Income Statement

Question 1

What is the presentation order of Income and Retained Earnings Statements?

Answer 1

IDEA- Income from continuing Operations, Income from Discontinued Operations, Extraordinary Items, Cumulative effective of a change in accounting principle.

Question 2

Which items in the income statement is reported gross of tax?

Answer 2

Income from continuing operations

Question 3

which items in the income statement is reported net of tax?

Answer 3

Income from discontinued operations, extraordinary items, cumulative effect of change in Accounting Principle

Question 4

True/False: The Multiple Step income statement is required for all GAAP users?

Answer 4

False- Multistep or Single Step income statement

Question 5

True/False: The Multiple Step Income statement shows operating and nonoperating income from continuing operations

Answer 5

True

Question 6

What three segments make up the income (loss) from Discontinued Operations Segment of the Income Statement?

Answer 6

1. Impairment losses. 2. Gain/loss from actual operations 3. Gain/loss on disposal.

Question 7

Under US GAAP when is expectation of the sale a business component to be considered held for sale?

Answer 7

1 year from the date of the financial statements

Question 8

Before/After: Under IFRS, a component must be remeasured for impairment or gains (before or after) it is listed as held for sale?

Answer 8

Before

Question 9

True/False: Assets held for sale continue to be depreciated/amortized.

Answer 9

False- they suspend their deprecation.

Question 10

What is the equation to calculate impairment losses on a component disposed/held for sale?

Answer 10

NRV(Net Realizable Value= Fair Value - Cost to sale) - carrying value (Value on the books) = impairment loss(negative number)

Question 11

True False: Certain gains are losses from the extinguishment of debt can be classified as an extraordinary item

Answer 11

True

Question 12

True/False, In IFRA there is a provision for extraordinary items

Answer 12

False - nothing is considered extraordinary in IFRS

Question 13

How is a change in accounting estimate handled?

Answer 13

As a prospective change with a disclosure in the footnotes

Question 14

How is a change in accounting principle handled?

Answer 14

Retrospective change, and adjustments to restate of prior periods

Question 15

What is the exception to the handling of an accounting principle

Answer 15

If it is impractical to estimate the cumulative effective then it is handled prospectively

Question 16

How is a change in deprecation method (e.g double deprecation to straight line) handled?

Answer 16

Prospectively - no retrospective adjustment needed

Question 17

How is a change in accounting entity handled?

Answer 17

Retrospective change that follows a restatement of prior periods.

Question 18

How is a change in accounting error handled?

Answer 18

Retrospective change for a restatement.