Question 1

The combined audit report on a company's financial statements and internal control over financial reporting typically contains five paragraphs.

Accepted Answer

A) True 
 B)False

Question 2

The gain or loss on the disposal of a business segment is shown on the income statement as:

Accepted Answer

A)  an extraordinary item.
B)  part of discontinued operations
C)  part of income from operations.
D)  other gains or losses.

Question 3

The current market price per share is $32.Earnings per share for income from continuing operations is $10.00 per share.Earnings per share for net income is $5.00 per share.The investment capitalization rate is 10%.What is the estimated value of the stock per share?

Accepted Answer

A)  $10.00
B)  $50.00
C)  $100.00
D)  $320.00

Question 4

A company has a Foreign-Currency Transaction Gain of $1,000 and a Foreign-Currency Transaction Loss of $10,000.How is this information reported on the income statement?

Accepted Answer

A)  Other Losses: Foreign-Currency Transaction Loss $10,000 and Other Gains: Foreign-Currency Transaction Gain $1,000
B)  Other Losses: Foreign-Currency Transaction Loss,net $9,000
C)  Other Comprehensive Loss: Foreign-Currency Transaction Loss $10,000 and Other Comprehensive Income: Foreign-Currency Transaction Gain $1,000
D)  Other Comprehensive Loss: Foreign-Currency Transaction Loss,net $9,000

Question 5

Earnings per share shows how much income a company earned for each share of stock.

Accepted Answer

A) True 
 B)False

Question 6

The formula to determine income tax expense is:

Accepted Answer

A)  taxable income (from the income tax return) multiplied by the income tax rate.
B)  taxable income(from the income statement) multiplied by the income tax rate.
C)  income before income tax expense (from the tax return) multiplied by the income tax rate.
D)  income before income tax expense (from the income statement) multiplied by the income tax rate.

Question 7

Which entity requires companies issuing publicly traded stock to have their financial statements audited by an external auditor?

Accepted Answer

A)  Securities and Exchange Commission
B)  Internal Revenue Service
C)  Committee of Sponsoring Organizations
D)  Financial Accounting Standards Board

Question 8

Accumulated Other Comprehensive Income is reported in the:

Accepted Answer

A)  income statement.
B)  statement of comprehensive income.
C)  statement of retained earnings.
D)  balance sheet. D

Question 9

The revenue recognition principle requires that sales revenues be recognized when it is earned.

Accepted Answer

A) True 
 B)False

Question 10

Financial statement fraud does not include the improper recognition of expenses.

Accepted Answer

A) True 
 B)False

Question 11

Extraordinary items:

Accepted Answer

A)  include the expropriation of a company's assets by a foreign government.
B)  include the loss from the sale or exchange of equipment.
C)  are treated the same under IFRS and GAAP.
D)  include the gains and losses due to management restructuring.

Question 12

A U.S.-based company purchases merchandise on account from a company in Mexico.The purchase contract is denominated in pesos.If the peso decreases in value relative to the dollar,the purchaser will record a ________.We say the peso ________ relative to the dollar.

Accepted Answer

A)  Foreign Currency Transaction Loss; weakens
B)  Foreign Currency Transaction Loss; strengthens
C)  Foreign Currency Transaction Gain; weakens
D)  Foreign Currency Transaction Gain; strengthens

Question 13

It is NOT the independent auditor's responsibility to determine whether the audited company's financial statements comply with GAAP.

Accepted Answer

A) True 
 B)False

Question 14

Income tax expense appears on the:

Accepted Answer

A)  tax return.
B)  statement of stockholders' equity.
C)  income statement.
D)  balance sheet.

Question 15

The loss from the disposal of a segment of a business is called:

Accepted Answer

A)  an extraordinary loss.
B)  other expense.
C)  other loss.
D)  loss on sale of discontinued operations.

Question 16

If an item is unusual but not infrequent it is:

Accepted Answer

A)  reported net of tax as Other Gains and Losses.
B)  reported at its gross amount as Other Gains and Losses.
C)  disclosed as a note to the financial statements.
D)  reported as an extraordinary item. B

Question 17

Modern Detailing,Inc.has incurred a $50,000 loss on property due to an earthquake.Earthquakes are rare in this region.What amount will be reported for this loss on the company's income statement,assuming a 30% tax rate? How will the loss be classified on the income statement?

Accepted Answer

A)  Other Losses,$50,000
B)  Extraordinary Loss,$35,000
C)  Extraordinary Loss,$15,000
D)  Other Losses,$35,000

Question 18

Ongoing expenses incurred by the entity,other than the direct expenses for merchandise,are called:

Accepted Answer

A)  other expenses.
B)  extraordinary items.
C)  cost of goods sold.
D)  operating expenses.

Question 19

For a retailer,there will be positive income from operations if:

Accepted Answer

A)  revenues are greater than cost of goods sold.
B)  revenues are greater than operating expenses.
C)  gross profit is greater than operating expenses.
D)  cost of goods sold is greater than operating expenses.

Question 20

Comprehensive income is:

Accepted Answer

A)  used to determine earnings per share only.
B)  used to determine net income only.
C)  not used to determine net income or earnings per share.
D)  used to determine net income or earnings per share. C

Exam 11: Evaluating Performance: Earnings Quality, the Income Statement, the Statement of Comprehensive Income

The combined audit report on a company's financial statements and internal control over financial reporting typically contains five paragraphs.

Correct AnswerverifiedShow Answer

The gain or loss on the disposal of a business segment is shown on the income statement as:

Correct AnswerverifiedShow Answer

The current market price per share is $32.Earnings per share for income from continuing operations is $10.00 per share.Earnings per share for net income is $5.00 per share.The investment capitalization rate is 10%.What is the estimated value of the stock per share?

Correct AnswerverifiedShow Answer

A company has a Foreign-Currency Transaction Gain of $1,000 and a Foreign-Currency Transaction Loss of $10,000.How is this information reported on the income statement?

Correct AnswerverifiedShow Answer

Earnings per share shows how much income a company earned for each share of stock.

Correct AnswerverifiedShow Answer

The formula to determine income tax expense is:

Correct AnswerverifiedShow Answer

Which entity requires companies issuing publicly traded stock to have their financial statements audited by an external auditor?

Correct AnswerverifiedShow Answer

Accumulated Other Comprehensive Income is reported in the:

Correct AnswerverifiedD

The revenue recognition principle requires that sales revenues be recognized when it is earned.

Correct AnswerverifiedShow Answer

Financial statement fraud does not include the improper recognition of expenses.

Correct AnswerverifiedShow Answer

Extraordinary items:

Correct AnswerverifiedShow Answer

A U.S.-based company purchases merchandise on account from a company in Mexico.The purchase contract is denominated in pesos.If the peso decreases in value relative to the dollar,the purchaser will record a ________.We say the peso ________ relative to the dollar.

Correct AnswerverifiedShow Answer

It is NOT the independent auditor's responsibility to determine whether the audited company's financial statements comply with GAAP.

Correct AnswerverifiedShow Answer

Income tax expense appears on the:

Correct AnswerverifiedShow Answer

The loss from the disposal of a segment of a business is called:

Correct AnswerverifiedShow Answer

If an item is unusual but not infrequent it is:

Correct AnswerverifiedB

Modern Detailing,Inc.has incurred a $50,000 loss on property due to an earthquake.Earthquakes are rare in this region.What amount will be reported for this loss on the company's income statement,assuming a 30% tax rate? How will the loss be classified on the income statement?

Correct AnswerverifiedShow Answer

Ongoing expenses incurred by the entity,other than the direct expenses for merchandise,are called:

Correct AnswerverifiedShow Answer

For a retailer,there will be positive income from operations if:

Correct AnswerverifiedShow Answer

Comprehensive income is:

Correct AnswerverifiedC

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D

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A U.S.-based company purchases merchandise on account from a company in Mexico.The purchase contract is denominated in pesos.If the peso decreases in value relative to the dollar,the purchaser will record a .We say the peso relative to the dollar.

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B

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C