Acc 3100

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Chapter 04
The Income Statement and Statement of Cash Flows
 

True / False Questions
 

1. Income from continuing operations sometimes includes gains from nonoperating activities.  True    False

 

2. Intraperiod tax allocation is the process of associating income tax effects with the income statement components that create those effects.  True    False

 

3. Material restructuring costs are reported as an element of income from continuing operations.  True    False

 

4. Earnings quality refers to the ability of reported earnings (income) to predict future earnings.  True    False

 

5. Gains, but not losses, from discontinued operations must be separately reported in an income statement.  True    False

 

6. An item must meet the subjective criteria of being either unusual or infrequent to be reported as extraordinary.  True    False

 

7. The definition of what constitutes an extraordinary item should be independent of the operating environment.  True    False

 

8. Income statements prepared according to both U.S. GAAP and International Financial Reporting Standards require the separate reporting, as an extraordinary item, of material gains and losses from events that are both unusual and infrequent.  True    False

 

9. A change in depreciation method is accounted for by retrospectively revising prior years' financial statements.  True    False

 

10. Changes in accounting estimates require disclosure of their effects, if material, on current year net income and EPS but do not require restatement of prior years' financial statements.  True    False

 

11. The income effect of a change in reporting entity is shown separately in the income statement in the year of the change.  True    False

 

12. EPS disclosure is required only for income from continuing operations.  True    False

 

13. Comprehensive income reports an expanded version of income to include certain types of gains and losses not included in traditional income statements.  True    False

 

14. Comprehensive income is the total change in shareholders' equity that occurred during the period.  True    False

 

15. The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities.  True    False

 

16. International Financial Reporting Standards require a company to classify expenses in an income by function.  True    False

 

17. Under International Financial Reporting Standards, the components of other comprehensive income can be presented in the statement of shareholders' equity.  True    False

 

18. In a statement of cash flows prepared under International Financial Reporting Standards, interest received is most often classified as an operating cash flow.  True    False

 

19. In a statement of cash flows prepared under International Financial Reporting Standards, interest paid is most often classified as a financing cash flow.  True    False

 
 

Matching Questions
 

20. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. 

|1. Taxable income  |     Also known as income tax expense.  |  ____  | |2. Intraperiod tax allocation  |     From transactions or events that are not likely to occur in the |  ____  | | |foreseeable future.  | | |3. Prior period adjustment  |     Associates tax with income statement items.  |  ____  | |4. Provision for income tax  |     Used as the base for computing taxes currently payable.  |  ____  | |5. Transitory earnings  |     Made to correct a material error. ...
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