The major elements of the income statement are
a. revenue, cost of goods sold, selling expenses, and general expense.
b. operating section, nonoperating section, discontinued operations, extraordinary items, and cumulative effect.
c. revenues, expenses, gains, and losses.
d. all of these.
The income statement reveals
a. resources and equities of a firm at a point in time.
b. resources and equities of a firm for a period of time.
c. net earnings (net income) of a firm at a point in time.
d. net earnings (net income) of a firm for a period of time.
The single-step income statement emphasizes
a. the gross profit figure.
b. total revenues and total expenses.
c. extraordinary items and accounting changes more than these are emphasized in the multiple-step income statement.
d. the various components of income from continuing operations.
The occurrence which most likely would have no effect on 2012 net income (assuming that all amounts involved are material) is the
a. sale in 2012 of an office building contributed by a stockholder in 1983.
b. collection in 2012 of a receivable from a customer whose account was written off in 2011 by a charge to the allowance account.
c. settlement based on litigation in 2012 of previously unrecognized damages from a serious accident which occurred in 2010.
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.
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 revenue 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.
The following items were among those that were reported on Dye Co.'s income statement for the year ended December 31, 2012:
Legal and audit fees $390,000
Rent for office space 540,000
Interest on inventory floor plan 630,000
Loss on abandoned equipment used in operations 105,000
The office space is used equally by Dye's sales and accounting departments. What amount of the above-listed items should be classified as general and administrative expenses in Dye's multiple-step income statement?
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.
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
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.
Manning Company has the following items: write-down of inventories, $360,000; loss on disposal of Sports Division, $555,000; and loss due to strike, $339,000. Ignoring income taxes, what total amount should Manning Company report as extraordinary losses?
a. $ -0-.
Dole Company, with an applicable income tax rate of 30%, reported net income of $350,000. Included in income for the period was an extraordinary loss from flood damage of $50,000 before deducting the related tax effect. The company's income before income taxes and extraordinary items was
Which of the following should be reported as a prior period adjustment?
Change in Estimated Lives Change from Unaccepted
of Depreciable Asset Principle to Accepted Principle
a. Yes Yes
b. No Yes
c. Yes No
d. No No
James, Inc. incurred the following infrequent losses during 2012:
A $140,000 write-down of equipment leased to others.
A $80,000 adjustment of accruals on long-term contracts.
A $120,000 write-off of obsolete inventory.
In its 2012 income statement, what amount should James report as total infrequent losses that are not considered extraordinary?
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
Prophet Corporation has an extraordinary loss of $600,000, an unusual gain of $420,000, and a tax rate of 40%. At what amount should Prophet report each item?
Extraordinary loss Unusual gain
a. $(600,000) $420,000
b. (600,000) 252,000
c. (360,000) 420,000
d. (360,000) 252,000
Lantos Company had a 40 percent tax rate. Given the following pre-tax amounts, what would be the income tax expense reported on the face of the income statement?
Sales revenue $ 300,000
Cost of goods sold 180,000
Salaries and wages expense 24,000
Depreciation expense 33,000
Dividend revenue 27,000
Utilities expense 3,000
Extraordinary loss 30,000
Interest expense 6,000
d. $ 9,600
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.
Which of the following items will not appear in the retained earnings statement?
a. Net loss
b. Prior period adjustment
c. Discontinued operations
Which of the following is included in comprehensive income?
a. Investments by owners.
b. Unrealized gains on available-for-sale securities.
c. Distributions to owners.
d. Changes in accounting principles.