CHAPTER 14: COMPREHENSIVE INCOME Flashcards
(40 cards)
1
Q
- What is the purpose of reporting comprehensive income
a. To report transactions with owners
b. To report a measure of overall entity performance
c. To replace net income with a better measure
d. To combine income from continuing operations with income from discontinued operations
A
b. To report a measure of overall entity performance
2
Q
- Which of the following is not an acceptable option of reporting other comprehensive income?
a. In a separate statement of comprehensive income
b. In a single statement of comprehensive income
c. In the notes to financial statements
d. In a statement of changes in equity
A
c. In the notes to financial statements
3
Q
- When a complete set of financial statements is presented comprehensive income and the components should
a. Appear as a part of discontinued operations.
b. Be reported net of related income tax effect, in total and individually.
c. Appear in a supplemental schedule in the notes.
d. Be displayed in a statement that has the same prominence as other financial statements.
A
d. Be displayed in a statement that has the same prominence as other financial statements.
4
Q
- Why is reclassification adjustment used when reporting other comprehensive income?
a. To reclassify an item of comprehensive income another item of comprehensive income
b. To avoid double counting of items
c. To make net income equal comprehensive income
d. To adjust the income tax effect of OCI
A
b. To avoid double counting of items
5
Q
- The components of OCI include all, except
a. Unrealized gain on derivative contract designated cash flow hedge
b. Loss from translating the financial statements of a foreign operation
c. Actuarial gain on defined benefit plan
d. Dividend paid to shareholders
A
d. Dividend paid to shareholders
6
Q
- Which is not a component of OCI?
a. Foreign currency translation adjustment
b. Unrealized gain on financial asset held for trading
c. Loss on derivative designated as cash flow hedge
d. Change in revaluation surplus
A
b. Unrealized gain on financial asset held for trading
7
Q
- Which is not a component of OCI?
a. Remeasurement of defined benefit plan
b. Treasury shares at cost
c. Foreign currency translation adjustment
d. Unrealized gain on equity investment at FVOCI
A
b. Treasury shares at cost
8
Q
- Which of the following options for displaying other comprehensive income is preferred?
a. A continuation from net income in the income statement
b. A separate statement that begins with net income
c. In the statement of changes in equity
d. A continuation from net income in the income statement or a separate statement that begins with net income
A
d. A continuation from net income in the income statement or a separate statement that begins with net income
9
Q
- How should exchange gain or loss resulting from foreign currency transaction be accounted for?
a. Component of income from continuing operations
b. Component of other comprehensive income
c. Included in the statement of financial position
d. Included in net income for gain but deferred for loss
A
a. Component of income from continuing operations
10
Q
- Unusual and infrequent gain and loss should be reported
a. Below income from continuing operations.
b. As an extraordinary item.
c. Line item within income from continuing operations.
d. Component of other comprehensive income.
A
c. Line item within income from continuing operations.
11
Q
- The term comprehensive income
a. Must be reported on the face of the income statement.
b. Includes all changes in equity except those resulting from investments by and distributions to owners.
c. Is the net change in owners’ equity for the period.
d. Is synonymous with the term net income.
A
b. Includes all changes in equity except those resulting from investments by and distributions to owners.
12
Q
- All of the following components of other comprehensive income are reclassified to profit or loss, except
a. Gain from translation of a foreign operation
b. Loss from remeasuring debt investment at FVOCI
c. Gain on hedging instrument in a cash flow hedge
d. Gain on remeasuring equity investment at FVOCI
A
d. Gain on remeasuring equity investment at FVOCI
13
Q
- Which component of other comprehensive income should be reclassified to retained earnings?
a. Revaluation surplus
b. Remeasurement of defined benefit plan
c. Change in fair value attributable to credit risk of financial liability designated at FVPL
d. All of these components of OCI should be reclassified to retained earnings
A
d. All of these components of OCI should be reclassified to retained earnings
14
Q
- Earnings
a. Include certain gains excluded from comprehensive income
b. Are the same as comprehensive income
c. Exclude certain gains and losses included in comprehensive income
d. Include certain gains and losses excluded from comprehensive income
A
c. Exclude certain gains and losses included in comprehensive income
15
Q
- The two-statement approach of presenting comprehensive income is preparing
a. A comparative statement of comprehensive income
b. A combined statement of comprehensive income and retained earnings changes in equity
c. A combined income statement and a statement of
d. A separate income statement and a separate statement of comprehensive income
A
d. A separate income statement and a separate statement of comprehensive income
16
Q
- An analysis of expenses is based on
a. The nature of expenses.
b. The function of expenses.
c. Either the nature of expenses or the function of expenses, whichever provides information that is reliable and more relevant.
d. Either the nature of expenses or the function of expenses, whichever the entity would prefer to present
A
c. Either the nature of expenses or the function of expenses, whichever provides information that is reliable and more relevant.
17
Q
- Line items in an analysis of expenses by nature include
a. Purchases, transport costs, employee benefits, depreciation, extraordinary items.
b. Distribution costs and administrative costs.
c. Depreciation, purchases, transport costs, employee benefits and advertising costs.
d. Cost of goods sold, administrative and distribution costs.
A
c. Depreciation, purchases, transport costs, employee benefits and advertising costs.
18
Q
- Line items in an analysis of expenses by function include
a. Purchases, transport costs, employee benefits, depreciation, extraordinary items
b. Purchases, distribution costs, administrative costs
c. Depreciation, purchases, transport costs, employee benefits and advertising costs
d. Cost of goods sold, administrative and distribution costs
A
d. Cost of goods sold, administrative and distribution costs
19
Q
- Under IFRS, the extraordinary item presentation
a. Has not changed from current rules.
b. Has been eliminated.
c. Has been eliminated from the net of tax presentation.
d. Has been eliminated from EPS reporting.
A
b. Has been eliminated.
20
Q
- Amounts reclassified to profit or loss or retained earnings in the current period but were recognized in OCI in the current or previous periods are known as
a. Correcting entries
b. Prior period adjustments
c. Unusual and irregular items
d. Reclassification adjustments
A
d. Reclassification adjustments
21
Q
- The income statement reveals
a. Resources and equity at a point in time.
b. Resources and equity for a period of time.
c. Net earnings at a point in time.
d. Net earnings for a period of time.
A
d. Net earnings for a period of time.
22
Q
- Conceptually, net income is a measure of
a. Wealth
b. Change of wealth
c. Capital maintenance
d. Cash flow
A
b. Change of wealth
23
Q
- Which term cannot be used to describe a line item in the statement of comprehensive income?
a. Revenue
b. Gross income
c. Income before tax
d. Extraordinary
A
Extraordinary
24
Q
- Comprehensive income includes all, except
a. Dividend revenue
b. Loss on disposal of asset
c. Investment by owners
d. Unrealized gain on trading investment
A
c. Investment by owners
24
4. Comprehensive income includes all, except
a. Revenue and gain
b. Expense and loss
c. Preference share dividend
d. Unrealized gain and loss on derivative contract
c. Preference share dividend
24
1. Income determination is arrived at by
a. Measuring the change in owners' equity
b. Identifying the change in the purchasing power
c. Using a transaction approach
d. Applying the value added concept
c. Using a transaction approach
25
2. Net income equals
a. Assets minus liabilities
b. Revenue minus cost of goods sold
c. Revenue minus expenses
d. Cash receipts minus cash payments
c. Revenue minus expenses
26
3. Comprehensive income always
a. Is the same as net income.
b. Is greater than net income
c. Is less than net income.
d. Could be greater than or less than net income.
d. Could be greater than or less than net income.
27
4. Gains are
a. Inflows from selling a product to a customer
b. Increases in equity resulting from transfers of assets to the entity from owners
c. Increases in equity from peripheral transactions
d. All of these can be considered gains
c. Increases in equity from peripheral transactions
28
5. Change in equity from nonowner sources is
a. Comprehensive income
b. Revenue
c. Expense
d. Gain or loss
a. Comprehensive income
29
1. The limitations of the income statement include all of the following, except
a. Items that cannot be measured reliably are not reported.
b. Only actual amounts are reported in net income.
c. Income measurement involves judgment.
d. Income numbers are affected by the accounting method.
b. Only actual amounts are reported in net income.
30
2. Which of the following would represent the least likely use of an income statement?
a. Use by customers to determine an entity's ability to Use provide needed goods and services
b. Use by labor unions to examine earnings closely as a basis for salary discussions
c. Use by government to formulate tax policy
d. Use by investors interested in financial position
d. Use by investors interested in financial position
31
3. The income statement would help in which of the following?
a. Evaluate liquidity
b. Evaluate solvency
c. Estimate amount, timing and uncertainty of future cash flows
d. Estimate future financial flexibility
c. Estimate amount, timing and uncertainty of future cash flows
32
4. Investors and creditors use income statement information for each of the following, except
a. To evaluate the future performance of an entity.
b. To provide a basis for predicting future performance. c. To help assess the risk and uncertainty of achieving future cash flows.
d. To evaluate the past performance of an entity.
a. To evaluate the future performance of an entity.
33
5. The income statement would help in which of the following?
a. Assess capital structure
b. Determine financial position
c. Estimate future cash flows
d. Estimate need for additional financing
c. Estimate future cash flows
34
1. In the statement of changes in equity, the effect of a change in accounting policy is presented
a. Separately for each component of equity.
b. In aggregate for total equity.
c. In total for the amount attributable to owners of the parent and the noncontrolling interest.
d. Separately for the total amount attributable to owners of parent and the noncontrolling interest
a. Separately for each component of equity.
35
2. In the statement of changes in equity, the effect of the correction of a prior period error is presented
a. Separately for each component of equity.
b. In aggregate for total equity.
c. In total for the amount attributable to owners of the parent and the noncontrolling interest.
d. Separately for the total amount attributable to owners noncontrolling interest. of the parent and the noncontrolling
a. Separately for each component of equity.
36
3. Which does not appear in the statement of retained earnings?
a. Net loss
b. Prior period error
c. Preference share dividend
d. Other comprehensive income
d. Other comprehensive income
37
4. Which appears first in a statement of retained earnings?
a. Net income
b. Prior period error
c. Cash dividend
d. Share dividend
b. Prior period error
38
5. Corrections of errors in prior period are included in
a. Retained earnings
b. Other comprehensive income
c. Net income
d. Share premium
a. Retained earnings
