Income Statement Other Items
Self Test
Self Test
Click the “Check Your Answer” box below each problem to reveal the correct answer and explanation.
1. Comprehensive income consists of.
a. all gains and losses only
b. net income plus other gains and losses not included in net income
c. all transactions with shareholders that change equity
d. all gains and losses except those related to derivatives
Answer
2. Gains and losses that are not included as part of net income are
a. recorded as part of owner’s equity
b. reported on the statement of other comprehensive income
c. never a part of comprehensive income
d. a. and b.
Answer
3. Earnings quality relates to
a. the percentage that net income is increasing over the prior year
b. the ability to use the income statement to predict future earnings
c. using the same accounting principles consistently
d. the ability to compare one company to another
Answer
4. Restructuring costs must always be recorded
a. in the period they are incurred
b. in the period they are expected to occur
c. in the period the restructure is planned
d. when the cash is paid for the restructure cost
Answer
5. With “discontinued operations”, an operation is defined as a component of an entity
a. that has a separate facility
b. that has operations in several different countries
c. that has clearly distinguished cash flows
d. is never a separate legal entity
Answer
6. The operations of a component that are discontinued will be reported separately as discontinued operations when the
a. cash flows from the operation will be eliminated in the future
b. management will not be involved in the future
c. both a. and b.
d. neither a. or b.
Answer
7. A discontinued operation will be reported
a. on the income statement
b. in the footnotes
c. in the cash flow statement
d. all of the above
Answer
8. Discontinued operations is always reported
a. after tax
b. net of tax
c. before tax
d. either a. or b.
Answer
9. The income from discontinued operations during the period is reported when
a. the operation is sold during the period
b. the operation is held for sale during the period
c. the operation is for sale and not expected to be sold during the period
d. all of the above
Answer
10. An impairment loss related to discontinuing operations is reported when
a. the operation was sold this period
b. the period the operating component is held for sale
c. when the assets are reported at less than fair market value
d. never
Answer
11. A transaction is reported separately as a restructuring expense when it is
a. a plan to reduce operating expenses to improve future profits
b. a sale of a component of the business that is operating at a loss
c. an unusual loss
d. only a one-time expense
Answer
12. An “accounting change” occurs when
a. the company changes from one acceptable method to another
b. the company changes from an unacceptable method to an acceptable method.
c. the company changes from one unacceptable method to another
d. all of the above
Answer
13. A company reports a change in an accounting estimate by
a. a footnote disclosure only
b. adjusting the affected accounts in the current period
c. retroactive restatement of affected accounts
d. changing retained earnings for the affect of the change
Answer
14. A change in the composite of reported entities requires
a. a footnote disclosure only
b. adjusting the affected accounts in the current period only
c. retroactive restatement of affected accounts
d. changing retained earnings only for the affect of the change
Answer
15. Earnings per share must be reported for
a. net income only
b. discontinued operations only
c. income from continuing operations only
d. all items reported after income tax expense