Question 1

Amityville Company has two divisions,C and D.The operations and cash flows of these two divisions are clearly distinguishable.On July 1,2015,the company decided to dispose of the assets and liabilities of Division D.It is probable that the disposal will be completed early next year.The revenues and expenses of Amityville Company for 2015 and for the preceding two years are as follows:
  
During the latter part of 2015,Amityville disposed of a portion of Division D and recognized a pretax loss of $10,000 on the disposal.The income tax rate for Amityville Company is 40%.
Prepare the comparative income statements for Amityville Company for the years 2013,2014,and 2015.

Accepted Answer

The answer of Amityville Company has two divisions,C and D.The...

Question 2

International Accounting Standard 8 requires

Accepted Answer

International Accounting Standard 8 requires the reporting of the cumulative effect of a change in accounting principle as a direct adjustment to beginning retained earnings in the year of the change. Therefore, choice C is the correct answer. Choices A and D are incorrect, as they do not accurately reflect the requirements of IAS 8. Choice B is also incorrect, as the cumulative effect of a change in accounting principle should not be reported as part of net income in the year of the change.

Question 3

The revenue principle states that revenue should be recognized at a point when

Accepted Answer

The revenue principle requires revenue to be recognized when an exchange transaction involving goods or services takes place and when the earnings process is complete or substantially complete. This means that the seller has provided the goods or services, and the buyer has accepted them, and the payment is reasonably assured. Choices B, C, and D are not entirely accurate as the mere receipt of an order, signing a contract, or shipping merchandise to a customer does not guarantee revenue recognition.

Question 4

The forecast of income for future periods begins with a forecast of sales.An accurate projection of sales is essential to the determination of the amount of assets needed to do business and the level of financing required.
What factors should be considered in preparing the forecast of sales?

Accepted Answer

The answer of The forecast of income for future periods...

Question 5

A classic definition of income states that income is the amount one could consume at the end of a period and still be as well off as at the beginning of the period.Embedded in this definition of income is the concept of capital maintenance.Conceptually,income can occur only after the beginning capital has been recovered.When accountants adopt different measuring units,they are attempting to maintain different concepts of capital.
Identify the type of capital maintained when the measuring unit is (a)nominal dollars,(b)constant dollars,and (c)current costs.When would nominal cost and constant dollar measurements provide equivalent results?

Accepted Answer

The answer of A classic definition of income states that...

Question 6

The following pretax amounts pertain to the Spartan Corp.for the year ended December 31,2014.
  
The effective corporate tax rate is 30 percent.The company had 10,000 shares of common stock outstanding for the entire year.
(1)Prepare a multiple-step income statement in good form for the year ended December 31,2014.
(2)Prepare a retained earnings statement in good form for the year ended December 31,2014.

Accepted Answer

The answer of The following pretax amounts pertain to the...

Question 7

Soluble Water Products had sales during 2014 of $895,000.Soluble's gross profit percentage is 55 percent.Purchases of inventory during 2014 totaled $466,250 and a count of inventory on hand at the end of the year totaled $189,500.Selling expenses are 18 percent of sales and general and administrative expenses are equal to 80 percent of selling expenses.Soluble's income tax rate is 30 percent and the company has 60,000 shares of common stock outstanding.
Prepare an income statement,including earnings per share data,for the year ended December 31,2014.

Accepted Answer

The answer of Soluble Water Products had sales during 2014...

Question 8

The Sutton Forest Products Company had sales during 2014 of $1,200,000.Sutton operates at a gross profit of 50%.Purchases of inventory during 2014 totaled $675,000 and ending inventory totaled $210,500.Selling expenses were 20% of sales and general and administrative expenses were 75% of the selling expenses.Sutton's tax rate is 40% and the company has 50,000 shares of common stock outstanding.
Prepare an income statement for Sutton Forest Products,including earnings per share data,for the year ended December 31,2014

Accepted Answer

The answer of The Sutton Forest Products Company had sales...

Question 9

Jonathan L.Supreme Company has two divisions,A and B.The operations and cash flows of these two divisions are clearly distinguishable.On July 1,2015,the company decided to dispose of the assets and liabilities of Division B.It is probable that the disposal will be completed early next year.The revenues and expenses of Jonathan L.Supreme Company for 2015 and for the preceding two years are as follows:
  
During the latter part of 2015,Jonathan L.Supreme disposed of a portion of Division B and recognized a pretax loss of $8,000 on the disposal.The income tax rate for Jonathan L.Supreme Company is 40%.
Prepare the comparative income statements for Jonathan L.Supreme Company for the years 2013,2014,and 2015.

Accepted Answer

The answer of Jonathan L.Supreme Company has two divisions,A and...

Question 10

The changes in the account balances and the following additional information are taken from the accounts of the Coalition Co.
  
Dividends for 2015 were $82,500.There were no transactions in 2015 affecting retained earnings other than the dividends and net income.Calculate the 2015 net income.

Accepted Answer

The answer of The changes in the account balances and...

Question 11

Jaguar Corp.purchased a patent on January 2,2009,for $700,000.The original life of the patent was estimated to be 14 years.In December of 2014,the company received information that the patent would be obsolete within 4 years.Accordingly,the company decided to write off the unamortized portion of the patent cost over 5 years beginning in 2014.
How would the change in useful life be reflected in the accounts for 2014 and subsequent years?

Accepted Answer

The answer of Jaguar Corp.purchased a patent on January 2,2009,for...

Question 12

An example of direct matching of an expense with revenues would be

Accepted Answer

Direct labor costs incurred to produce inventory sold during a period is an example of direct matching of an expense with revenues because it is directly related to the production of the inventory that was sold during the same period. This is known as cost of goods sold, which is deducted from revenue to arrive at gross profit. Depreciation expense, office salaries expense, and advertising expense are not directly tied to the production of inventory and are therefore not examples of direct matching.

Question 13

Which of the following would be treated as an extraordinary item?

Accepted Answer

Expropriation of an entity's operations in a foreign country is an unusual and infrequent event that is beyond the control of the company and is not expected to recur. Therefore, it qualifies as an extraordinary item. The other options are not considered extraordinary items as they are either part of the normal business operations or the result of mismanagement.

Question 14

Which of the following categories of expenses is subject to immediate recognition on the income statement?

Accepted Answer

The salary of the company president is considered a period cost and is recognized immediately on the income statement as an operating expense. Repairs and maintenance expense, production foreman salary, and utilities expense for production line are all considered part of the cost of goods sold and are recognized on the income statement as a cost of goods sold expense over the period in which the underlying goods are sold.

Question 15

All of the following would appear on a single-step income statement except

Accepted Answer

In a single-step income statement, revenues and expenses are listed together without calculating a gross profit, which is the difference between sales and cost of goods sold. Gross profit is typically reported in a multi-step income statement, not in a single-step format.

Question 16

The following data are available for Synopsis Products,a partnership:
  
Compute the purchases and the net income for the partnership for 2013,2014,and 2015,assuming that the firm sells its merchandise at 25 percent above cost.

Accepted Answer

The answer of The following data are available for Synopsis...

Question 17

Which of the following is true regarding Statement of Financial Accounting Standards No.144,"Accounting for the Impairment or Disposal of Long-Lived Assets," accounting and reporting standards for discontinued operations?

Accepted Answer

Statement of Financial Accounting Standards No. 144 requires a test for, and recognition of, an impairment loss if the fair value of a component is less than its carrying amount. This ensures that the financial statements accurately reflect the value of assets and the financial position of the entity.

Question 18

The following data are available from the records of Mandarin,Inc.:
  
Prepare a single-step income statement and a retained earnings statement for Mandarin,Inc.for the year ended December 31,2014.

Accepted Answer

The answer of The following data are available from the...

Question 19

Which of the following accounting changes requires the restatement of financial statements presented for prior years?

Accepted Answer

The answer of Which of the following accounting changes requires...

Question 20

Panther Corp.reported the following pretax amounts for the year ending December 31,2014:
  
The income tax rate applicable to Panther is 30 percent.Prepare a partial income statement for the year ending December 31,2014,beginning with "Income from continuing operations before income taxes." Include the presentation of earnings per share,assuming 50,000 shares were outstanding during the year.

Accepted Answer

The answer of Panther Corp.reported the following pretax amounts for...

Quiz 4: The Income Statement

International Accounting Standard 8 requires

The revenue principle states that revenue should be recognized at a point when

The forecast of income for future periods begins with a forecast of sales.An accurate projection of sales is essential to the determination of the amount of assets needed to do business and the level of financing required. What factors should be considered in preparing the forecast of sales?

The changes in the account balances and the following additional information are taken from the accounts of the Coalition Co. Dividends for 2015 were $82,500.There were no transactions in 2015 affecting retained earnings other than the dividends and net income.Calculate the 2015 net income.