Question 1

For purposes of discontinued operations, the key elements in determining that a separate segment exists are that the component is
A)a separate business and a separate legal entity.
B)a separate legal entity and generates its own net cash flows.
C)in a separate geographic region and can be sold.
D)a separate business and generates its own cash flow.

Accepted Answer

The key elements in determining a separate segment for purposes of discontinued operations include being a separate business and generating its own cash flow. Being a separate legal entity or having a presence in a separate geographic region are not necessarily essential factors in identifying a separate segment.

Question 2

Which one of the following types of losses is excluded from the determination of net income in the income statement?
A)material losses resulting from correction of errors related to prior periods
B)material losses resulting from sale of assets not originally acquired for resale
C)material losses resulting from write-off of intangibles
D)material losses resulting from sale of investments

Accepted Answer

Material losses resulting from correction of errors related to prior periods are considered prior period adjustments and are not included in the determination of net income in the current period's income statement.

Question 3

Intraperiod tax allocation
A)allocates tax balances between fiscal years.
B)allocates tax balances within a fiscal period.
C)is used for income from continuing operations but not for income from discontinued
Operations.
D)is used for other comprehensive income but not for income from discontinued operations.

Accepted Answer

The answer of Intraperiod tax allocation
A)allocates tax balances between fiscal...

Question 4

Comprehensive income includes all changes in equity during a period EXCEPT
A)gains and losses from discontinued operations.
B)unrealized gains and losses on available for sale securities.
C)those resulting from investments by owners and distributions to owners.
D)gains and losses from irregular items.

Accepted Answer

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Gains and losses from discontinued operations, unrealized gains and losses on available for sale securities, and gains and losses from irregular items are all included in comprehensive income.

Question 5

When expenses are presented by function in the income statement,
A)they should be presented by type of expense (e.g., depreciation, purchases, salaries).
B)they should be reported as part of other comprehensive income.
C)their cash flow predictive value is increased.
D)more professional judgment is required to allocate expenses between functions.

Accepted Answer

When expenses are presented by function in the income statement, it often requires more professional judgment to allocate expenses between different functions such as cost of goods sold, selling expenses, and administrative expenses. This is because some expenses, like salaries, utilities, or depreciation, may need to be allocated across several functions, and determining the most appropriate allocation can involve significant judgment.

Question 6

Which of the following is a required disclosure in the income statement when reporting the disposal of a segment of the business?
A)The gain or loss on disposal should be reported as an unusual item.
B)Results of operations of a discontinued segment should be disclosed immediately below
Other irregular items.
C)Earnings per share from both continuing operations and net income should be disclosed
On the face of the statement or in the notes.
D)The gain or loss on disposal should not be segregated, but should be reported together
With the results of continuing operations.
Reporting Financial Performance 4 - 11

Accepted Answer

The answer of Which of the following is a required...

Question 7

All-inclusive income includes all of the following EXCEPT
A)investments by owners.
B)losses on disposal of assets.
C)dividend revenue.
D)gains on the expropriation of property by the government.

Accepted Answer

Investments by owners are not included in all-inclusive income. All-inclusive income typically includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Question 8

Unusual gains and losses are items on the income statement that
A)are typical of everyday activities but do not occur frequently.
B)are not typical of everyday activities or do not occur frequently.
C)include writedown of inventories and writeoff of bad debts.
D)are not usually disclosed separately.

Accepted Answer

Unusual gains and losses are items on the income statement that are not typical of everyday activities or do not occur frequently. They could include things like gains or losses from the sale of a subsidiary, an insurance payout from an unexpected event, or a significant legal settlement. They are usually disclosed separately on the income statement since they can distort the overall picture of a company's financial performance.

Question 9

When an asset is held for sale
A)it must relate to a discontinued operation.
B)the entity must continue to record depreciation for the asset.
C)the asset is remeasured to the lower of carrying (book)value and fair value less costs to
Sell.
D)the asset is remeasured to the lower of fair value and carrying (book)value.

Accepted Answer

When an asset is classified as held for sale, it is remeasured to the lower of its carrying amount and fair value less costs to sell, according to accounting standards.

Question 10

When a company disposes of a discontinued operation (segment), the transaction should be included in the income statement as a gain or loss on disposal, and reported as
A)a prior period adjustment.
B)other comprehensive income.
C)an amount after continuing operations.
D)a bulk sale of plant assets included in income from continuing operations.

Accepted Answer

The gain or loss on disposal of a discontinued operation should be reported as an amount after continuing operations in the income statement. This is because the transaction relates to a segment that the company has already decided to dispose of and is not part of its ongoing operations. It should not be reported as a prior period adjustment or included in other comprehensive income, as these are not the appropriate categories for this type of transaction. Additionally, it should not be reported as a bulk sale of plant assets included in income from continuing operations, as this would not accurately reflect the nature of the transaction.

Question 11

The single-step income statement emphasizes
A)the gross profit figure.
B)total revenues and total expenses.
C)discontinued operations and accounting changes.
D)the various components of income from continuing operations.

Accepted Answer

The single-step income statement lists all revenues and expenses in a single section, making it easy to see the total amounts for each. It does not provide information on gross profit, discontinued operations, accounting changes, or income from continuing operations separately.

Question 12

IFRS requires that expenses be presented in the income statement
A)by amount or in alphabetical order.
B)by geographical area or by the single-step method.
C)by nature or by function.
D)by current or non-current.

Accepted Answer

IFRS requires that expenses be presented either by their nature (such as cost of goods sold, salaries and wages, rent, etc.) or by their function (such as cost of sales, administrative expenses, etc.). This information helps users of financial statements to understand the nature of expenses and how they relate to the activities of the entity.

Question 13

If an asset is to be classified as held for sale, which of the following conditions does NOT apply?
A)The sale has been authorized by the company's management.
B)Changes to the sale plan are likely.
C)It is probable that the asset will be sold within one year.
D)There is an active program to find a buyer.

Accepted Answer

Changes to the sale plan being likely would not prevent an asset from being classified as held for sale as long as the other conditions are met. The other conditions that must be met are that the sale has been authorized by management, it is probable that the asset will be sold within one year, and there is an active program to find a buyer.

Question 14

Which of the following is NOT a generally practiced method of presenting the income statement?
A)including corrections of errors made in a prior period
B)the single-step income statement
C)the multiple-step income statement
D)including gains and losses from discontinued operations

Accepted Answer

The correction of errors made in a prior period would be reflected in the statement of retained earnings or in the notes to the financial statements, but not in the income statement. The other options are all commonly used methods of presenting the income statement.

Question 15

Intraperiod tax allocation
A)arises because certain revenue and expense items appear in the income statement
Either before or after they are included in the tax return.
B)is required for the cumulative effect of changes in accounting principles but not for
Discontinued operations.
C)allocates income tax expense evenly over a number of accounting periods.
D)relates income tax expense to the items which affect the amount of tax.

Accepted Answer

Intraperiod tax allocation relates income tax expense to specific items that affect the amount of tax, such as discontinued operations, extraordinary items, and changes in accounting principles, to provide a clearer picture of the tax effects of these items in the financial statements.

Question 16

Accumulated other comprehensive income would be reported in
A)shareholders' equity.
B)retained earnings.
C)net income.
D)net income from continuing operations.

Accepted Answer

Accumulated other comprehensive income is a component of shareholders' equity and is not included in the calculation of net income. It includes items such as unrealized gains or losses on available-for-sale securities, foreign currency translation adjustments, and pension plan adjustments.

Question 17

Under IFRS, which of the following is NOT required to be presented separately in the statements of income/comprehensive income?
A)Revenues.
B)Discontinued operations.
C)Cost of goods sold.
D)Depreciation/depreciation.

Accepted Answer

The answer of Under IFRS, which of the following is...

Question 18

Which of the following is a change in accounting principle?
A)a change in the estimated service life of machinery
B)a change from FIFO to weighted average for inventory costing
C)a change in the estimated allowance for bad debts
D)a change in estimated future warranty expense

Accepted Answer

A change from one inventory costing method to another (such as from FIFO to weighted average) is considered a change in accounting principle. The other options are changes in accounting estimate which are accounted for differently.

Question 19

Which of the following items will NOT appear in the retained earnings statement?
A)net loss
B)correction of an error
C)change in accounting estimates
D)stock dividends

Accepted Answer

Changes in accounting estimates affect future periods and are not retroactively applied to prior periods' financial statements. Therefore, they do not appear in the retained earnings statement, which reflects past earnings, adjustments, and distributions.

Question 20

Regarding earnings per share (EPS)data
A)both public and private corporations are required to report EPS on the face of the income
Statement.
B)although public corporations are required to report EPS, private corporations are not.
C)EPS related to comprehensive income is required.
D)financial analysts do not attach much importance to EPS data.

Accepted Answer

The answer of Regarding earnings per share (EPS)data
A)both public and...

Quiz 1: Intermediate Accounting Volume 1

For purposes of discontinued operations, the key elements in determining that a separate segment exists are that the component is

Which one of the following types of losses is excluded from the determination of net income in the income statement?

Intraperiod tax allocation

Comprehensive income includes all changes in equity during a period EXCEPT

When expenses are presented by function in the income statement,

Which of the following is a required disclosure in the income statement when reporting the disposal of a segment of the business?

All-inclusive income includes all of the following EXCEPT

Unusual gains and losses are items on the income statement that

When an asset is held for sale

When a company disposes of a discontinued operation (segment) , the transaction should be included in the income statement as a gain or loss on disposal, and reported as

The single-step income statement emphasizes

IFRS requires that expenses be presented in the income statement

If an asset is to be classified as held for sale, which of the following conditions does NOT apply?

Which of the following is NOT a generally practiced method of presenting the income statement?

Intraperiod tax allocation

Accumulated other comprehensive income would be reported in

Under IFRS, which of the following is NOT required to be presented separately in the statements of income/comprehensive income?

Which of the following is a change in accounting principle?

Which of the following items will NOT appear in the retained earnings statement?

Regarding earnings per share (EPS) data