Reference no: EM13116387
1) The following items were among those that were reported on dye co.'s income statement for the year ended Dec. 31, 2010:
Legal and audit fees $130,000
Rent for office space $180,000
Interest on inventory floor plan $210,000
Loss on abandoned equipment used in operations $35,000
The office space is used equally by dye's sales and accounting departments. What amount of the above-listed items should be classified as general and administrative expenses in dye's multiple-step income statement?
a) $310,000
b) $430,000
c) $220,000
d) $225,000
2) Chase corp. had the following infrequent transactions during 2010:
A $150,000 gain from selling the only investment chase has ever owned
A $210,000 gain on the sale of equipment
A $70,000 loss on the write- down of inventories
In its 2010 income statement, what amount should chase report as total infrequent net gains that are not considered extraordinary?
a) $290,000
b) $80,000
c) $360,000
d) $140,000
3) 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 investment accounts
b) Material losses resulting from correction of errors related to prior periods
c) Material losses resulting from the write-off of intangibles
d) Material losses resulting from unusual sales of assets not acquired for resale
4) Leonard Corporation reports the following information:
Correction of overstatements of depreciation expense
in prior years, net of tax $215,000
Dividends declared $160,000
Net income $500,000
Retained earnings, 1/1/10, as reported $1,000,000
Leonard should report retained earning, 12/31/10, at
a) $1,340,000
b) $785,000
c) $1,125,000
d) $1,555,000
5) Gross billings for merchandise sold by Lang Co. to its customers last year amounted to $15,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Co. were
a) $15,720,000
b) $15,350,000
c) 15,175,000
d) 15,035,000
6) A material item which is unusual in nature or infrequent in occurrence, but not both should be shown in the income statement
Net of Tax Disclosed separately
a) NO Yes
b) NO NO
c) Yes No
d) Yes Yes
7) Which of the following items would be reported at its gross amount on the face of the income statement?
a) Unusual gain
b) Prior period adjustment
c) Extraordinary loss
d) Cumulative effect of a change in an accounting principle
8) Ortiz co. had the following account balances:
Sales $120,000
Costs of goods sold 60,000
Salary expense 10,000
Depreciation expense 20,000
Dividend revenue 4,000
Utilities expense 8,000
Rental revenue 20,000
Interest expense 12,000
Sales returns 11,000
Advertising expense 13,000
What would Ortiz report as total expenses in a single-step income statement?
a) $127,000
b) 123,000
c) 134,000
d) 63,000
9) The income statement information would help in which of the following tasks?
a) Evaluate the liquidity of a company
b) Estimate future financial flexibility
c) Estimate future cash flows
d) Evaluate the solvency of a company
10) Lantos company had a 40% tax rate. Given the following pre-tax amounts, what would be in the income tax expense reported on the face of the income statement?
Sales $100,000
Cost of goods sold 60,000
Salary expense 8,000
Depreciation expense 11,000
Dividend revenue 9,000
Utilities expense 1,000
Extraordinary loss 10,000
Interest expense 2,000
a) $10,800
b) 7,200
c) 6,800
d) 3,200
11) What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?
a) Delay shipments to customers until after the end of the fiscal year
b) Relax credit policies for customers
c) Delay purchases from suppliers until after the end of the fiscal year
d) Increase research and development activities
12) Which disclosure method do most companies use to display the components of other comprehensive income?
a) Second income statement
b) Combined statement of retained earnings
c) As part of the statement of stockholder's equity
d) Combined statement of comprehensive income
13) Which of the following is an example of managing earnings down?
a) Not writing off obsolete inventory
b) Reducing research and development expenditures
c) Revising the estimated life of equipment from 10 years to 8 years
d) Changing estimated bad debts from 3% to 2.5% of sales
14) Which of the following would represent the least likely use of an income statement prepared for a business enterprise?
a) Use by government agencies to formulate tax and economic policy.
b) Use by labor unions to examine earning closely as a basis for salary discussions
c) Use by customers to determine a company's ability to provide needed goods and services
d) Use by investors interested in the financial position of the entity
15) Which of the following is an example of managing earnings up?
a) Decreasing estimated salvage value of equipment
b) Writing off obsolete inventory
c) Underestimating warranty claims
d) Accruing a contingent liability for an ongoing lawsuit
16) 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 not be segregated, but should be reported together with the results of continuing operations.
b) Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement.
c) Results of operations of a discontinued component should be disclosed immediately below extraordinary items.
d) The gain or loss on disposal should be reported as an extraordinary item.
17) Earnings per share should always be shown separately for
a) Net income and pretax income
b) Extraordinary items and prior period adjustments
c) Net income and gross margin
d) Income before extraordinary items
18) Arreaga Corp. has a tax rate of 40% and income before non-operating items of $232,000. It also has the following items (gross amounts):
Unusual loss $37,000
Extraordinary loss 101,000
Gain on disposal of equipment 8,000
Change in accounting principle
Increasing prior year's income 74,000
What is the amount of income tax expense to be reported on the income statement?
a) 92,800
b) 81,200
c) 99,200
d) 62,000
19) Which of the following earnings per share figures must be disclosed on the face of the income statement?
a) EPS for income before taxes
b) EPS for gross profit
c) EPS for income from continuing operations
d) The effect on EPS from unusual items