Question 1

If Company A acquires Company B, required financial statement disclosures include all of the following except:

Accepted Answer

A)  The effect of the change on net income.
B)  The effect of the change on market share.
C)  The effect of the change on income before extraordinary items.
D)  The per share effects of the change.E) All of the above
F) C) and D)

Question 2

Aggie Co. purchased equipment on January 1, 2004, at a cost of $650,000. The asset was estimated to have a 12-year life with a residual value of $50,000. Aggie uses straight-line depreciation. In 2009, Aggie revised its total estimated life to 10 years, with no residual value.
Required: Prepare journal entries to record Aggie's depreciation expense for 2008 and 2009. Show computations.

Accepted Answer

The answer of Aggie Co. purchased equipment on January 1,...

Question 3

A voluntary change in accounting principle is accounted for by:

Accepted Answer

A)  A cumulative effect on income in the year of the change.
B)  A retrospective reporting of all comparative financial statements shown.
C)  A prior period adjustment.
D)  A separate line component of income.E) A) and D)
F) All of the above

Question 4

Rowdy's would report net cash inflows (outflows)  from investing activities in the amount of:

Accepted Answer

A)  $(4,000) .
B)  $ 100.
C)  $(3,900) .
D)  $(1,900) .E) B) and C)
F) C) and D)

Question 5

Comprehensive income is the total change in shareholders' equity that occurred during the period.

Accepted Answer

A) True 
 B)False

Question 6

Rowdy's would report net cash inflows (outflows)  from financing activities in the amount of:

Accepted Answer

A)  $ 1,100.
B)  $(1,100) .
C)  $ 820.
D)  $ 900.E) B) and C)
F) B) and D)

Question 7

The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s)  should Mercedes report as loss on discontinued operations in its 2009 income statement?

Accepted Answer

A)  $2,000,000 loss.
B)  $2,500,000 loss.
C)  None.
D)  $500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.$2,000,000 loss from operations and $500,000 impairment loss = $2,500,000.E) C) and D)
F) A) and B) B

Question 8

Pro forma earnings:

Accepted Answer

A)  Are management's view of permanent earnings.
B)  Are needed for the correction of errors.
C)  Are standardized under generally accepted accounting principles.
D)  Are useful to compare two different firms' performance.E) C) and D)
F) A) and B)

Question 9

The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities.

Accepted Answer

A) True 
 B)False

Question 10

On August 1, 2009, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to SFAS No. 144. The disposal of the division was expected to be concluded by June 30, 2010. On January 31, 2010, Rocket's fiscal year-end, the following information relative to the discontinued division was accumulated: In its income statement for the year ended January 31, 2010, Rocket would report a before-tax loss on discontinued operations of:

Accepted Answer

A)  $115,000.
B)  $195,000.
C)  $ 65,000.
D)  $125,000.E) C) and D)
F) None of the above

Question 11

Reconciliation between net income and comprehensive income would include:

Accepted Answer

A)  Unrealized losses but not unrealized gains on available for sale securities.
B)  Unrealized gains but not unrealized losses on available for sale securities.
C)  Unrealized losses and unrealized gains on available for sale securities.
D)  Neither unrealized losses nor unrealized gains on available for sale securities.E) B) and D)
F) A) and B)

Question 12

Income statements prepared according to both U.S. GAAP and International Accounting Standards require the separate reporting, as an extraordinary item, of material gains and losses from events that are both unusual and infrequent.

Accepted Answer

A) True 
 B)False  False

Question 13

Material restructuring costs are reported as an element of income from continuing operations.

Accepted Answer

A) True 
 B)False

Question 14

The Claxton Company manufactures children's toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to SFAS No. 144. How should Claxton report the sale in its 2009 income statement?

Accepted Answer

A)  As an extraordinary item.
B)  As a discontinued operation, reported below income from continuing operations.
C)  Report the income or loss from operations of the division in discontinued operations below continuing operations and the gain or loss from disposal in continuing operations.
D)  None of these.E) A) and D)
F) None of the above

Question 15

Cash flows from financing activities include:

Accepted Answer

A)  Interest received.
B)  Interest paid.
C)  Dividends received.
D)  Dividends paid.E) A) and D)
F) A) and B)

Question 16

Cash flows from investing activities do not include:

Accepted Answer

A)  Proceeds from issuing bonds.
B)  Payment for the purchase of equipment.
C)  Proceeds from the sale of marketable securities.
D)  Cash outflows from acquiring land.E) All of the above
F) A) and D)

Question 17

The FASB's stated preference for reporting operating cash flows is the:

Accepted Answer

A)  Indirect method.
B)  Direct method.
C)  Working capital method.
D)  All financial resources method.E) B) and C)
F) C) and D) B

Question 18

Income from continuing operations sometimes includes gains from non-operating activities.

Accepted Answer

A) True 
 B)False

Question 19

Give an example of a non-cash financing and investing activity and explain when and how it would be reported in the financial statements.

Accepted Answer

The purchase of land and building in exc...

Question 20

Major Co. reported 2009 income of $300,000 from continuing operations before income taxes and a before-tax extraordinary loss of $80,000. All income is subject to a 30% tax rate. In the 2009 income statement, Major Co. would show the following line-item amounts for income tax expense and net income:

Accepted Answer

A)  $66,000 and $210,000.
B)  $90,000 and $154,000.
C)  $90,000 and $276,000.
D)  $66,000 and $220,000.E) B) and D)
F) All of the above

Exam 4: The Income Statement and Statement of Cash Flows

If Company A acquires Company B, required financial statement disclosures include all of the following except:

Correct Answer
verified

Correct Answer
verified

A voluntary change in accounting principle is accounted for by:

Correct Answer
verified

Rowdy's would report net cash inflows (outflows) from investing activities in the amount of:

Correct Answer
verified

Comprehensive income is the total change in shareholders' equity that occurred during the period.

Correct Answer
verified

Rowdy's would report net cash inflows (outflows) from financing activities in the amount of:

Correct Answer
verified

The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2009 income statement?

Correct Answer
verified
B

Pro forma earnings:

Correct Answer
verified

The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities.

Correct Answer
verified

Correct Answer
verified

Reconciliation between net income and comprehensive income would include:

Correct Answer
verified

Income statements prepared according to both U.S. GAAP and International Accounting Standards require the separate reporting, as an extraordinary item, of material gains and losses from events that are both unusual and infrequent.

Correct Answer
verified
False

Material restructuring costs are reported as an element of income from continuing operations.

Correct Answer
verified

Correct Answer
verified

Cash flows from financing activities include:

Correct Answer
verified

Cash flows from investing activities do not include:

Correct Answer
verified

The FASB's stated preference for reporting operating cash flows is the:

Correct Answer
verified
B

Income from continuing operations sometimes includes gains from non-operating activities.

Correct Answer
verified

Give an example of a non-cash financing and investing activity and explain when and how it would be reported in the financial statements.

Correct Answer
verified
The purchase of land and building in exc...
View Answer

Major Co. reported 2009 income of $300,000 from continuing operations before income taxes and a before-tax extraordinary loss of $80,000. All income is subject to a 30% tax rate. In the 2009 income statement, Major Co. would show the following line-item amounts for income tax expense and net income:

Correct Answer
verified

Exam 4: The Income Statement and Statement of Cash Flows

If Company A acquires Company B, required financial statement disclosures include all of the following except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A voluntary change in accounting principle is accounted for by:

Correct AnswerverifiedShow Answer

Rowdy's would report net cash inflows (outflows) from investing activities in the amount of:

Correct AnswerverifiedShow Answer

Comprehensive income is the total change in shareholders' equity that occurred during the period.

Correct AnswerverifiedShow Answer

Rowdy's would report net cash inflows (outflows) from financing activities in the amount of:

Correct AnswerverifiedShow Answer

The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2009 income statement?

Correct AnswerverifiedB

Pro forma earnings:

Correct AnswerverifiedShow Answer

The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Reconciliation between net income and comprehensive income would include:

Correct AnswerverifiedShow Answer

Income statements prepared according to both U.S. GAAP and International Accounting Standards require the separate reporting, as an extraordinary item, of material gains and losses from events that are both unusual and infrequent.

Correct AnswerverifiedFalse

Material restructuring costs are reported as an element of income from continuing operations.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cash flows from financing activities include:

Correct AnswerverifiedShow Answer

Cash flows from investing activities do not include:

Correct AnswerverifiedShow Answer

The FASB's stated preference for reporting operating cash flows is the:

Correct AnswerverifiedB

Income from continuing operations sometimes includes gains from non-operating activities.

Correct AnswerverifiedShow Answer

Give an example of a non-cash financing and investing activity and explain when and how it would be reported in the financial statements.

Correct AnswerverifiedThe purchase of land and building in exc...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified
The purchase of land and building in exc...
View Answer

Correct Answer
verified