A strength of the income statement as compared to the balance sheet is that items that cannot be measured reliably can be reported in the income statement.
False
Earnings management generally makes income statement information more useful for predicting future earnings and cash flows.
False
Both revenues and gains increase both net income and owners' equity.
True
Gross profit and income from operations are reported on a multiple-step but not a single- step income statement.
True
The accounting profession has adopted a current operating performance approach to income reporting.
False
Discontinued operations, extraordinary items, and unusual gains and losses are all reported net of tax in the income statement.
False
A company that reports a discontinued operation or an extraordinary item has the option of reporting per share amounts for these items.
Falses
Prior period adjustments can either be added or subtracted in the Retained Earnings
Statement.
True
Companies only restrict retained earnings to comply with contractual requirements or current necessity.
False
Comprehensive income includes all changes in equity during a period except those resulting from distributions to owners.
False
The components of other comprehensive income can be reported in a statement of stockholders' equity.
True
In order to be classified as extraordinary it must be
unusual, infrequent and material in nature
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
only in the cost of goods sold section of the income statement.
The occurrence that most likely would have no effect on 2012 net income is the
correction of an error in the financial statements of a prior period discovered
subsequent to their issuance.
The occurrence which most likely would have no effect on 2012 net income (assuming that all amounts involved are material) is the
collection in 2012 of a receivable from a customer whose account was written off in
2011 by a charge to the allowance account.
Which of the following is not a generally practiced method of presenting the income statement?
including prior period adjustments in determining net income
Which of the following is an advantage of the single-step income statement over the multiple-step income statement?
It does not imply that one type of revenue or expense has priority over another.
What might a manager do during the last quarter of a fiscal year if she wanted to decrease current annual net income?
Delay shipments to customers until after the end of the fiscal year.
What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?
Relax credit policies for customers.
Which of the following is an example of managing earnings up?
Underestimating warranty claims.
Which of the following would represent the least likely use of an income statement prepared for a business enterprise?
Use by investors interested in the financial position of the entity.
Limitations of the income statement include all of the following except
income numbers are affected by the accounting methods employed.
The major elements of the income statement are
revenues, expenses, gains, and losses.
What would Ortiz report as total revenues in a single-step income statement?
sales rev + rent rev - sales returns and allowances
What would Ortiz report as total expenses in a single-step income statement?
CGS + all expenses
In Mortenson's single-step income statement, gross profit
should not be reported.
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
dont include freight out
An income statement shows "income before income taxes and extraordinary items" in the amount of $2,740,000. The income taxes payable for the year are $1,440,000, including $480,000 that is applicable to an extraordinary gain. Thus, the "income before extr
so just subtract 480000 from inc taxes and then subtract that number from income before...
An item that should be classified as an extraordinary item is
gains from a company selling the only investment it has ever owned.
How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?
Shown as a separate item in operating revenues or expenses if material and supple-
mented by a footnote if deemed appropriate.
Which of the following is a change in accounting principle?
A change from FIFO to LIFO and a change from straight-line to double-declining-
balance
Which of the following is never classified as an extraordinary item?
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?
Earnings per share from both continuing operations and net income should be
disclosed on the face of the income statement.
A material item which is unusual in nature or infrequent in occurrence, but not both should be shown in the income statement
not net of tax but disclosed seperately
Companies use intraperiod tax allocation for all of the following items except
Changes in accounting estimates.
Which of the following items would be reported net of tax on the face of the income statement?
Discontinued operations
Which of the following items would be reported at its gross amount on the face of the income statement?
Unusual gain
Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles?
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?
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.
Earnings per share should always be shown separately for
ncome before extraordinary items.
a correction of an error in prior periods income will be reported
not in the inc st but net of tax
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 taxes, were $2,100,000 in 2012. How should these
zero on inc from ops and 300,000 loss on results of disc ops
what gets taxed : extraordinary or unusual gain/loss
extra