Acco 201 Asignacion 3A

The Income Statement


MULTIPLE CHOICE



1. Which of the following is the best description of issues associated with the income statement?
a.|The income statement can alternatively be referred to as a statement of financial position.|
b.|The income statement is the most important financial statement in the annual report.|
c.|The income statement serves as a link between the statementof retained earnings and the balance sheet.|
d.|The income statement summarizes the results of a company's cash operations for the accounting period.|




2. In an accrual-based transactional approach, net income is typically defined as
a.|revenues - expenses + gains + losses|
b.|revenues - expenses|
c.|revenues - expenses + gains - losses|
d.|increase in net assets from non-ownertransactions|






3. Which of the following would not be considered a part of "comprehensive income"?
a.|error corrections|
b.|extraordinary gains|
c.|prior period adjustments|
d.|owner investments|





4. What income measurement approach is identified by the following equation?

Net income = Net assets at the end of the year - Net assets at the beginning of the year -Additional investment by owners + Distributions to owners
a.|Transactional|
b.|cash flow|
c.|historical cost|
d.|capital maintenance|




5. Realization of revenue means
a.|the item is formally recorded and reported in the financial statements.|
b.|the process of converting noncash resources into cash or rights to cash.|
c.|the actual exchange of noncash resources into cash.|
d.|theearnings process is complete or essentially complete.|










6. A revenue recognition method that recognizes revenue before the time of sale is
a.|percentage-of-completion.|
b.|installment.|
c.|cost recovery.|
d.|point of sale.|





7. Depreciation is an example of which expense recognition principle?
a.|association of cause and effect|
b.|systematic and rationalallocation|
c.|cost recovery|
d.|immediate recognition|





8. Which of the following expenses is an example of expense recognition under the immediate recognition principle?
a.|sales commissions|
b.|Depreciation|
c.|management salaries|
d.|transportation out|






9. In 2002, the Damon Company had sales of $600,000; cost of sales of $430,000; interest expense of $12,000; again on the sale of a component of $12,000; and an extraordinary loss of $20,000. For its income statement, Damon uses the single-step format and the all-inclusive concept. What was Damon's reported pretax income from continuing operations?
a.|$150,000|
b.|$170,000|
c.|$158,000|
d.|$138,000|





10. The major components of the income statement are listed below:
A = extraordinary itemsB = income from continuing operations
C = earnings per share
D = cumulative effects of change in accounting principle
E = results from discontinued operations

In what sequence do they normally appear on the income statement?
a.|B-A-E-D-C|
b.|B-E-A-D-C|
c.|B-E-D-A-C|
d.|B-D-E-A-C|





11. The subtotal, gross profit, will be disclosed on
a.|a multiple-step income statement.|b.|both multiple-step and single-step income statements.|
c.|neither multiple-step nor single-step income statements.|
d.|a single-step income statement.|






12. To be considered an extraordinary item, an event must be
a.|unusual.|
b.|unusual or infrequent.|
c.|infrequent.|
d.|infrequent and unusual.|




13. A company is justified in changing from one generally acceptedaccounting principle to another generally accepted accounting principle only if
a.|the change decreases the entity's reported net income.|
b.|the change both improves the financial statement presentation and increases the entity's reported net income.|
c.|the change produces more informative financial statements.|
d.|approval is first obtained from the Financial Accounting Standards Board.|...