Intermediate Accounting Reporting and Analysis 2017 Update 2e James M Wahlen Jefferson P Jones Donald P Pagach - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below 1. Together with the cash flow statement, the income statement enables the investors to determine the rate of return …
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Intermediate Accounting Reporting and Analysis 2017 Update 2e James M Wahlen Jefferson P Jones Donald P Pagach – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
1. Together with the cash flow statement, the income statement enables the investors to determine the rate of return the company is generating relative to the amount of capital invested.
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2. The information reported in the income statement can be used to predict a company’s future income and cash flows.
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3. The amount of money that can be distributed to shareholders as a return of capital, without being a return on capital, is the capital financial concept.
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4. U.S. GAAP and IFRS companies commonly measure and report net income and comprehensive income.
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5. Revenue can be recognized either when it is earned, collection has occurred, or collection is reasonably certain to occur.
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6. Systematic and rational allocation is used to recognize revenue.
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7. If a company does not have any discontinued operations to list on its income statement, the labels should still be there with a zero balance noted.
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8. Interperiod tax allocation involves apportioning a corporation’s total income tax expense for a period to the various components of its net income and other comprehensive income items.
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9. When a parent company owns a majority of the common shares of a subsidiary company but not 100% of them, the parent company will consolidate all of the subsidiary’s revenues and expenses into its financial statements.
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10. When a company classifies a component as held for sale, it must report the component on its balance sheet at the lower of its book value or its fair value minus costs to sell.
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11. A company does not have to disclose information about the sale of a discontinued component in the notes to its financial statements until the actual sale has occurred.
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12. Any disposal of a large number of long-lived assets can appropriately be reported in the income statement as results from discontinued operations.
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13. There is no prescribed income statement format under IFRS whereas U.S. GAAP requires the use of the single-step or the multiple-step format.
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14. To compute earnings per share the denominator is net income attributable to common shareholders less any preferred stock dividends for the period.
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15. Under U.S. GAAP or IFRS, a company can either report its comprehensive income or loss under present net income and comprehensive income in a single continuous performance statement or report it in a separate but consecutive financial statement.
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16. Gains or losses associated with derivative financial instruments would be included in income from continuing operations.
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17. The information contained in the statement of cash flows allows external users to assess a company’s risk, liquidity, financial flexibility, and operating capability.
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18. The most common way in which to prepare the statement of cash flows is the indirect method, which is encouraged by FASB.
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19. Companies with lower coverage ratios have a greater risk and a lower financial flexibility.
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20. The SEC scrutinizes reported earnings numbers to assess the quality of earnings and to detect any potential for earnings management.
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21. A segment must pass all of the tests in order for it to be considered a reportable segment. These tests include the revenue, profit, and asset tests.
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22. A company is not required to follow a specific format in making the disclosures for its segments but the FASB encourages the most useful format for its specific circumstances.
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23. Who is the income statement designed to inform?
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24. Operating capability refers to
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25. The income statement helps users
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26. Which of the following is helpful to report separately?
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27. Which of the following is not a purpose of the income statement?
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28. The income statement is an important financial statement for all of the following reasons, except
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29. In accrual accounting, net income is defined as
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30. The income statement reports
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| 31. Below is a list of account balances for Fraggle Company:
What is Fraggle Company’s net income, assuming a 30% tax rate?
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32. On December 31, 2015, the net assets of Martinez Manufacturing amounted to $40,000. Net income calculated by using the financial capital maintenance concept amounted to $12,000. During the year, additional common stock was issued for $8,000, and $5,000 of dividends was paid. The net assets at January 1, 2015, amounted to
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33. Georgio Company began 2015 with net assets of $80,000. Net income calculated by using the capital maintenance concept was $21,000. During 2015, owners contributed $26,000 of new capital. By year-end, the net assets totaled $78,000. Dividends to the owners during 2015 were
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34. In general, revenue is recognized as being earned
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35. To be recognized as revenue, an item must
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36. Which of the following is not recognized by the FASB as an expense recognition principle that properly matches expenses against revenues?
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37. Examples of matching expenses against revenues using the association of cause and effect include all of the following except
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38. Depreciation is an example of which expense recognition principle?
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39. Which of the following expenses is an example of expense recognition under the immediate recognition principle?
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40. In distinguishing between revenues and gains, which of the following statements is false?
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| 41. The major components of the income statement are listed below:
A = revenues B = income from continuing operations C = earnings per share D = results from discontinued operations E = operating income
In what sequence do they normally appear on the income statement?
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42. Which of the following are components of the income statement?
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43. Which of the following would appear after the heading of operating income?
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44. Which of the following is not a component of the income statement?
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45. The subtotal, gross profit, will be disclosed on
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46. Which of the following is not used as a caption if there is nothing to report?
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47. All of the following are included in the computation of cost of goods sold except
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48. From the following information, compute cost of goods sold.
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49. Using the information below in the computation of cost of goods sold, what would be the appropriate amount of Purchases?
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50. The gross profit of Larry Company for 2015 is $300,000, cost of goods manufactured is $400,000, the beginning inventories of goods in process and finished goods are $28,000 and $35,000, respectively, and the ending inventories of goods in process and finished goods are $50,000 and $70,000, respectively. The cost of goods sold of Larry Company for 2015 must have been
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51. In 2014, Dallas Company had sales of $600,000; cost of sales of $430,000; interest expense of $12,000; and a gain on the sale of a component of $52,000; For its income statement, Dallas uses the single-step format and the all-inclusive concept. What was Dallas’s reported pretax income from continuing operations?
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52. Intraperiod tax allocation
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53. Intraperiod tax allocation requires a corporation’s total income tax expense to be allocated to all of the following except
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54. A company that discontinues and disposes of an operation (component) should include the gain or loss on sale in the income statement as a(n)
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55. When an entity reports on a sale of a component of the business
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56. Which of the following is a required disclosure in the income statement when reporting the sale of a component of the business?
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57. Which is least likely to be classified as a sale of a component?
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58. Gregory Company is disposing of a component of its company. The net loss from the sale is estimated to be $600,000. Included in the $600,000 is termination pay of $100,000, which is directly associated with the decision to dispose of the component; and net losses from component asset write-downs of $400,000. Ignoring taxes, Gregory’s income statement should report a loss on sale of a business component of
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| Exhibit 5-1 The following condensed income statement of Ranger Corporation is presented for the two years ended December 31, 2016 and 2015:
On January 1, 2016, Ranger entered into an agreement to sell one of its separate operating divisions for $2,000,000. The sale resulted in a gain on disposition of $900,000 on November 12, 2016, and qualifies as a discontinued component. This division’s contribution to Ranger’s reported income before income taxes for each year was as follows:
Assume an income tax rate of 30%. |
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59. Refer to Exhibit 5-1. In the preparation of a revised comparative income statement, Ranger should report income from continuing operations after income taxes for 2016 and 2015, respectively, amounting to
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60. Refer to Exhibit 5-1. In the preparation of a revised comparative income statement, Ranger should report under the caption “Discontinued Operations” for 2016 and 2015, respectively,
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61. Nelly Company sold its cattle ranching component on June 30, 2016, for a gain of $1,000,000. From January through June, the component had sustained operating income of $300,000. The income tax rate is 35%. How should Nelly report the income and the sale on its income statement?
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62. Which of the following is required to be disclosed, pursuant to GAAP?
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63. How should the gain or loss that is considered infrequent but not unusual in nature be disclosed?
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64. Earnings per share is an important disclosure because
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65. The numerator in the earnings per share calculation is
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66. Morgan Company reported the following information for the year ended December 31, 2015:
What was Morgan’s earnings per share for 2015?
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67. Lester Company reported the following information for the year ended December 31, 2015:
What was Lester’s earnings per share for 2015?
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68. IFRS content in the income statement is similar to U.S. GAAP in all of the following areas except the disclosure of
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69. Differences that currently exist between IFRS and U.S. GAAP with regard to the presentation of information on the income statement include all of the following except
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70. IFRS reporting requires all of the following items except
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71. Comprehensive income is an important concept in accounting because it represents
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72. Comprehensive income includes the following changes in equity in a company during a period except
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73. Comprehensive income consists of
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74. Which of the following is not part of other comprehensive income?
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75. Which of the following is not considered part of comprehensive income?
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76. Which of the following is included in comprehensive income?
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77. When is a company not required to report comprehensive income?
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78. Which of the following is an acceptable way of reporting a company’s comprehensive income?
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79. The primary purpose of a company’s statement of cash flows is to provide information about the company’s
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80. The statement of cash flows is least likely to help external users assess
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81. Which of the following sections will not appear in the statement of cash flows?
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82. Which of the following events would be classified as an operating activity in a statement of cash flows?
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83. Which of the following events would be classified as an investing activity on a statement of cash flows?
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84. In a statement of cash flows, the payment of a cash dividend on preferred stock outstanding should be classified as cash outflows for
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85. In a statement of cash flows, which of the following events would be classified as a financing activity?
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86. Which of the following statements regarding a statement of cash flows is false?
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87. Financial flexibility is generally defined as
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88. Which ratios are the most commonly analyzed from the income statement?
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Exhibit 5-2
The following is an income statement from the financial records of Peace, Love and Joy Company for the year ended December 31, 2015:
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89. Refer to Exhibit 5-2. Compute the gross profit margin for Peace, Love, and Joy Company.
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90. Refer to Exhibit 5-2. Compute operating margin for Peace, Love, and Joy Company.
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91. Refer to Exhibit 5-2. Compute net profit margin for Peace, Love, and Joy Company.
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92. Refer to Exhibit 5-2. Compute earnings-based interest coverage for Peace, Love, and Joy Company.
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93. Which is the most commonly computed coverage ratio?
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94. An operating segment is a component of a company
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95. An operating segment is a component of a company that does all of the following except
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96. An operating segment is a reportable segment if it
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97. An operating segment is significant and reportable if it satisfies at least one of three tests. Which of the following is not one of those three tests?
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98. Under GAAP for segment reporting, a company must report
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99. Information reported or disclosed about the profit or loss of reportable segments consists of
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100. Which of the following is not true about interim financial statements?
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101. Expenses that affect the operating activities of more than one interim period are allocated among the periods based on an estimate of
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102. The following information relates to Zhulu Corporation (in thousands):
Required: Compute the amount of dividends paid during the year, using the financial capital maintenance approach.
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103. The following information relates to Peter Company (in thousands):
Required: Compute net income, using the capital maintenance approach.
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104. Listed below are the three expense recognition principles followed by a series of expense items.
Required:
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105. The following income statement information for 2014 and 2015 was obtained from the accounting records of Upperco Company.
Required:
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106. The information for Roberts Company is presented below:
Required:
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107. The income statement information for 2014 and 2015 of Kloe Company is as follows:
Required:
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108. The information below is taken from the December 31, 2016 adjusted trial balance of Rummer Company:
The inventory on December 31, 2016 was $165,000. The income tax rate is 30%. There were 25,000 shares of common stock outstanding throughout the year. Required:
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| 109. Taylor Corporation sold Division M (a business component). It was determined that the pretax loss from the operations of Division M during the year totaled $50,000 and that a pretax gain of $125,000 was realized on the sale of the division. The tax rate is 35%.
Required: In good form, prepare the appropriate section of the income statement.
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| 110. On May 1, 2016, Wheaton Company decided to dispose of its foreign sales operations (a change which represents a strategic shift in the geographic area of Wheaton’s operations). The component was sold on November 24, 2016, for $1,000,000 resulting in a $96,000 loss on the sale. The foreign sales operations recorded a $300,000 operating profit in 2016 up to the date of sale. Wheaton Company is subject to a 30% income tax rate.
Required: Prepare the results from discontinued operations section of Wheaton Company’s income statement for 2016.
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| 111. On October 1, 2016, Croatan Corporation finalized its plans to discontinue operations of its retail component. The plan calls for the sale of the retail operations to another company for $700,000 (current fair value) on April l, 2017. The current book value of the assets is $800,000. For the first nine months of 2016, the component incurred a pretax operating income of $60,000. During the last quarter of 2016, the pretax income was $10,000, while the expected pretax income for the first quarter in 2017 is expected to be $20,000. Croatan is subject to a 30% income tax rate.
Required:
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| 112. Baxter, Inc., reported income from continuing operations (before taxes) of $55,000. In addition, there was a $15,000 loss (pretax) on the sale of a discontinued component of the business. Taxes of $16,500 (30%) were paid.
Required: Prepare the bottom portion of the income statement.
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113. Below are selected accounts taken from the adjusted trial balance of Sherri’s Designs on December 31, 2015:
Sherri’s Designs has 2,000 shares of common stock outstanding and net income per share for 2015 was $0.63. The income tax rate is 30%. Required:
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114. The following accounts are taken from the accounting records of Dory Company at December 31, 2015 after adjustments:
In addition, the following information is available:
Required:
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| 115. Swiger Music Company had the following information related to its financial statements:
1) The company issued bonds in the amount of $50,000. 2) The company earned net income of $78,900 and declared a cash dividend of $0.25 per share. Currently there are 50,000 shares outstanding. 3) Retained earnings at January 1, 2016 was $82,000. Required:
Prepare the reconciliation of retained earnings for December 31, 2016.
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116. Information from the accounts of Gause Company is shown below:
The merchandise inventory on January 1, 2016, was $3,200,000. There were 250,000 shares of common stock outstanding during the entire year. Required: Assuming a 30% income tax rate, prepare a 2016 income statement for Gause Company. Use a multiple-step format.
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| 117. Below is a list of terms:
Required:
Match the appropriate term with the definitions shown below by placing the appropriate letter in the space provided.
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| 118. Below are the Consolidated Statements of Earnings (in part) for Starlights, Inc.
Required:
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119. Accounting information might be separately reported in any of the following components of the income statement or statement of retained earnings and their supporting schedules and footnotes:
Several items of accounting information are listed below.
Required:
Identify where the items of accounting information shown above would be most appropriately reported by placing the letters (a-e) in the space provided. If the information would not appear in any of the above components, place an (X) in the space. Items may be reported in more than one location.
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120. Below is a list of financial statement components with a corresponding letter code.
Required:
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121. Bradley’s Inc.’s adjusted trial balance contains the following account balances at December 31, 2016:
Income taxes are 30% on all items, and there were 2,000 shares of common stock outstanding during the year. Required:
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122. On December 31, 2016, Melissa Company’s adjusted trial balance contained the following account balances:
The income tax rate is 30%, and the company had 2,000 shares of common stock outstanding during the year. Required:
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123. The following are accounting items taken from the records of Paul Company for 2015:
Required:
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124. The following are accounting items taken from the records of Sterling Company for 2016:
Required:
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125. The following items involve the cash flow activities of Prizzie Company for 2016:
Required:
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126. The following cash flows and other information pertain to Elon Company for 2016:
Required:
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127. For income reporting purposes, items can appear in any of the following components of the income statement, the statement of retained earnings, and related schedules and footnotes:
Several items of accounting information are listed below:
Required:
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| 128. Tiger Corporation presents the following condensed comparative income statement for
2015, 2016, and 2017:
Required:
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| 129. Below are the income statement and balance sheet for Lily Company:
Required:
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| 130. List five purposes of the income statement.
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| 131. The SEC reported that overstating revenue and recognizing revenue too soon was the culprit in more than half of the financial reporting frauds in the United States. As such Staff Accounting Bulletin No. 104 provided additional guidance on revenue recognition. It emphasized four criteria for revenue recognition. What are these criteria?
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| 132. What are the three expense recognition principles used to properly recognize expense either by matching revenues or matching periods?
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| 133. What are seven major components of a company’s income statement?
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| 134. What is the difference between interperiod tax allocation and intraperiod tax allocation?
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| 135. What criteria must be met in order for a company to classify a component as held for sale?
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| 136. What are the four items of other comprehensive income under U.S. GAAP?
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| 137. How does the statement of cash flows help external users assess the overall health of a company when used in conjunction with the other financial statements?
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| 138. What three tests are used to evaluate an operating segment in order to determine if it is a reportable segment?
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| 139. The capital maintenance concept focuses on the net assets of an organization. Under this concept, periodic net income is the change in the net assets from the beginning of the period to the end of the period, excluding owner investments and distributions. The valuation and determination of assets and liabilities are of prime importance, rather than the focus on revenues and expenses.
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| 140. The accounting profession has developed three alternatives for matching expenses: association of cause and effect, systematic and rational allocation, and immediate recognition. Discuss the conceptual merits of each alternative and give two examples for each expense matching alternative.
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141. Describe the major differences that still exist between the income statement information presentation requirements under IFRS and GAAP.
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| 142. In the preparation of interim income statements, the expenses are recognized differently depending on whether or not they are directly related to product sales or services.
Required:
Discuss the general treatment of expenses in interim statements when they
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Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
