The major elements of the income statement are
A.
revenue, cost of goods sold, selling expenses, and general expense.
B.
operating section, non-operating section, discontinued operations, and extraordinary items.
C.
revenues, expenses, gains, and losses.
D.
revenue, cost of goods sold, operating expenses, non-operating section.

C.
revenues, expenses, gains, and losses.

The single-step income statement emphasizes
A.
the gross profit and income from operations.
B.
total revenues and total expenses.
C.
extraordinary items and discontinued operations more than these are emphasized in the multiple-step income statement.
D.
the various components of income from continuing operations.

B.
total revenues and total expenses.

Which of the following is an acceptable method of presenting the income statement?
A.
A single-step income statement
B.
A multiple-step income statement
C.
A condensed income statement
D.
All of these

D.
All of these

Classification as an extraordinary item on the income statement would be appropriate for the
A.
gain or loss on disposal of a component of the business.
B.
substantial write-off of obsolete inventories.
C.
loss from a strike.
D.
gain from condemnation settlement.

D.
gain from condemnation settlement.

Which of the following is true about intraperiod tax allocation?
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 extraordinary items and discontinued operations 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.

D.
Its purpose is to relate the income tax expense to the items which affect the amount of tax.

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?
A.
The gain or loss on disposal should be reported as an extraordinary item.
B.
Results of operations of a discontinued component should be disclosed immediately below extraordinary items.
C.
Earnings per share for both continuing operations and net income should be disclosed on the face of the income statement.
D.
The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.

C.
Earnings per share for both continuing operations and net income should be disclosed on the face of the income statement.

Which one of the following types of losses is excluded from the determination of net income in income statements?
A.
Material losses resulting from transactions in the company's investments account.
B.
Material losses resulting from unusual sales of assets not acquired for resale.
C.
Material losses resulting from the write-off of intangibles.
D.
Material losses resulting from correction of errors related to prior periods.

D.
Material losses resulting from correction of errors related to prior periods.

The approach most companies use to provide information related to the components of other comprehensive income is in a
A.
second separate income statement.
B.
combined income statement of comprehensive income.
C.
separate column in the statement of changes in stockholders' equity.
D.
footnote disclosure.

C.
separate column in the statement of changes in stockholders' equity.

Information in the income statement helps users to
A.
evaluate the past performance of the enterprise.
B.
provide a basis for predicting future performance.
C.
help assess the risk or uncertainty of achieving future cash flows.
D.
all of these.

D.
all of these.

For Wolverton Company, the following information is available:
Cost of goods sold $99,000
Dividend revenue 2,500
Income tax expense 2,000
Operating expenses 53,000
Sales 170,000

In Wolverton's single-step income statement, gross profit
A.
will not be reported.
B.
will be reported at $16,000.
C.
will be reported at $18,000.
D.
will be reported at $71,000.

A.
will not be reported.
Gross profit is an element of the multiple-step income statement, not the single-step income statement.

The occurrence which most likely would have no effect on 2010 net income (assuming that all amounts involved are material) is the
A.
sale in 2010 of an office building contributed by a stockholder in 1986.
B.
collection in 2010 of a receivable from a customer whose account was written off in 2009 by a charge to the allowance account.
C.
settlement based on litigation in 2010 of previously unrecognized damages from a serious accident which occurred in 2008.
D.
worthlessness determined in 2010 of stock purchased on a speculative basis in 2006.

B.
collection in 2010 of a receivable from a customer whose account was written off in 2009 by a charge to the allowance account

How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?
A.
Shown as a separate item in operating revenues or expenses if material and supplemented by a footnote if deemed appropriate.
B.
Shown in operating revenues or expenses if material but not shown as a separate item.
C.
Shown net of income tax after ordinary net earnings but before extraordinary items.
D.
Shown net of income tax after extraordinary items but before net earnings.

A.
Shown as a separate item in operating revenues or expenses if material and supplemented by a footnote if deemed appropriate.

Cordoba Corporation has an extraordinary loss of $150,000, an unusual gain of $350,000, and a tax rate of 20%. At what amount should Cordoba report each item?
Extraordinary loss Unusual gain
A.
$(150,000) $350,000
B.
(150,000) 280,000
C.
(120,000) 350,000
D.
(120,000) 280,000

C.
(120,000) 350,000
$150,000 less 20% of $150,000, or $120,000 as an extraordinary loss and $350,000 as an unusual gain.

Reddaway Corporation reports the following information:
Net income $500,000
Dividends on common stock 140,000
Dividends on preferred stock 60,000
Weighted average common shares outstanding 100,000

Reddaway should report earnings per share of
A.
$3.00.
B.
$3.60.
C.
$4.40.
D.
$5.00.

C.
$500,000 less $60,000 dividends on preferred stock divided by 100,000 common stock shares, $4.40.

Nguyen Corporation reports the following information:
Correction of overstatement of depreciation expense in prior years, net of tax, $215,000
Dividends declared $160,000
Net income $500,000
Retained earnings, 1/1/12, as reported $1,000,000
Nguyen should report retained earnings, 12/31/12, at
A.
$785,000.
B.
$1,125,000.
C.
$1,340,000.

D.
$1,555,000.
$1,000,000, plus $215,000 overstatement of depreciation, plus net income $500,000, less dividends $160,000 results in $1,555,000 ending balance.

Stamey Company reported the following information for 2012:
Sales revenue $500,000
Cost of goods sold 350,000
Operating expenses 55,000
Unrealized holding gain on available-for-sale securities 20,000
Cash dividends received on the securities
2,000
For 2012, Stamey would report comprehensive income of
A.
$117,000.
B.
$115,000.
C.
$97,000.
D.
$20,000.

A.
$117,000.
$500,000 less $350,000 less $55,000 plus $20,000 plus $2,000 equals $117,000.

Investors and creditors can use the information in the income statement to:
A.
evaluate the past performance of the enterprise.
B.
provide a basis for predicting future performance.
C.
help assess the risk or uncertainty of achieving future cash flows.
D.
All of these.

D.
All of these.

Expenses include all of the following except:
A.
cost of goods sold.
B.
depreciation.
C.
loss on sale of investments.
D.
salaries and wages.

C.
loss on sale of investments.

In the single-step income statement:
A.
interest revenue and rental revenue are reported as other revenues and gains.
B.
just two groupings exist - revenues and expenses.
C.
expenses are classified by functions, such as merchandising, selling and administration.
D.
an income from operations figure is presented.

B.
just two groupings exist - revenues and expenses.

Nonoperating items include all of the following except:
A.
interest revenue.
B.
rent expense.
C.
rent revenue.
D.
interest expense.

B.
rent expense.

Irregular transactions such as discontinued operations and extraordinary items should be reported separately in:
A.
both a single-step and multiple-step income statement.
B.
a single-step income statement only.
C.
a multiple-step income statement only.
D.
neither a single-step nor a multiple-step income statement.

A.
both a single-step and multiple-step income statement.

The gain or loss from disposal of a component of a business is shown as a (an):
A.
unusual gain or loss.
B.
part of discontinued operations.
C.
extraordinary item.
D.
prior period adjustment.

B.
part of discontinued operations.

All of the following would meet the criteria for an extraordinary item except gains or losses from:
A.
a major casualty.
B.
prohibition under a newly enacted law or regulation.
C.
an expropriation of assets.
D.
loss on exchange of foreign currencies.

D.
loss on exchange of foreign currencies.

A change in the method of inventory pricing from FIFO to LIFO would be accounted for as a (an):
A.
part of discontinued operations.
B.
extraordinary item.
C.
change in accounting principle.
D.
change in estimate.

C.
change in accounting principle.

Intraperiod tax allocation is used for all of the following except:
A.
changes in accounting principle.
B.
discontinued operations.
C.
extraordinary items.
D.
unusual gains/losses.

D.
unusual gains/losses

Which of the following statements related to extraordinary items and intraperiod tax allocation is correct?
A.
Extraordinary gains, but not extraordinary losses, are reported net of tax.
B.
Extraordinary losses, but not extraordinary gains, are reported net of tax.
C.
Both extraordinary gains and losses are reported net of tax.
D.
Neither extraordinary gains nor losses are reported net of tax.

C.
Both extraordinary gains and losses are reported net of tax.