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Exam 5: Income Statement and Related Information

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Question 21

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Shank 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

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 extraordinary item for the year in which the error was made.
D) a prior period adjustment.

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Question 22

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The concept that reports extraordinary items in the income statement is called the

A) phase-out period concept.
B) prior period adjustment concept.
C) current operating performance concept.
D) all-inclusive concept.

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Question 23

Multiple Choice

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For Garret Wolfe Company, the following information is available: -In Garret Wolfe's single-step income statement, gross profit

Snead, Inc. incurred the following infrequent losses during 2008: In its 2008 income statement, what amount should Snead report as total infrequent losses that are not considered extraordinary?

The primary reason the income statement is so important to investors and creditors relates to its ability to provide information helpful in

A review of the December 31, 2008, financial statements of Baden Corporation revealed that under the caption "extraordinary losses," Baden reported a total of $515,000. Further analysis revealed that the $515,000 in losses was comprised of the following items: (1) Baden recorded a loss of $150,000 incurred in the abandonment of equipment formerly used in the business. (2) In an unusual and infrequent occurrence, a loss of $250,000 was sustained as a result of hurricane damage to a warehouse. (3) During 2008, several factories were shut down during a major strike by employees, resulting in a loss of $85,000. (4) Uncollectible accounts receivable of $30,000 were written off as uncollectible. Ignoring income taxes, what amount of loss should Baden report as extraordinary on its 2008 income statement?

When a manufacturing company sells one of its plant assets at a price in excess of its book value, it should recognize

Meyer Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2008, included the following expense accounts: One-half of the rented premises is occupied by the sales department -How much of the expenses listed above should be included in Meyer's general and administrative expenses for 2008?

Which of the following should not be reported on the income statement as an extra-ordinary item?

Which of the following is true about intraperiod tax allocation?

Which of the following should be reported on the income statement as an extraordinary item?

A change in accounting principle is considered appropriate only when it is demonstrated that the newly adopted principle is preferable to the old one.

During the year 2008, Siska Corporation had the following information available related to its income statement: Cost of goods sold for 2008 amounted to

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

Meyer Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2008, included the following expense accounts: One-half of the rented premises is occupied by the sales department -How much of the expenses listed above should be included in Meyer's selling expenses for 2008?

Hogan Corp.'s trial balance of income statement accounts for the year ended December 31, 2008 included the following: On Hogan's multiple-step income statement for 2008, -Inventory purchases are

Hogan Corp.'s trial balance of income statement accounts for the year ended December 31, 2008 included the following: On Hogan's multiple-step income statement for 2008, -Income before extraordinary item is

According to the FASB, displaying comprehensive income as a part of the statement of stockholders' equity is one of the acceptable ways of presenting comprehensive income items.

A correction of an error in prior periods' income will be reported

The following information was extracted from the accounts of Boone Corporation at December 31, 2008: What should be the balance of retained earnings at December 31, 2008?