ACCT 301 Smartbook Chapter 4 The Income Statement, comprehensive Income, and the solutions answers

ACCT 301 Smartbook Chapter 4 The Income Statement, comprehensive Income, and the Statement of Cash solutions complete answers 

 

The inflow of resources resulting from providing goods or services to customers is referred to as       . (Enter only one word.)

 

Which of the following items are reported as components of operating income for most manufacturing and merchandising companies? (Select all that apply.)

 

True or false: Income tax expense may be disclosed either on the income statement or in the notes to the financial statements.

 

Which of the following are acceptable methods of presenting the income statement? (Select all that apply.)

 

Analyzing earnings quality requires an analyst to

 

An inflow of resources resulting from providing goods or services to customers is a(n) ______.

 

The evidence that a financial statement user or analyst might use as evidence to suggest that earnings have been smoothed is

 

Which of the following items are included in calculating operating income? (Select all that apply.)

 

Costs that are planned and controlled by management that materially change the scope of the business undertaken or the manner in which the business is conducted are called        costs. (Enter only one word.)

 

Income tax expense is reported in what way on the income statement?

 

Gains and losses from the sale of investments can affect earnings quality because

 

The two approaches most commonly used to prepare an income statement are

 

In looking at earnings quality, analysts try to separate a company's        earnings effects from its        earnings. (Enter only one word per blank.)

 

Income smoothing describes the concept that

 

Management's assessment of permanent earnings are referred to as what?

 

If a company reorganizes its operation to gain efficiency, the cost associated with this reorganization is classified as

 

Nonoperating items that are not expected to continue into the future are considered a ______ component of earnings and should be __________ when forecasting future performance.

 

How are discontinued operations reported? (Select all that apply.)

 

The two approaches for preparing an income statement are the       step and       step approaches.

 

Separate reporting as a(n)        operation is required when the disposal of a component represents a strategic shift that has, or will have, a major effect on a company's operations and financial results. (Enter only one word.)

 

The ability of reported earnings to predict a company's future earnings is referred to as earnings       . (Enter only one word.)

 

Non-GAAP earnings are calculated

 

Revenues, expenses, gains, losses, and income tax related to a(n)               must be removed from continuing operations and reported separately on the income statement. (Enter only one word per blank.)

 

_____ costs include costs associated with shutdown or relocation of facilities.

 

If discontinued operations have a _____ effect on the income statement, they must be reported separately.

 

The guidance on discontinued operations defines a discontinued operation as a component that either/or (Select all that apply.)

 

Which of the following is a category of accounting change?

 

Which of the following are accounting errors? (Select all that apply.)

 

What items must be removed from continuing operations and reported separately for a discontinued operation? (Select all that apply.)

 

Basic earnings per share is calculated as net income available to common shareholders divided by

 

Companies have considerable flexibility in reporting income from        operations, but the reporting of income from        operations is strictly mandated. (Enter only one word per blank.)

 

When a transaction is recorded incorrectly or is not recorded at all, this is treated as an accounting       . (Enter only one word.)

 

In calculating basic earnings per share, ______ is divided by the weighted average common shares outstanding.

 

True or false: Net income is a portion of comprehensive income.

 

Discontinued operations should be reported on the income statement

 

Which of the following are acceptable methods for reporting comprehensive income? (Select all that apply.)

 

The three types of accounting changes are a change in accounting principle, a change in accounting       , and a change in reporting       . (Enter one word per blank.)

 

If a component of the business qualifies for discontinued operations treatment, which of the following statements are true? (Select all that apply.)

 

Other comprehensive income is reported in the current reporting period on the income statement or as an addition to the income statement, and        other comprehensive income is reported on the balance sheet. (Enter only one word.)

 

The calculation of        income omits certain gains and losses that are instead included in the broader perspective of other        income. (Enter one word per blank.)

 

The financial statement that provides information about cash receipts and cash disbursements for the period is the

 

True or false: Reporting comprehensive income can be done with a single, continuous statement or in two separate, but consecutive statements.

 

The statement of cash flows is useful because (select all that apply)

 

The statement of cash flows classifies items as

 

Accumulated other comprehensive income represents

 

The operating activities section on the statement of cash flows includes the elements of net income on a(n)        basis rather than a(n)        basis. (Enter one word per blank.)

 

The purpose of the statement of cash flows includes which of the following? (Select all that apply.)

 

Inflows and outflows of cash related to the acquisition and disposition of long-lived assets used in operations and investment assets are what type of cash flow?

 

Operating, investing, and financing activities are found on which financial statement?

 

Cash borrowed or paid to a creditor is an example of a(n) _____ activity.

 

Where are the elements of net income found on a cash basis rather than an accrual basis?

 

Which is a significant noncash activity?

 

Cash flows from        activities are related to the purchase and sale of long-term assets used in business operations. (Enter only one word.)

 

The type of activities related to the external financing of the company are _____ activities.

 

Compute the asset turnover ratio using the following information: net sales is $100,000 for the year, last year's assets in place were $900,000 and this year's assets in place are $1,100,000. Receivables for both years are $50,000.

 

Significant noncash investing and financing activities are disclosed because they

 

Interim reports are financial statements covering a period

 

U.S. GAAP requires that a statement of cash flows must be presented for

 

Some        recognition is modified in interim reporting to cause interim statements to relate better to annual statements. (Enter only one word.)

 

Cash flows from investing activities include inflows and outflows of cash related to the acquisition and disposition of long-term        used in operations. (Enter only one word.)

 

What is the formula for the asset turnover ratio?

 

How are discontinued operations and unusual items treated in interim financial statements under U.S. GAAP?

 

Interim reports are typically issued

 

The earnings per share calculation for interim financial reporting under U.S. GAAP is consistent with which view?

 

Which of the following would require modified accounting treatment for interim reporting under U.S. GAAP? (Select all that apply.)

 

Accounting changes made in an interim period are reported       . (Enter only one word.)

 

Investing activities involve the acquisition and sale of (Select all that apply.)

 

Which of the following are required minimum disclosures in interim financial statements? (Select all that apply.)

 

The treatment of discontinued operations and unusual items in interim reporting under U.S. GAAP is more consistent with the _____ view.

 

Computations for EPS for interim reports under U.S. GAAP are based on what?

 

When an accounting change occurs during an interim period, the change is applied retrospectively. In subsequent interim periods of the same fiscal year, which of the following are disclosed? (Select all that apply.)

 

What represents the costs of providing goods and services to customers?

 

Which of the following is a decrease in equity due to an incidental transaction? 

 

Identify which items on an income statement are included in calculating income from continuing operations. 

 

If a causal relationship cannot be established between revenues and expenses, which of the following occurs?

 

What are increases or decreases in equity from peripheral or incidental transactions? 

 

Revenues, expenses, gains, and losses that will likely continue in future periods make up what?   

 

The outflows of resources incurred while generating revenue are referred to as 

 

Which of the following is an increase in equity from a peripheral or incidental transaction that is included in income from continuing operations?

 

Which of the following items may be included in nonoperating income for a company that manufactures televisions? 

 

Where on the income statement is income tax expense reported? 

 

True or false: If a causal relationship can be established, expenses are reported in the same period that the related revenue is recognized.

 

Gains and losses are increases or decreases in equity from which type of transactions? 

 

Janex Company manufactures refrigerators. Which of the following items would likely be included in the determination of nonoperating income on Janex's income statement? 

 

A company prepares its income statement by listing all sources of revenues and gains at the top, followed by a list of all expenses and losses. Which income statement approach does this describe?

 

An income statement that classifies items and uses subtotals for gross profit, operating income, and income from continuing operations is called a(n) __  Multiple  __ 

 

True or false: The single-step and the multiple-step formats are most commonly used in income statement preparation; however, there are no specific standards on how income from continuing operations must be displayed.

 

Operating and nonoperating items are not separately classified in a        step income statement.

 

The advantages of a multiple-step income statement is 

 

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement. 

 

________ requires certain minimum information be reported on the face of the income statement, while _____ does not have minimum requirements.

 

An income statement prepared in accordance with IFRS allows expenses to be classified by 

 

True or false: Under both U.S. GAAP and IFRS, the "bottom line" of the income statement is typically referred to as net income or net loss.

 

Net income using the multiple-step income statement presentation is ____ net income using the single-step income statement presentation.

 

A multiple-step income statement includes which of the following? 

 

Which standards require certain minimum information to be reported on the face of the income statement?

 

Expenses reported on an income statement can be classified by nature or by function under these accounting standards.

 

Although U.S. GAAP uses the term net income on the income statement, IFRS uses the terms        and       

 

Categorizing operating expenses as nonoperating expenses is an example of 

 

When are restructuring costs recognized on the income statement?

 

Earnings quality refers to 

 

When a company uses a special charge such as restructuring costs and shows a loss on the income statement, income may be manipulated through 

 

What basis is used for estimated restructuring costs?

 

If a company pays termination benefits in a restructuring and future service is not required, the restructuring costs should be recognized: 

 

If a company frequently uses restructuring charges in its income statement, an analyst should 

 

GAAP requires that restructuring costs are recognized when? 

 

What basis is used for estimated restructuring costs? 

 

The more frequently a company incurs restructuring costs, the more appropriate it is for financial statement users to include those costs in estimates of        earnings when forecasting future performance.

 

Which of the following best describes why losing a major customer at the end of the fiscal year can affect earnings quality? 

 

_____ long-lived assets should have their balance reduced if there has been a significant impairment of value. 

 

Which of the following would most likely affect earnings quality?

 

Non-GAAP earnings are 

 

The process of associating income tax effects with the income statement components that create those effects is referred to as        tax allocation.

 

The Sarbanes-Oxley Act requires that if non-GAAP earnings are included in a report or any public disclosure, the company must 

 

Which of the following activities would constitute discontinued operations?

 

The income tax expense or benefit associated with discontinued operations 

 

If a company owns multiple lines of business in different areas such as cable TV, film entertainment, networks, and publishing, and decides to sell a specific unit, the resulting gain or loss would most likely be classified as a(n)______ on the income statement. 

 

The primary purpose of the FASB/IASB convergence project on discontinued operations was to 

 

When a component has been sold and qualifies for treatment as a discontinued operation, the reported income effects disclosed will include which of the following items? 

 

As part of convergence efforts, the FASB and IASB have developed a common definition and common set of financial statement        for discontinued operations.

 

Carol Corp. has a component that is a discontinued operation. The component suffered a loss of $60,000. The component was sold for a gain of $200,000. The tax rate is 40%. What is the total income tax effect of the discontinued operations?

 

To qualify as an operation for purposes of determining discontinued operations, which of the following must occur? 

 

_____ from discontinued operations will result in additional income tax expense; _____ from discontinued operations will result in a tax benefit.

 

When a discontinued operation is sold before the end of the reporting period, the income or loss from operations and the        or        on the disposal of assets is included in the reported income.

 

Crimson Corp. has a component that is a discontinued operation. The component incurred a loss from operations of $40,000. The component was sold with an additional loss of $160,000. The tax rate is 30%. What is the income tax effect for the discontinued operation? 

 

Regal Corporation has a component that is a discontinued operation. The revenues and expenses of the component were $120,000 and $100,000 respectively. The component was sold with a resulting loss of $80,000. The tax rate is 40%. What is the total gain or loss on discontinued operations (net of tax effects) that will be reported on the income statement? 

 

A gain from discontinued operations will result in an income tax       , whereas a loss from discontinued operations will result in an income tax       .

 

When a discontinued operation is sold before the end of the reporting period, the        or        from operations and the gain or loss on the disposal of assets is included in the reported income.

 

A(n)        loss is reported if a discontinued operation is held for sale and the book value of the assets is more than the fair value minus cost to sell.

 

Crimson Corp. has a component that is a discontinued operation. The revenues and expenses of the component were $200,000 and $240,000, respectively. The component was sold with a resulting loss of $160,000. The tax rate is 30%. What is the total gain or loss on discontinued operations (net-of-tax effects) that will be reported on the income statement? 

 

Which of the following information must be included in the notes to the financial statements regarding discontinued operations? 

 

At what amount are the liabilities of a discontinued operation held for sale reported in the balance sheet? 

 

A component is qualified as a discontinued operation. What are the two elements that may be reported in discontinued operations on the income statement if the component is not sold by the end of the reporting period? 

 

Which of the following is true regarding interim reporting requirements for a discontinued operation? 

 

Additional details about discontinued operations, whether sold or held for sale, are provided in the        to the financial statements.

 

If a discontinued operation is held for sale and there is an impairment loss, what are the acceptable methods for disclosing the impairment loss? 

 

True or false: If a component of an entity is considered held for sale at the end of a quarter, the income effects of that component must be separately reported as discontinued operations. 

 

When a company changes from one acceptable accounting method to another, this is treated as a change in accounting 

 

Which of the following are acceptable ways of implementing a FASB mandated change in accounting principle? 

 

How does GAAP typically require that voluntary changes in accounting principle be accounted for? 

 

When a component that qualifies as a discontinued operation is held for sale, what are the two elements that may be reported in discontinued operations? 

 

Which of the following situations qualifies for treatment as a change in accounting principle?

 

Which implementation of a mandated change in accounting principle applies to the adoption period and future periods with an adjustment to the beginning balance of retained earnings? 

 

A change in depreciation method is accounted for by 

 

When a company voluntarily changes its inventory method from LIFO to FIFO, GAAP typically requires that this change be accounted for 

 

What is one difference in the reporting requirements between most changes in accounting estimates and a change in depreciation method?

 

A change in depreciation method is treated as a change in accounting        that is achieved by a change in accounting       .

 

Which type of change requires a justification in the notes to the financial statements? 

 

Which of the following is a routine change in estimate that does not require a disclosure note if the amount is not material? 

 

Changes in accounting estimates are reflected in the financial statements of the        period and        period.

 

Which of the following are changes in accounting estimates? 

 

When a company discovers an immaterial error in a year subsequent to the year the error is made, what is the proper course of action?

 

A prior period adjustment requires an adjustment to

 

Which of the following changes are treated on a prospective basis because the change affects the current period and future periods? 

 

Which of the following is required to correct a material error in the financial statements? 

 

When an immaterial error is discovered in the same year it is made before the financial statements are issued, what is the appropriate course of action?

 

The correction of a material error in the prior year's financial statements is considered a 

 

The accounting treatment required for a material error in financial statements that have already been issued is to 

 

A change in the residual value of a depreciable asset is treated as a change in accounting       .

 

The majority of errors discovered are not        and are corrected in the year discovered.

 

Which of the following is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding?

 

Which of the following are used to calculate diluted earnings per share? 

 

Earnings per share is disclosed at the bottom of the              .

 

Public companies report basic earnings per share on their financial statements, but if there are potentially dilutive securities,        earnings per share must also be disclosed on the income statement.

 

Which of the following is required to be disclosed on the face of a public company's income statement?

 

Where is earnings per share disclosed in the financial statements? 

 

Analyzing earnings quality requires an analyst to                  

Asset turnover ratio is net sales divided by               

A discontinued operation is reported when a (1) of an entity either (a) has been disposed of or (b) is classified as held for sale. (Enter one word per blank)                  

What is the asset turnover ratio for year 2 rounded to the nearest 1/1000?               

Inflows and outflows of cash related to the transactions used to determine net operating income are what type of activities?                 

Match each company to the type of revenue it receives.                   

Net income is a part of          

Non-GAAP earnings are                   

The potential tax expense or benefits of items reported as components of Other Comprehensive Income                 

In order to provide more complete information, U.S. GAAP allows that any significant noncash investing and financing activities may be reported (Select all that apply.)                  

The classifications on the statement of cash flows are cash flows from (Select all that apply.)             

The three types of accounting changes are a change in          

To qualify as an operation for purposes of determining discontinued operations, which of the following must occur? (Select all that apply.)             

Which of the following are significant noncash activities? (Select all that apply.)                   

Which of the following financial statement elements are measured and reported as a result of providing goods and services to customers? (Select all that apply.)             

True or false: The single-step and the multiple-step formats are most commonly used in income statement preparation; however, there are no specific standards on how income from continuing operations must be displayed.                  

When an expense benefits more than just the period in which it is incurred, how is the expense treated under U.S. GAAP?           

Where on the income statement is income tax expense reported?                

Which of the following is disclosed on the balance sheet?