Income Statement PnL

Question 1

What amount of gains should be presented on the income statement (continuing operations) for a disposal of a business segment?

Answer 1

Nothing. Gains on disposal of business units will be reported as discontinued operations NOT continuing operations.

Question 2

Comprehensive income includes…

Answer 2

all items of the income statement and changes in equity during a period except those resulting from investments by owners and distributions to owners.

Question 3

Accumulated other comprehensive income is reported in the

Answer 3

stockholders’ equity section of the balance sheet.

Question 4

In the single step income statement, the Total revenues =

Answer 4

Net Sale + Other revenues and gains

Question 5

Which of the following disclosures should prospective financial statements include?

Answer 5

Summary of significant accounting policies

Summary of significant assumptions

Question 6

What should be included or disclosed in the summary of significant accounting policies?

Answer 6

The basis of consolidation
Depreciation methods
Amortization of intangible assets (excluding Goodwill)
Inventory pricing
Recognition of Profit on long-term construction-type contracts
Recognition of Revenue from franchising and leasing operations

Question 7

Disclosure of information about significant concentrations of credit risk is required for

Answer 7

ALL FINANCIAL INSTRUMENTS

Question 8

With regards to life insurance policy redemption, what amount of revenue should be reported in financial statements if your firm collects on a policy?

Answer 8

Proceeds received - cash surrender value

Life insurance proceeds received on death of the officer will be treated as income only to the extent they exceed the cash surrender value of the policy. Cash surrender value of the policy is an asset that is recognized each time the life insurance premium increases the cash value of the policy.

Question 9

Comprehensive income includes all changes in equity except….

Answer 9

Those caused by owner investments or distributions to owners.

Also note: Net income is a component to comprehensive.

Question 10

OCI example

Answer 10

Examples include foreign currency items, pension adjustments, unrealized gains and losses on certain investments in debt and equity securities, and gains and losses on cash flow hedging derivative instruments.