Question 1

In which section of the income statement is interest expense reported?

Accepted Answer

A)  Gross profit.
B)  Income from operations.
C)  Income before income taxes.
D)  Non-controlling interest.

Question 2

Income before income taxes is computed by deducting interest expense from income from operations.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a generally practiced method of presenting the income statement?

Accepted Answer

A)  Including prior period adjustments in determining net income.
B)  The condensed income statement.
C)  The consolidated income statement.
D)  Including gains and losses from discontinued operations of a component of a business in determining net income.

Question 4

Which of the following does not appear on a statement of retained earnings?

Accepted Answer

A)  Net loss.
B)  Prior period adjustments.
C)  Preference share dividends.
D)  Other comprehensive income.

Question 5

Investors and creditors use income statement information for each of the following
Except to

Accepted Answer

A)  evaluate the future performance of the company.
B)  provide a basis for predicting future performance.
C)  help assess the risk and uncertainty of achieving future cash flows.
D)  All of the above.

Question 6

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

Accepted Answer

A)  a prior period adjustment.
B)  an other income and expense item.
C)  an amount after continuing operations and before net income.
D)  a bulk sale of plant assets included in income from continuing operations.S56.Gains or losses on the disposal of investments should be shown in the income statementS56.Gains or losses on the disposal of investments should be shown in the income statement  " class="answers-bank-image d-inline" rel="preload" >

Question 7

Watts 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

Accepted Answer

A)  an increase in depreciation expense for the year in which the error is discovered.
B)  a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements.
C)  an other expense item for the year in which the error was made.
D)  a prior period adjustment.

Question 8

Both revenues and gains increase both net income and equity.

Accepted Answer

A) True 
 B)False

Question 9

A change in accounting principle requires what kind of adjustment to the financial statements?

Accepted Answer

A)  Current period adjustment.
B)  Prospective adjustment.
C)  Retrospective adjustment.
D)  Current and prospective adjustment.

Question 10

Which of the following items will not appear in the retained earnings statement?

Accepted Answer

A)  Net loss.
B)  Prior period adjustment.
C)  Discontinued operations.
D)  Dividends.

Question 11

The non-controlling interest section of the income statement is shown

Accepted Answer

A)  below net income.
B)  below income from operations.
C)  above other income and expenses.
D)  above income tax.

Question 12

A strength of the income statement as compared to the statement of financial position is that items that cannot be measured reliably can be reported in the income statement.

Accepted Answer

A) True 
 B)False

Question 13

A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is included in comprehensive income?

Accepted Answer

A)  Investments by owners.
B)  Unrealized gains on available-for-sale securities.
C)  Distributions to owners.
D)  Changes in accounting principles.

Question 15

Companies only restrict retained earnings to comply with contractual requirements or current necessity.

Accepted Answer

A) True 
 B)False

Question 16

Comprehensive income includes all changes in equity during a period except those resulting from distributions to owners.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is an example of managing earnings down?

Accepted Answer

A)  Changing estimated bad debts from 3 percent to 2.5 percent of sales.
B)  Revising the estimated life of equipment from 10 years to 8 years.
C)  Not writing off obsolete inventory.
D)  Reducing research and development expenditures.

Question 18

Discontinued operations and gains and losses are both reported net of tax in the income statement.

Accepted Answer

A) True 
 B)False

Question 19

The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

Accepted Answer

A) True 
 B)False

Exam 4: Income Statement and Related Information

Income before income taxes is computed by deducting interest expense from income from operations.

Correct Answer
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Which of the following does not appear on a statement of retained earnings?

Correct Answer
verified

Comprehensive income includes all changes in equity during a period except those resulting from distributions to owners.

Correct Answer
verified

A change in accounting principle requires what kind of adjustment to the financial statements?

Correct Answer
verified

Which of the following is an example of managing earnings down?

Correct Answer
verified

Which of the following is not a generally practiced method of presenting the income statement?

Correct Answer
verified

A strength of the income statement as compared to the statement of financial position is that items that cannot be measured reliably can be reported in the income statement.

Correct Answer
verified

Both revenues and gains increase both net income and equity.

Correct Answer
verified

Which of the following items will not appear in the retained earnings statement?

Correct Answer
verified

Which of the following is included in comprehensive income?

Correct Answer
verified

The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

Correct Answer
verified

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

Correct Answer
verified

Companies only restrict retained earnings to comply with contractual requirements or current necessity.

Correct Answer
verified

In which section of the income statement is interest expense reported?

Correct Answer
verified

Investors and creditors use income statement information for each of the following Except to

Correct Answer
verified

A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.

Correct Answer
verified

The non-controlling interest section of the income statement is shown

Correct Answer
verified

Correct Answer
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Discontinued operations and gains and losses are both reported net of tax in the income statement.

Correct Answer
verified

Exam 4: Income Statement and Related Information

Income before income taxes is computed by deducting interest expense from income from operations.

Correct AnswerverifiedShow Answer

Which of the following does not appear on a statement of retained earnings?

Correct AnswerverifiedShow Answer

Comprehensive income includes all changes in equity during a period except those resulting from distributions to owners.

Correct AnswerverifiedShow Answer

A change in accounting principle requires what kind of adjustment to the financial statements?

Correct AnswerverifiedShow Answer

Which of the following is an example of managing earnings down?

Correct AnswerverifiedShow Answer

Which of the following is not a generally practiced method of presenting the income statement?

Correct AnswerverifiedShow Answer

A strength of the income statement as compared to the statement of financial position is that items that cannot be measured reliably can be reported in the income statement.

Correct AnswerverifiedShow Answer

Both revenues and gains increase both net income and equity.

Correct AnswerverifiedShow Answer

Which of the following items will not appear in the retained earnings statement?

Correct AnswerverifiedShow Answer

Which of the following is included in comprehensive income?

Correct AnswerverifiedShow Answer

The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Companies only restrict retained earnings to comply with contractual requirements or current necessity.

Correct AnswerverifiedShow Answer

In which section of the income statement is interest expense reported?

Correct AnswerverifiedShow Answer

Investors and creditors use income statement information for each of the following Except to

Correct AnswerverifiedShow Answer

A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.

Correct AnswerverifiedShow Answer

The non-controlling interest section of the income statement is shown

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Discontinued operations and gains and losses are both reported net of tax in the income statement.

Correct AnswerverifiedShow Answer

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