M2 Income Statement and Balance Sheet

Question 1

Net Concept

Answer 1

Proceeds less carrying amount

Question 2

Material transaction infrequent in occurence and/or unusual in nature

Answer 2

Should be presented separately as a component of “income from continuing operations” when the transaction results in a gain or loss

Question 3

Noncurrent Asset

Answer 3

Cash will be realized at a time beyond the normal operating cycle or one year

Question 4

F/A Sale

Answer 4

Gain or loss is recognized as part of income from continuing operations. The amount of the gain or loss is equal to the difference between the proceeds from the sale and the carrying amount of the F/A sold

Question 5

Unusual and Infrequent

Answer 5

Reported as separate component of income from continuing operations

Question 6

Disposal of a component of a business

Answer 6

Discontinued Operations

Question 7

Loss on abandonment of equipment

Answer 7

Treated like a sale

Question 8

Current Liabilities

Answer 8

All payables due within one year

Question 9

Discount on bonds payable

Answer 9

Current liability

Question 10

Income (Loss) from Operations

Answer 10

Shown gross (before taxes). The line item is an intermediate line item displayed on a multiple step income statement that represents the difference between gross margin and operating expenses such as selling and general and administrative expenses

Question 11

Multi-Step income statement

Answer 11

Net Sales
(Cost of Goods Sold)
= Gross Profit
(Selling and Administrative)
= Operating Income
Other income (gain on sale)
= Income from continuing operations
Income tax expense
= Income before discontinued operations
Gain from discounted segment (after tax)
= Net Income