Question 1

The income statement provides investors and creditors information that helps them predict

Accepted Answer

A)   the amounts of future cash flows.
B)   the timing of future cash flows.
C)   the uncertainty of future cash flows.
D)   All of these answers are correct.

Question 2

Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as

Accepted Answer

A)   an increase in depreciation expense for the year in which the error is discovered.
B)   a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements.
C)   an other expense item for the year in which the error was made.
D)   a prior period adjustment.

Question 3

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?

Accepted Answer

A)   Increase research and development activities.
B)   Relax credit policies for customers.
C)   Delay shipments to customers until after the end of the fiscal year.
D)   Delay purchases from suppliers until after the end of the fiscal year.

Question 4

Which of the following is not required to be presented on the income statement
Under IFRS?

Accepted Answer

A)   Revenue.
B)   Other gains/losses.
C)   Finance costs.
D)   Tax expense.

Question 5

Which method of income measurement is used in the preparation of the income statement?

Accepted Answer

A)   Capital maintenance approach.
B)   Transaction approach.
C)   Cash-flow approach.
D)   Income components approach.

Question 6

The earnings per share computation is not required for

Accepted Answer

A)   Net income.
B)   Gain on disposal of discontinued operation, net of tax.
C)   Income from continuing operations.
D)   Income from operations.

Question 7

Under IFRS other comprehensive income must be displayed (reported)  in

Accepted Answer

A)   the equity section of the statement of financial position.
B)   a second income statement.
C)   the comprehensive income statement or the income statement and comprehensive income statement.
D)   the retained earnings the statement.

Question 8

Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?

Accepted Answer

A)   Non-cumulative only.
B)   Cumulative only.
C)   Neither non-cumulative nor cumulative.
D)   Both non-cumulative and cumulative.

Question 9

Companies frequently report income tax as the last item before net income on the income statement.

Accepted Answer

A) True 
 B)False

Question 10

Comprehensive income includes all of the following except

Accepted Answer

A)   dividend revenue.
B)   losses on disposal of assets.
C)   investments by owners.
D)   unrealized holding gains.

Question 11

Which of the following would appear first in a statement of retained earnings?

Accepted Answer

A)   Net income.
B)   Prior period adjustment.
C)   Cash dividends.
D)   Share dividends.P67. A correction of an error in prior periods' income will be reported

Question 12

Prior years income statements are not restated for

Accepted Answer

A)   changes in accounting principle.
B)   changes in estimates.
C)   corrections of errors.
D)   All of these answer choices are correct.

Question 13

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of

Accepted Answer

A)   quality of earnings.
B)   earnings management.
C)   smoothing of earnings.
D)   earnings averaging.

Question 14

A change in accounting principle requires what kind of adjustment to the financial statements?

Accepted Answer

A)   Current period adjustment.
B)   Prospective adjustment.
C)   Retrospective adjustment.
D)   Current and prospective adjustment.

Question 15

IFRS requires that a single amount be disclosed within the income statement for

Accepted Answer

A)   the post-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal of discontinued operational assets.
B)   the pre-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal of discontinued operational assets.
C)   the pre-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal of discontinued operational assets.
D)   the post-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal of discontinued operational assets.

Question 16

The income statement presents subtotals for gross profit, income before continuing operations, income before income tax, and net income.

Accepted Answer

A) True 
 B)False

Question 17

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to

Accepted Answer

A)   beginning retained earnings for the earliest period presented.
B)   net income for the period in which the change occurred.
C)   comprehensive income for the earliest period presented.
D)   stockholders' equity for the period in which the change occurred.

Question 18

Income from operations represents a company's results before any gain or loss on discontinued operations.

Accepted Answer

A) True 
 B)False

Question 19

In 2019, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2018. In 2019, which of the following accounts will have to be credited to correct this error?

Accepted Answer

A)   Salaries and Wages Payable.
B)   Salaries and Wages Expense.
C)   Retained Earnings.
D)   Income Summary.

Question 20

The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

Accepted Answer

A) True 
 B)False

Exam 4: Income Statement and Related Information

Prior years income statements are not restated for

Correct Answer
verified

The income statement provides investors and creditors information that helps them predict

Correct Answer
verified

The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

Correct Answer
verified

IFRS requires that a single amount be disclosed within the income statement for

Correct Answer
verified

The income statement presents subtotals for gross profit, income before continuing operations, income before income tax, and net income.

Correct Answer
verified

A change in accounting principle requires what kind of adjustment to the financial statements?

Correct Answer
verified

Which of the following would appear first in a statement of retained earnings?

Correct Answer
verified

Under IFRS other comprehensive income must be displayed (reported) in

Correct Answer
verified

Companies frequently report income tax as the last item before net income on the income statement.

Correct Answer
verified

In 2019, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2018. In 2019, which of the following accounts will have to be credited to correct this error?

Correct Answer
verified

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of

Correct Answer
verified

Income from operations represents a company's results before any gain or loss on discontinued operations.

Correct Answer
verified

Which of the following is not required to be presented on the income statement Under IFRS?

Correct Answer
verified

Comprehensive income includes all of the following except

Correct Answer
verified

Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?

Correct Answer
verified

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to

Correct Answer
verified

Correct Answer
verified

The earnings per share computation is not required for

Correct Answer
verified

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?

Correct Answer
verified

Which method of income measurement is used in the preparation of the income statement?

Correct Answer
verified

Exam 4: Income Statement and Related Information

Prior years income statements are not restated for

Correct AnswerverifiedShow Answer

The income statement provides investors and creditors information that helps them predict

Correct AnswerverifiedShow Answer

The transaction approach of income measurement focuses on the income-related activities that have occurred during the period.

Correct AnswerverifiedShow Answer

IFRS requires that a single amount be disclosed within the income statement for

Correct AnswerverifiedShow Answer

The income statement presents subtotals for gross profit, income before continuing operations, income before income tax, and net income.

Correct AnswerverifiedShow Answer

A change in accounting principle requires what kind of adjustment to the financial statements?

Correct AnswerverifiedShow Answer

Which of the following would appear first in a statement of retained earnings?

Correct AnswerverifiedShow Answer

Under IFRS other comprehensive income must be displayed (reported) in

Correct AnswerverifiedShow Answer

Companies frequently report income tax as the last item before net income on the income statement.

Correct AnswerverifiedShow Answer

In 2019, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2018. In 2019, which of the following accounts will have to be credited to correct this error?

Correct AnswerverifiedShow Answer

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of

Correct AnswerverifiedShow Answer

Income from operations represents a company's results before any gain or loss on discontinued operations.

Correct AnswerverifiedShow Answer

Which of the following is not required to be presented on the income statement Under IFRS?

Correct AnswerverifiedShow Answer

Comprehensive income includes all of the following except

Correct AnswerverifiedShow Answer

Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?

Correct AnswerverifiedShow Answer

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The earnings per share computation is not required for

Correct AnswerverifiedShow Answer

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?

Correct AnswerverifiedShow Answer

Which method of income measurement is used in the preparation of the income statement?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified