury stock
b. preferred stock, common stock, retained earnings
c. capital stock, additional paid-in capital, retained earnings
d. capital stock, appropriated retained earnings, unappropriated retained earnings

capital stock, additional paid-in capital, retained earnings

which of the following is not an acceptable major asset classification?
a. current assets
b. long-term investments
c. property, plant and equipment
d. deferred changes

deferred changes

which of the following is a contra account?
a. premium on bonds payable
b. unearned revenue
c. patents
d. accumulated depreciation

accumulated depreciation

the financial statement which summarizes operating, investing, and financing activities of an entity for a period of time is the
a. retained earnings statement
b. income statement
c. statement of cash flows
d. statement of financial position

statement of cash flows

the statement of cash flows provides answers to all of the following questions except
a. where did the cash come from during the period?
b. what was the cash used for during the period?
c. what is the impact of inflation on the cash balance at the end of the year?
d. what was the change in the cash balance during the period?

what is the impact of inflation on the cash balance at the end of the year?

the statement of cash flows reports all of the following except
a. the net change in cash for the period
b. the cash effects of operations during the period
c. the free cash flows generated during the period
d. investing transactions

the free cash flows generated during the period

the statement of cash flows helps meet one of the objectives of financial reporting, which is to assess all of the following except the
a. amount of future cash flows
b. source of future cash flows
c. timing of future cash flows
d. uncertainty of future cash flows

source of future cash flows

if common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows?
a. it would depend on whether you are using the direct or indirect method
b. it would be a position $8,000 in the financing section and a negative $8,000 in the investing section
c. it would be a negative $8,000 in the financing section and a positive $8,000 in the investing section
d. it would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities

it would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities

which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
a. cash purchases of equipment
b. cash purchases of bonds issued by another company
c. cash received as repayment for funds loaned
d. cash purchase of treasury stock

cash purchase of treasury stock

making and collecting loans and disposing of property, plant and equipment are
a. operating activities
b. investing activities
c. financing activities
d. liquidity activities

investing activities

in preparing a statement of cash flows, sale of treasury stock at an amount greater than cost would be classified as a(n)
a. operating activity
b. financing activity
c. extraordinary activity
d. investing activity

financing activity

in preparing a statement of cash flows, cash flows from operating activities
a. are always equal to accrual accounting income
b. are calculated as the difference between revenues and expenses
c. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash
d. can be calculated by appropriately adding to or deducting from the net income those items in the income statement that do affect cash

can be calculated by appropriately adding to or deducted from net income those items in the income statement that do not affect cash

in preparing a statement of cash flows, which of the following transactions would be considered an investing activity?
a. sale of equipment at book value
b. sale of merchandise on credit
c. declaration of a cash dividend
d. issuance of bonds payable at a discount

sale of equipment at book value

preparing the statement of cash flows involves all of the following except determining the
a. cash provided by operations
b. cash provided by or used in investing and financing activities
c. change in cash during the period
d. cash collections from customers during the period

cash collections from customers during the period

the cash debt coverage ratio is computed by dividing the net cash provided by operating activities by
a. average long-term liabilities
b. average total liabilities
c. ending long-term liabilities
d. ending total liabilities

average total liabilities

the current cash debt coverage ratio is often used to assess
a. financial flexibility
b. liquidity
c. profitability
d. solvency

liquidity

a measure of a company's financial flexibility is the
a. cash debt coverage ratio
b. current cash debt coverage ratio
c. free cash flow
d. cash debt coverage ratio and free cash flow

cash debt coverage ratio and free cash flow

free cash flow is calculated as net cash provided by operating activities less
a. capital expenditures
b. dividends
c. capital expenditures and dividends
d. capital expenditures and depreciation

capital expenditures and dividends

one of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility. which of the following explanations is a description of financial flexibility?
a. the nearness to cash of assets and liabilities
b. the firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities
c. the firm's ability to pay its debts as they mature
d. the firm's ability to invest in a number of projects with different objectives and costs

the firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities

net cash provided by operating activities divided by average total liabilities equals the
a. current cash debt coverage ratio
b. cash debt coverage ratio
c. free cash flow
d. current ratio

cash debt coverage ratio

which of the following balance sheet classifications would normally require the greatest amount of supplementary disclosure?
a. current assets
b. current liabilities
c. plant assets
d. long-term liabilities

long-term liabilities

the presentation of long-term liabilities in the balance sheet should disclose
a. maturity dates
b. interest rates
c. conversion rights
d. all of the above

all of the above

which of the following is not a required supplemental disclosure for the balance sheet?
a. contingencies
b. financial forecasts
c. accounting policies
d. contractual situations

financial forecasts

typical contractual situations that are disclosed in the notes to the balance sheet include all of the following except
a. debt covenants
b. lease obligations
c. advertising contracts
d. pension obligations

advertising contracts

accounting policies disclosed in the notes to the financial statements typically include all of the following except
a. the cost flow assumption used
b. the depreciation methods used
c. significant estimates made
d. significant inventory purchasing policies

significant inventory purchasing policies

which of the following best exemplifies a contingency that is reported in the notes to the financial statements?
a. losses from potential future lawsuits
b. loss from a lawsuit settled out of court prior to the end of the fiscal year
c. warranty claims on future sales
d. estimated loss from an ongoing lawsuit

estimated loss from an ongoing lawsuit

which of the following is not a method of disclosing pertinent information?
a. supporting schedules
b. parenthetical explanations
c. cross reference and contra items
d. all of these are methods of disclosing pertinent information

all of these are methods of disclosing pertinent information

significant accounting policies may not be
a. selected on the basis of judgment
b. selected from existing acceptable alternatives
c. unusual or innovative in application
d. omitted from financial-statement disclosure

omitted from financial-statement disclosure

a general description of the depreciation methods applicable to major classes of depreciable assets
a. is not a current practice in financial reporting
b. is not essential to a fair presentation of financial position
c. is needed in financial reporting when company policy differs from income tax policy
d. should be included in corporate financial statements or notes thereto

should be included in corporate financial statements or notes thereto

it is mandatory that the essential provisions of which of the following be clearly stated in the notes to the financial statements
a. stock option plans
b. pension obligations
c. lease contracts
d. all of these

all of these

a generally accepted account title is
a. prepaid revenue
b. appropriation for contingencies
c. earned surplus
d. reserve for doubtful accounts

appropriation for contingencies

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set