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Exam 4: Income Statement and Related Information

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Question 41

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How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?

A) Shown as a separate item in operating revenues or expenses if material and supple-mented by a footnote if deemed appropriate.
B) Shown in operating revenues or expenses if material but not shown as a separate item.
C) Shown net of income tax after ordinary net earnings but before extraordinary items.
D) Shown net of income tax after extraordinary items but before net earnings.

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Question 42

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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.

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Question 43

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The approach most companies use to provide information related to the components of other comprehensive income is a

An income statement shows "income before income taxes and extraordinary items" in the amount of $2,055,000.The income taxes payable for the year are $1,080,000, including $360,000 that is applicable to an extraordinary gain.Thus, the "income before extraordinary items" is

Penn Company reported the following information for 2007: $\begin{array} { l r } \text { Sales revenue } & \$ 510,000 \\\text { Cost of goods sold } & 350,000 \\\text { Operating expenses } & 55,000 \\\text { Unrealized holding gain on available-for-sale securities } & 40,000 \\\text { Cash dividends received on the securities } & 2,000\end{array}$ For 2007, Penn would report other comprehensive income of

The primary advantage of the multiple-step format lies in the simplicity of presentation and the absence of any implication that one type of revenue or expense item has priority over another.

The components of other comprehensive income can be reported in a statement of stockholders' equity.

Shank Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation.The error caused the net income to be reported at almost double the proper amount.Correction of the error when discovered in the next year should be treated as

Sam Hurd Company has the following items: write-down of inventories, $120,000; loss on disposal of Sports Division, $185,000; and loss due to strike, $113,000.Ignoring income taxes, what total amount should Sam Hurd Company report as extraordinary losses?

Use of a multiple-step income statement will result in the company reporting a higher net income than if they used a single-step income statement.

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.

Earnings per share should always be shown separately for

Which of the following is never classified as an extraordinary item?

The occurrence that most likely would have no effect on 2007 net income is the

Discontinued operations, extraordinary items, and unusual gains and losses are all reported net of tax in the income statement.

A correction of an error in prior periods' income will be reported $\begin{array} { l l c } & \text { In the income statement } & \text { Net of tax } \\\text { a. } & \text { Yes } & \text { Yes } \\\text { b. } & \text { No } & \text { No } \\\text { c. } & \text { Yes } & \text { No } \\\text { d. } & \text { No } & \text { Yes }\end{array}$

Snead, Inc.incurred the following infrequent losses during 2007: A $70,000 write-down of equipment leased to others. A $40,000 adjustment of accruals on long-term contracts. A $60,000 write-off of obsolete inventory. In its 2007 income statement, what amount should Snead report as total infrequent losses that are not considered extraordinary?

Intraperiod tax allocation relates the income tax expense of the period to the specific items that give rise to the amount of the tax provision.

Gross profit and income from operations are reported on a multiple-step but not a single-step income statement.

Both revenues and gains increase both net income and owners' equity.