Income Statement

Question 1

Freight-Out Expense (not billed to customers) belongs in which section on the income statement?

Answer 1

Selling Expenses (under SG&A)

Question 2

Where is Income Tax Expense Reported on the income statement?

Answer 2

Income tax expense is attributable only to income from continuing operations. The tax effects of items below continuing operations are shown along with the items itself in a process called “intraperiod tax allocation”

Question 3

How should changes to new accounting principles be accounted for?

Answer 3

When a new accounting principle is made, you through retroactive application

Question 4

How should an unusual event not meeting the current criteria for an extraordinary item be disclosed?

Answer 4

Shown as a separate item in operating revenues or expenses and supplemented footnote if deemed appropriate.

Question 5

Unusual or infrequent items on the income statement should be reported where and when

Answer 5

WHERE: As a component of income from continuing operations

WHEN: If material

Question 6

At what amount should gains be reported on the income statement (if land or equipment was sold in excess of carrying value)

Answer 6

For the amount received (not net of taxes)

Question 7

T/F: Discontinued operations should be included in unusual or infrequent items on the income statement?

Answer 7

False. Unusual or infrequent items appear in income from continuing operations