Income Statement

Question 1

The _____ __ ___ _____ _______ is to provide information on the uses of funds in the income process, uses of funds that will never be used to earn income (losses), the sources of funds created by those expenses, and the sources of funds not associated with the earnings process (gains)

Answer 1

purpose of the income statement

Question 2

The income statement is useful in determining _______, value for _______ purposes, ______ worthiness, and _______ future cash flows

Answer 2

profitability; investment; credit; predicting

Question 3

An amount expended for items such as capital assets, services, and merchandise received

Answer 3

cost

Question 4

Costs that will expire in future periods and be charged against revenues from future periods

Answer 4

unexpired costs

Question 5

Inventory, prepaid insurance, NBV of fixed assets, and unexpired costs of patents are:

Answer 5

unexpired costs

Question 6

Unexpired costs =

expired costs=

Answer 6

assets

expenses

Question 7

Revenues and expenses are reported at their ______ amounts

Answer 7

gross

Question 8

Gains (on the sale of fixed assets) and losses (on the sale of investment assets) are reported at their ______ amounts

Answer 8

net

Question 9

Presentation order of the income statement and retained earnings statements

Answer 9

IDEA
Income from continuing operations
Discontinued operations
Extraordinary items
Accounting principle change

Question 10

Income from continuing operations reports both _______ and ________ activities

Answer 10

operating; non-operating

Question 11

Income from continuing operations includes _____ income and income ____ ___ ______

Answer 11

gross; net of tax

Question 12

Multiple step income statements report operating revs and exps ______ from non-operating revs and exps and other gains and losses

Answer 12

separately

Question 13

Benefit of multiple step income statements:

Answer 13

enhanced user information

Question 14

Purchase price and freight in included in:

Answer 14

inventory cost

Question 15

Freight out, salaries and commissions, advertising included in:

Answer 15

selling expense

Question 16

Officer’s salaries, accounting and legal, insurance included in:

Answer 16

general & administrative

Question 17

auxiliary activities, interest expense included in:

Answer 17

non-operating

Question 18

Single step income statement shows total ______ subtracted from total ______

Answer 18

expenses; revenues

Question 19

Discontinued operations are reported ____ ___ _____

Answer 19

net of tax

Question 20

Impairment loss, a gain/loss from actual operations, a gain/loss on disposal are:

Answer 20

discontinued operations

Question 21

Discontinued operations are included in the period in which they _____

Answer 21

occur

Question 22

A component of an entity is _______ ______, both _____ and for ______ _____ purposes from the rest of the entity

Answer 22

clearly distinguished; operationally; financial reporting

Question 23

Criteria for held for sale (5)

Answer 23

a plan to sell
available for immediate sale
active program to locate buyer
sale is probably and expected within one year
actively marketed

Question 24

Under IFRS, before a component can be classified as held for sale individual _____ and _____ of component must be measured

Answer 24

assets; liabilities

Question 25

Recorded under discontinued operations if entity has been _______ or classified as ____ __ _____

Answer 25

disposed of; held for sale

Question 26

Conditions that must be present to report in discontinued operations (2)

Answer 26

eliminated from ongoing operations; no significant continuing involvement

Question 27

Items included in results of discontinued operations (3)

Answer 27

results of operations
gain or loss on disposal
impairment loss

Question 28

A gain on discontinued operations is recognized for any subsequent increase in fair value minus the costs to sell but ___ __ _____ of the previously recognized cumulative loss

Answer 28

not in excess

Question 29

Assets within the discontinued operations component are no longer ______ or ______

Answer 29

depreciated; amortized

Question 30

A component classified as held for sale is measured at the lower of its ____ _____ or ____ _____ less costs to sell

Answer 30

carrying amount; fair value

Question 31

As part of its convergence with IFRS, GAAP requires the recognition of a liability for the costs associated with an ____ or ______ activity

Answer 31

exit; disposal

Question 32

A liability is recognized only when (2):

Answer 32

an obligating event has occurred

a present obligation to transfer assets (payment)

Question 33

Future operating losses expected to be incurred as part of an exit or disposal activity are recognized in the ______ ______

Answer 33

period incurred

Question 34

Exit or disposal liabilities are measured at _____ ______ and are reported in ______ ______

Answer 34

fair value; discontinued operations

Question 35

Information on exit or disclosure activities must be disclosed in the _______

Answer 35

notes

Question 36

Extraordinary items are reported ____ ____ _____

Answer 36

net of tax

Question 37

An item is deemed extraordinary when it is (3):

Answer 37

material, unusual, and infrequent

Question 38

Some natural disasters, expropriation by the government, prohibition of a product line, some gains/losses from extinguishment of long-term debt

Answer 38

extraordinary items

Question 39

Gain/loss from sale or abandonment of property, large write-offs/write-downs, foreign currency transaction/translation, losses from major strike by employees, long-term debt extinguishments that are part of a common management strategy are __ ______ and are presented as a separate component of ________ _______

Answer 39

not extraordinary; continuing operations

Question 40

Unusual OR infrequent items are _____ _____ and included in ___________ revenues/expenses

Answer 40

not extraordinary; non-operating

Question 41

Under IFRS a company ______ present any item as extraordinary

Answer 41

cannot

Question 42

Accounting principle change is reported ____ ___ _____

Answer 42

net of tax

Question 43

Accounting principle changes are included in the ____ _____ ______

Answer 43

retained earnings statement

Question 44

Accounting changes classified as (3):

Answer 44

accounting estimate, accounting principle, accounting entity

Question 45

When a change in accounting estimate occurs prior periods are ____ _______

Answer 45

not restated

Question 46

Changes in accounting estimates are _______

Answer 46

prospective

Question 47

If a change in accounting estimate affects several future periods should be ____ __ ___ ______ to the financial statments

Answer 47

disclosed in the notes

Question 48

Changes in the estimates of uncollectible accounts and inventory do not need disclosed unless they are ______

Answer 48

material

Question 49

Changes in accounting principle (GAAP to GAAP) require _______ application

Answer 49

retrospective

Question 50

An accounting principle may be changed only if ______ by GAAP/IFRS or if the alternative principle is preferable and ____ _____ presents the information

Answer 50

required; more fairly

Question 51

If non-comparative financial statements used, then cumulative effect of a change in accounting principle = Beg. RE in the _____ ___ _____ - what the RE would have been had the change been ______ applied to all prior affect periods

Answer 51

period of change; retroactively

Question 52

If comparative financial statements used , then cumulative effect = Beg. RE in the _____ ____ _____ - what RE would have been if the new principle had been applied to all prior periods

Answer 52

first period presented

Question 53

Changes in accounting principle should be recognized by adjusting _____ ______ ______ in the _______ period presented for the cumulative effect of the change

Answer 53

beginning retained earnings; earliest

Question 54

In disclosing comparative information applying to an accounting principle, IFRS required the presentation of __ balance sheets

Answer 54

3

Question 55

Exceptions to the retrospective rule with changes in accounting principle (2):

Answer 55

change to LIFO (prospective)

change in depreciation method (prospective)

Question 56

Changes in accounting entity require a _______ application

Answer 56

retrospective

Question 57

An example of a change in accounting entity:

Answer 57

consolidated/combined financial statements that are presented in place of statements of individual companies

Question 58

If ______ financial statements are presented, restatements to reflect information for the new entity are required

Answer 58

comparative

Question 59

IFRS ____ _____ include the concept of a change in accounting entity

Answer 59

does not

Question 60

Error corrections (non-GAAP to GAAP) are a ____ _____ adjustment

Answer 60

prior period

Question 61

If comparative financial statements are presented either _____ the information if the year is presented or ___ _____ _____ _____ of the earliest year presented if the year is not presented

Answer 61

correct; adjust beginning retained earnings

Question 62

If comparative financial statements are not presented, adjust the ____ _____ of retained earnings (net of tax)

Answer 62

opening balance

Question 63

______ does not have an impracticality exemption for error corrections

Answer 63

GAAP