Accounting 320 Test 1 Multiple Choice || with 100% Correct Answers.

Income Statement correct answers Report that measures the success of company operations for a given period of time. It provides investors and creditors with information that helps them predict the amounts, timing, and uncertainty of future cash flows. Usefulness of the Income Statement correct answers 1) Evaluate the past performance of the company. 2) Provide a basis for predicting future performance. 3) Help assess the risk or uncertainty of achieving future cash flows. Limitations of the Income Statement correct answers 1) Companies omit items that they cannot measure reliably 2) Income numbers are affected by the accounting methods employed 3) Income measurement involves judgment Earnings Management correct answers The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings. In most cases, used to increase income in the current year at the expense of income in future years. Also used to decrease current earnings in order to increase income in the future. Classic case is the use of "cookie jar" reserves. Multiple Step Income Statement Format correct answers Operating (sales, cogs, selling expenses, administrative expenses) , Nonoperating ( other revenues and gains, other expenses and losses) , Income Tax, Discontinued Operations, Noncontrolling Interest, Earnings Per Share. Single Step Income Statement correct answers Only consists of two groupings: revenues and expenses. Primary advantage lies in its simple presentation and the absence of any implication that one type of revenue or expense has priority over another. Modified All-Inclusive Concept for I/S correct answers Companies record most items, including unusual or irregular ones, as part of net income. Companies are required to highlight these items in the financial statements so that users can better determine the long-run earning power of the company. 1) unusual gains/losses 2) discontinued ops 3) extraordinary items 4) noncontrolling interest Unusual G/L correct answers ex) losses on write down or write off of receivables, inventories, PPE, research and development costs, or other intangible assets. G/L from exchange or translation of foreign currencies. Restructuring charges. G/L from sale or abandonment of PPE. Strike Effects. Adjustment of accruals on long term contracts. normally reported above income from ops before income taxes.