F1 M1 Balance Sheet, Income Statement & Comprehensive Income Flashcards
The current exchange rate is 1.59 U.S. dollars per British pound. If a retailer in Great Britain were to quote the exchange rate using the direct method, he would say:
A. 1 British pound is equal to 1.59 U.S. dollars.
B. 1 U.S. dollar is equal to 1.59 British pounds.
C. 0.63 British pounds are equal to 1 U.S. dollar.
D. 0.63 U.S. dollars are equal to 1 British pound
C. 0.63 British pounds are equal to 1 U.S. dollar.
What are the 4 items included in Other Comprehensive Income (PUFI)
- Pension Adjustments
- Unrealized Gains & Losses on AFS securities
- Foreign Currency translations/transactions
- Instrument-specific credit risk (or Hedging Instruments)
Noshima, a Japanese company, exports goods to Jacobs, a U.S. company. If the transaction is to be settled in yen, which of the following statements is correct?
A. Noshima will book a gain if the Japanese yen depreciates versus the US dollar.
B. Noshima will book a gain if the U.S. dollar appreciates versus the Japanese yen
C. Jacobs will book a gain if the Japanese yen appreciates versus the U.S. dollar.
D. Jacobs will book a gain if the U.S. dollar appreciates versus the Japanese yen
D. Jacobs will book a gain if the U.S. dollar appreciates versus the Japanese yen.
Scott Corporation sold a fixed asset used for operations for greater than its carrying amount. Scott should report the transaction in the income statement using the:
A. Net concept, showing the total gain as part of continuing operations, not net of income taxes.
B. Gross concept, showing the proceeds as part of revenues and the carrying amount as part of expenses in the continuing operations section.
C. Net concept, showing the total amount as a component of other comprehensive income, net of income taxes.
D. Net concept, showing the total gain as part of discontinued operations, net of income taxes.
A. Net concept, showing the total gain as part of continuing operations, not net of income taxes.
In Dart Co.’s Year 2 single-step income statement, as prepared by Dart’s controller, the section titled “Revenues” consisted of the following:
Sales $250,000
Purchase discounts $3,000
Recovery of accounts written off $10,000
Total revenues $263,000
In its Year 2 single-step income statement, what amount should Dart report as total revenues?
$250,000
The single-step income statement will include in total revenues all sales of goods, services, and rentals. Purchase discounts are not included in revenue, but instead reduce cost of goods sold. The recovery of accounts written off does not hit the revenue account.
During January Year 3, Doe Corp. agreed to sell the assets and product line of its Hart division. The decision represents a major strategic shift for Doe and will have a significant effect on its operations and financial results. The sale was completed on January 15, Year 4, and resulted in a gain on disposal of $900,000. Hart’s operating losses were $600,000 for Year 3 and $50,000 for the period January 1 through January 15, Year 4. Disregarding income taxes, what amount of net gain (loss) should be reported in Doe’s comparative Year 4 and Year 3 income statements?
Year 3: $(600,000)
Year 4: $850,000
One of the elements of a financial statement is comprehensive income. Comprehensive income excludes changes in equity resulting from which of the following?
A. Unrealized loss on investments in non-current marketable equity securities.
B. Loss from discontinued operations.
C. Prior period error correction.
D. Dividends paid to stockholders.
D. Dividends paid to stockholders.
Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest of Envoy’s operations. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation?
A. When Envoy sells the majority of the assets of the segment.
B. When Envoy classifies it as held for sale.
C. When Envoy receives an offer for the segment.
D. When Envoy first sells any of the assets of the segment.
B. When Envoy classifies it as held for sale.
Which of the following statements regarding comprehensive income is correct?
A. Discontinued operations are the last items recorded in comprehensive income.
B. Comprehensive income must always equal or exceed net income.
C. The relationship between net income and retained earnings is analogous to the relationship between other comprehensive income and accumulated other comprehensive income.
D. Other comprehensive income is a permanent account, which never gets closed, thus it carries its balance over from one year to the next.
C. The relationship between net income and retained earnings is analogous to the relationship between other comprehensive income and accumulated other comprehensive income.
Ignoring taxes, which of the following situations will cause comprehensive income to decrease?
A. An unrealized gain on an available-for-sale security.
B. An unrealized loss on a trading security.
C. A dividend payout to company shareholders.
D. The amortization of an actuarial pension loss.
B. An unrealized loss on a trading security.
Which of the following items is included in accumulated other comprehensive income or loss?
A. Prior service costs not previously recognized as a component of net periodic pension costs.
B. Unrealized gains and losses from a derivative properly designated as a fair value hedge.
C. Unrealized holding gains or losses on securities classified as trading securities.
D. A reduction of shareholders’ equity related to employee stock ownership plans.
A. Prior service costs not previously recognized as a component of net periodic pension costs.
Which of the following is an accurate statement regarding tax reporting issues pertaining to other comprehensive income items?
A. The income tax expense or benefit for each other comprehensive income component must be disclosed in the footnotes to the financial statements.
B. The individual components of other comprehensive income must be reported on a net of tax basis.
C. The income tax expense or benefit for each other comprehensive income component must be disclosed on the face of the financial statements that these components appear.
D. The individual components of other comprehensive income may be either reported on a before tax basis with an aggregate tax amount reported after these items or individually on a net of tax basis.
D. The individual components of other comprehensive income may be either reported on a before tax basis with an aggregate tax amount reported after these items or individually on a net of tax basis.
