Question 1

Companies report the results of operations of a component of a business that will be disposed of separately from continuing operations.

Accepted Answer

A) True 
 B)False  True

Question 2

The earnings per share computation is not required for

Accepted Answer

A)  Net income.
B)  Gain on disposal of discontinued operation, net of tax.
C)  Income from continuing operations.
D)  Income from operations.E) B) and D)
F) A) and B)

Question 3

Income taxes are allocated to

Accepted Answer

A)  continuing operations.
B)  discontinued operations.
C)  prior period adjustments.
D)  All of these.E) B) and D)
F) None of the above

Question 4

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?

Accepted Answer

A)  Increase research and development activities.
B)  Relax credit policies for customers.
C)  Delay shipments to customers until after the end of the fiscal year.
D)  Delay purchases from suppliers until after the end of the fiscal year.E) All of the above
F) A) and C)

Question 5

Which method of income measurement is used in the preparation of the income statement?

Accepted Answer

A)  Capital maintenance approach.
B)  Transaction approach.
C)  Cash-flow approach.
D)  Income components approach.E) A) and D)
F) A) and C)

Question 6

Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?

Accepted Answer

A)  Non-cumulative only.
B)  Cumulative only.
C)  Neither non-cumulative nor cumulative.
D)  Both non-cumulative and cumulative.E) B) and C)
F) C) and D)

Question 7

Companies use intraperiod tax allocation for all of the following items except

Accepted Answer

A)  discontinued operations.
B)  prior period adjustments.
C)  changes in accounting estimates.
D)  income from continuing operations.E) A) and D)
F) B) and D)

Question 8

Which of the following equations expresses the definition of "income"?

Accepted Answer

A)  Income = Revenues - Expenses
B)  Income = (Revenues + Gains)  - (Expenses + Losses) 
C)  Income = Revenues + Gains
D)  Income = Gains - LossesE) C) and D)
F) None of the above C

Question 9

Which of the following situations involving different accounting methods or accounting estimates results in comparison difficulties between companies?

Accepted Answer

A)  Estimated useful lives for depreciable assets.
B)  Inventory methods.
C)  Estimates of bad debts.
D)  All of the above.E) B) and C)
F) C) and D)

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

The income statement provides investors and creditors information that helps them predict

Accepted Answer

A)  the amounts of future cash flows.
B)  the timing of future cash flows.
C)  the uncertainty of future cash flows.
D)  All of the above.E) B) and C)
F) A) and D)

Question 12

Income from operations represents a company's results before any gain or loss on discontinued operations.

Accepted Answer

A) True 
 B)False

Question 13

The income statement is useful for helping to assess the risk or uncertainty of achieving future cash flows.

Accepted Answer

A) True 
 B)False  True

Question 14

In 2011, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2010.In 2011, which of the following accounts will have to be credited to correct this error?

Accepted Answer

A)  Salaries Payable.
B)  Salaries Expense.
C)  Retained Earnings.
D)  Income Summary.E) A) and C)
F) A) and B)

Question 15

Which of the following is true about intraperiod tax allocation?

Accepted Answer

A)  It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return.
B)  It is required for the cumulative effect of accounting changes but not for prior period adjustments.
C)  Its purpose is to allocate income tax expense evenly over a number of accounting periods.
D)  Its purpose is to relate the income tax expense to the items which affect the amount of tax.E) A) and B)
F) None of the above

Question 16

Given the following income statement line items:
Income from operations
Income before income taxes
Income from continuing operations
Income from discontinued operations
Net income
How many earnings per share amounts are required to be disclosed?

Accepted Answer

A)  5
B)  4
C)  3
D)  2E) A) and B)
F) A) and C)

Question 17

Earnings per share relate to

Accepted Answer

A)  preference shares only.
B)  ordinary shares only.
C)  both preference and ordinary shares.
D)  neither preference nor ordinary shares.E) None of the above
F) A) and B)

Question 18

The major elements of the income statement are

Accepted Answer

A)  revenue, cost of goods sold, selling expenses, and general expense.
B)  operating section, nonoperating section, discontinued operations and cumulative effect.
C)  revenues, expenses, gains, and losses.
D)  All of these.E) A) and D)
F) B) and C)

Question 19

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of

Accepted Answer

A)  quality of earnings.
B)  earnings management.
C)  smoothing of earnings.
D)  earnings averaging.E) B) and C)
F) B) and D)

Question 20

Prior period adjustments can either be added or subtracted in the Retained Earnings Statement.

Accepted Answer

A) True 
 B)False

Exam 4: Income Statement and Related Information

Companies report the results of operations of a component of a business that will be disposed of separately from continuing operations.

Correct AnswerverifiedTrue

The earnings per share computation is not required for

Correct AnswerverifiedShow Answer

Income taxes are allocated to

Correct AnswerverifiedShow Answer

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?

Correct AnswerverifiedShow Answer

Which method of income measurement is used in the preparation of the income statement?

Correct AnswerverifiedShow Answer

Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?

Correct AnswerverifiedShow Answer

Companies use intraperiod tax allocation for all of the following items except

Correct AnswerverifiedShow Answer

Which of the following equations expresses the definition of "income"?

Correct AnswerverifiedC

Which of the following situations involving different accounting methods or accounting estimates results in comparison difficulties between companies?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The income statement provides investors and creditors information that helps them predict

Correct AnswerverifiedShow Answer

Income from operations represents a company's results before any gain or loss on discontinued operations.

Correct AnswerverifiedShow Answer

The income statement is useful for helping to assess the risk or uncertainty of achieving future cash flows.

Correct AnswerverifiedTrue

In 2011, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2010.In 2011, which of the following accounts will have to be credited to correct this error?

Correct AnswerverifiedShow Answer

Which of the following is true about intraperiod tax allocation?

Correct AnswerverifiedShow Answer

Given the following income statement line items: Income from operations Income before income taxes Income from continuing operations Income from discontinued operations Net income How many earnings per share amounts are required to be disclosed?

Correct AnswerverifiedShow Answer

Earnings per share relate to

Correct AnswerverifiedShow Answer

The major elements of the income statement are

Correct AnswerverifiedShow Answer

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of

Correct AnswerverifiedShow Answer

Prior period adjustments can either be added or subtracted in the Retained Earnings Statement.

Correct AnswerverifiedShow Answer

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True

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C

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True

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