303 Exam 1- CH. 3

Question 1

The income statement can be used to access

Answer 1

creditworthiness

Question 2

The _______ approach focuses on the income-related activities that have occurred during the period.

Answer 2

transaction

Question 3

Which of the following occur from peripheral or incidental transactions?

Answer 3

Gain on sale of equipment

Question 4

In the single-step income statement:

Answer 4

just two groupings exist: revenues and expenses

Question 5

Which of the following is an acceptable method of presenting the income statement?

Answer 5

A condensed income statement

Question 6

Unusual and infrequent gains and losses

Answer 6

include restructuring charges and are reported net of tax

Question 7

T/F: Earnings Per Share (EPS) is net income minus preferred dividends (income available to common stockholders), divided by the weighted-average of common shares outstanding.

Answer 7

True

Question 8

Which limitation of an income statement occurs when one company uses an accelerated depreciation method while another company uses straight-line depreciation?

Answer 8

Income numbers are affected by the accounting methods employed

Question 9

The major elements of the income statement are

Answer 9

revenues, expenses, gains, and losses

Question 10

Which of the following describes an expense?

Answer 10

outflows or other using-up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations.

Question 11

A multiple-step income statement

Answer 11

highlights certain intermediate components of income that analysts use to compute ratios for assessing the performance of the company.
separates operating transactions from nonoperating transactions
matches costs and expenses with related revenues

Question 12

Calculate Gross Profit

Question 13

The single-step income statement emphasizes

Answer 13

total revenues and total expenses

Question 14

EPS is computed as Net Income:

Answer 14

minus preferred dividends divided by the weighted-average of common shares outstanding.

Question 15

Calculate EPS

Question 16

Which of the following would be reported in a separate income statement category, separately from continuing operations, on the income statement?

Answer 16

Discontinues Operations

Question 17

T/F: Discontinued operations occur when a company eliminates the results of operations of a component of the business. The elimination of the component need not represent a strategic shift, having a major effect on the company’s operations and financial results

Answer 17

False; component NEEDS to represent a strategic shift…

Question 18

Which of the following disposals would be considered a strategic shift with respect to discontinued operations?

Answer 18

a major line of business

Question 19

Reporting correct amount with unusual gains/losses

Question 20

Gains and losses that bypass net income but affect stockholders’ equity are referred to as:

Answer 20

other comprehensive income

Question 21

T/F: Losses as a result of a strike are considered unusual and infrequent.

Answer 21

True

Question 22

Which of the following is not classified as an unusual and infrequent gain or loss?

Answer 22

a discontinued operation

Question 23

The occurrence which most likely would have no effect on 2021 net income (assuming that all amounts involved are material) is the

Answer 23

collection in 2021 of a receivable from a customer whose account was written off in 2020 by a charge to the allowance account

Question 24

The gain or loss from disposal of a component of a business is shown as a:

Answer 24

part of discontinued operations

Question 25

Which of the following is true about intraperiod tax allocation?

Answer 25

Its purpose is to relate the income tax expense to the items that give rise to the amount of income tax provision

Question 26

The statement of stockholders' equity

Answer 26

reports the change in each stockholders' equity account and in total stockholders' equity during the year

Question 27

Calculate comprehensive income

Question 28

When a company transfers an amount of restricted retained earnings into a different account, what is the title of that account?

Answer 28

Appropriated Retained Earnings

Question 29

For a contract to be valid, it must:

Answer 29

Have the commitment and approval of all parties collection is determinable represent a valid transaction

Question 30

T/F: A company generally allocates the transaction price to its separate performance obligations in proportion to stand-alone selling prices.

Answer 30

True

Question 31

T/F: Some companies go to great lengths to present their results in the most favorable light, by implementing "non-GAAP" reporting to present figures that are more representative of operating results.

Answer 31

True

Question 32

Which of the following represents a condition in a company's environment that could contribute to fraudulent reporting?

Answer 32

rapid changes in the business environment

Question 33

Which of the following items would require a retrospective adjustment?

Answer 33

change in accounting principle

Question 34

A change in the method of inventory pricing from FIFO to average-cost would be accounted for as a:

Answer 34

change in accounting principle

Question 35

Which of the following would NOT represent an accounting error?

Answer 35

change in the method of inventory pricing from FIFO to average-cost

Question 36

Calculate revisions of bad debt expense and know what those changes effect

Question 37

Prior period adjustments are reported as:

Answer 37

an addition to (or deduction from) the beginning balance of retained earnings