Test 4 Questions and Answers (9 July 2018 Exam)

CHAPTER 4
INCOME STATEMENT AND RELATED INFORMATION
IFRS questions are available at the end of this chapter.


TRUE-FALSE—Conceptual
Answer No. Description
T 1. Usefulness of the income statement.
F 2. Limitations of the income statement.
F 3. Earnings management.
T 4. Transaction approach of income measurement.
T 5. Single-step income statement.
T 6. Revenues and gains.
F 7. Multiple-step vs. single-step income statement.
F 8. Multiple-step income statement.
T 9. Multiple-step vs. single-step income statement.
F 10. Current operating performance approach.
T 11. Reporting discontinued operations.
F 12. Reporting extraordinary items.
F 13. Irregular items.
T 14. Intraperiod tax allocation.
F 15. Reporting earnings per share.
F 16. Computation of earnings per share.
T 17. Prior period adjustments.
F 18. Retained earnings restrictions.
F 19. Comprehensive income definition.
T 20. Reporting other comprehensive income.


MULTIPLE CHOICE—Conceptual
Answer No. Description
c 21. Elements of the income statement.
d 22. Usefulness of the income statement.
b 23. Limitations of the income statement.
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d 24. Use of an income statement.
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d 25. Income statement reporting.
c 26. Income statement information.
b 27. Example of managing earnings down.
c 28. Example of managing earnings up.
b 29. Improving current net income.
a 30. Decreasing current net income.
d 31. Single-step income statement advantage.
b 32. Single-step income statement.
d 33. Methods of preparing income statements.
a 34. Income statement presentation.
b 35. Event with no income statement effect.

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c 36. Net income effect.

,4-2 Test Bank for Intermediate Accounting, Fourteenth Edition

MULTIPLE CHOICE—Conceptual (cont.)
Answer No. Description
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b 37. Selling expenses.
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b 38. Reporting merchandise inventory.
a 39. Definition of an extraordinary item.
d 40. Classification of an extraordinary item.
d 41. Identification of an extraordinary item.
a 42. Identification of an extraordinary item.
d 43. Identification of an extraordinary item.
a 44. Presentation of unusual or infrequent items.
d 45. Identification of a change in accounting principle.
d 46. Classification of extraordinary items.
c 47. EPS disclosures on income statement.
c 48. Reporting discontinued operations.
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c 49. Reporting unusual or infrequent items.
d 50. Intraperiod tax allocation.
d 51. Purpose of intraperiod tax allocation.
c 52. Intraperiod tax allocation.
d 53. Reporting items net of tax.
d 54. Reporting items at gross amount.
c 55. Earnings per share disclosure.
d 56. EPS disclosures on income statement.
d 57. EPS disclosures on income statement.
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c 58. Earnings per share disclosure.
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d 59. Reporting correction of an error.
c 60. Retained earnings statement.
d 61. Prior period adjustment.
d 62. Identification of a prior period adjustment.
b 63. Reporting EPS amounts.
c 64. Reporting EPS on financial statements.
b 65. Comprehensive income inclusion.
a 66. Displaying comprehensive income.
d 67. Comprehensive income disclosure method.
c 68. Comprehensive income items.
c 69. Providing information about components of comprehensive income.


MULTIPLE CHOICE—Computational
Answer No. Description
a 70. Calculate total revenues.
c 71. Calculate total expenses.
a 72. Single-step income statement.
c 73. Multiple-step income statement.
c 74. Multiple-step income statement.
c 75. Calculation of net sales.
a 76. Presentation of gain on sale of plant assets.
a 77. Extraordinary items.
a 78. Extraordinary items.
a 79. Calculate income before extraordinary items.
c 80. Calculate income before taxes and extraordinary items.

, Income Statement and Related Information 4-3

MULTIPLE CHOICE—Computational (cont.)
b 81. Calculate extraordinary loss.
a 82. Events affecting income from continuing operations.
b 83. Calculation of events affecting net income.
c 84. Disposal of a major business component.
c 85. Tax effect on irregular items.
c 86. Tax effect on irregular items.
b 87. Calculate income tax expense.
a 88. Calculate income tax expense.
a 89. Calculate income tax expense.
b 90. Calculate earnings per share.
d 91. Calculate EPS for extraordinary loss.
d 92. Calculate earnings per share.
c 93. Earnings per share.
c 94. Earnings per share.
a 95. Retained earnings statement.
b 96. Retained earnings statement.
c 97. Retained earnings statement.
d 98. Retained earnings statement.
d 99. Calculate balance of retained earnings.
d 100. Calculate other comprehensive income.
a 101. Calculate comprehensive income.
c 102. Calculate ending Accumulated Other Comprehensive Income.
c 103. Calculate ending Retained Earnings balance.
a 104. Calculate total stockholders' equity.
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Note: these questions also appear in the Problem-Solving Survival Guide.
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Note: these questions also appear in the Study Guide.

MULTIPLE CHOICE—CPA Adapted
Answer No. Description
d 105. Calculate selling expenses.
a 106. Calculate general and administrative expenses.
a 107. Calculate selling expenses.
a 108. Calculate general and administrative expenses.
d 109. Calculate cost of goods manufactured.
c 110. Calculate income before extraordinary item.
a 111. Determine extraordinary loss.
b 112. Determine infrequent gains not extraordinary.
a 113. Determine infrequent losses not extraordinary.
b 114. Identification of prior period adjustment.