.) Intraperiod income tax presentation is primarily a matter of: A. Valuation. B. Going concern. C. Periodicity. D. Allocation. 2/50 2.) The difference between single-step and multiple-step income statements is primarily an issue of: A. Consistency. B. Presentation. C. Measurement. D. Valuation. 2/50 3.) Popson Inc. incurred a material loss which was not unusual in character, but was clearly an infrequent occurrence. This loss should be reported as: A. An extraordinary loss. B. A separate line item between income from continuing operations and income from discontinued operations. C. A separate line item within income from continuing operations. D. A separate line item in the retained earnings statement. 2/50 4.) Provincial Inc. reported the following before-tax income statement items: Operating Income $600,000Extraordinary Loss 100,000Extraordinary Gain 60,000Provincial has a 30% income tax rate.Provincial would report the following amount of income tax expense as a separate item in the income statement: A. $198,000. B. $180,000. C. $168,000. D. $150,000. 2/50 5.) . Freda’s Florist reported the following before-tax income statement items for the year ended December 31, 2009: Operating Income $250,000Extraordinary Gain 70,000All income statement items are subject to a 40% income tax rate. In its 2009 income statement, Freda’s separately stated income tax expense and total income tax expense would be: A. $128,000 and $128,000, respectively. B. $128,000 and $100,000, respectively. C. $100,000 and $128,000, respectively. D. $100,000 and $100,000, respectively 2/50 6.) Pro forma earnings: A. Are management’s view of permanent earnings. B. Are needed for the correction of errors. C. Are standardized under generally accepted accounting principles. D. Are useful to compare two different firms’ performance. 2/50 7.) The distinction between operating and non-operating income relates to: A. Continuity of income. B. Principal activities of the reporting entity. C. Consistency of income stream. D. Reliability of measurements. 2/50 8.) The principal benefit of separately reporting discontinued operations and extraordinary items is to enhance: A. Predictive ability. B. Consistency in reporting. C. Intraperiod continuity. D. Comprehensive reporting. 2/50 9.) The Claxton Company manufactures children’s toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to SFAS No. 144. How should Claxton report the sale in its 2009 income statement? A. As an extraordinary item. B. As a discontinued operation, reported below income from continuing operations. C. Report the income or loss from operations of the division in discontinued operations below continuing operations and the gain or loss from disposal in continuing operations. D. None of these. 2/50 10.) On August 1, 2009, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to SFAS No. 144. The disposal of the division was expected to be concluded by June 30, 2010. On January 31, 2010, Rocket’s fiscal year-end, the following information relative to the discontinued division was accumulated: Operating Loss 2/1/09 – 1/31/10 $115,000Estimated Operatnig Loss, 2/1-1/30/10 80,000Impairment of Division Assets at 1/31/10 10,000 In its income statement for the year ended January 31, 2010, Rocket would report a before-tax loss on discontinued operations of: A. $115,000. B. $195,000. C. $ 65,000. D. $125,000. 2/50 11.) On November 1, 2009, Jamison Inc. adopted a plan to discontinue its barge division, which qualifies as a separate component of the business according to SFAS No. 144. The disposal of the division was expected to be concluded by April 30, 2010. On December 31, 2009, the company’s year-end, the following information relative to the discontinued division was accumulated:Operating loss 1/1 – 12/31/09 $65MEstimated Operating Loss – 1/1 – 4/30/10 $80MExcess of fair value, less costs to sell, over book value at 12/31098 $15MIn its income statement for the year ended December 31, 2009, Jamison would report a before-tax loss on discontinued operations of: A. $ 65 million. B. $ 50 million. C. $130 million. D. $145 million. 2/50 12.) An extraordinary event for financial reporting purposes is both: A. Unusual and material. B. Infrequent and significant. C. Material and infrequent. D. Unusual and infrequent. 2/50 13.) Major Co. reported 2009 income of $300,000 from continuing operations before income taxes and a before-tax extraordinary loss of $80,000. All income is subject to a 30% tax rate. In the 2009 income statement, Major Co. would show the following line-item amounts for income tax expense and net income: A. $66,000 and $210,000. B. $90,000 and $154,000. C. $90,000 and $276,000. D. $66,000 and $220,000. 2/50 14.) Howard Co.’s 2009 income from continuing operations before income taxes was $280,000. Howard Co. reported a before-tax extraordinary gain of $50,000. All tax items are subject to a 40% tax rate. In its income statement for 2009, Howard Co. would show the following line-item amounts for net income and income tax expense: A. $198,000 and $112,000. B. $230,000 and $92,000. C. $330,000 and $132,000. D. $198,000 and $79,000. 2/50 Misty Company reported the following before-tax items during the current year:Sales $600Operating Expenses 250Restructuring Charges 20Extraordinary Loss 50Misty’s effective tax rate is 40%. 15.) What would be Misty’s income before extraordinary item(s)? A. $198. B. $210. C. $330. D. $360. 2/50 16.) 80. A voluntary change in accounting principle is accounted for by: A. A cumulative effect on income in the year of the change. B. A retrospective reporting of all comparative financial statements shown. C. A prior period adjustment. D. A separate line component of income. 2/50 17.) A change in depreciation method is accounted for: A. Retrospectively. B. As a cumulative adjustment to income in the year of change. C. Prospectively, like changes in accounting estimates. D. None of these. 2/50 18.) On June 1, 2009, Romano Inc. changed the estimated useful life of its office equipment from 20 to 12 years. This change would be accounted for: A. Prospectively. B. Retrospectively. C. As an accounting error. D. None of these. 2/50 19.) The financial statement presentation of a change in depreciation method is most similar to that of reporting: A. Changes in accounting estimates. B. Prior period adjustments. C. Correction of errors. D. Extraordinary items. 2/50 20.) Jack’s Fireworks, which was established in 2007, changed its method of accounting for inventories from the average cost method to the first-in, first-out (FIFO) method in 2009. Cost of goods sold for the periods 2007-2009 under FIFO and the average cost method were: Year FIFO AVERAGE Cost Difference2007 $120,000 $110,000 $10,000 2008 140,000 128,000 12,0002009 150,000 144,000 6,000Jack’s Fireworks is subject to a 30% income tax rate. In its income statement for the year ended December 31, 2009, Jack’s would report the cumulative effect of a change in accounting principle, net of income taxes, of: A. $(15,400). B. $ 0. C. $ 19,600. D. $ ( 4,200). 2/50 21.) Changes in accounting estimates are reported: A. Currently and prospectively. B. Retroactively and currently. C. Retroactively, currently, and prospectively. D. By restating prior years. 2/50 22.) In its December 31, 2009 financial statements, E-Z Prices estimated that losses on its current receivables would be $10.2 million. During 2010, E-Z Prices determined that the losses on the Dec. 31, 2009, receivables were actually $12.4 million. Ignoring taxes, E-Z Prices would report, in its 2010 financial statements, the additional $2.2 million loss on receivables as: A. An extraordinary item. B. A prior period adjustment. C. A retroactive adjustment. D. A current year’s expense. 2/50 23.) The financial statement presentation of a change in reporting entity is most similar to the reporting of a: A. A change in accounting principle. B. Change in accounting estimate. C. Discontinued business operation. D. Correction of a material error discovered after the year the error was made. 2/50 24.) The Maytag Corporation’s income statement includes income from continuing operations, a loss from discontinued operations, and extraordinary items. Earnings per share information would be provided for: A. Net income only. B. Income from continuing operations and net income only. C. Income from continuing operations, loss from discontinued operations and net income only. D. Income from continuing operations, loss from discontinued operations, extraordinary items and net income. 2/50 25.) Each of the following would be reported as items of other comprehensive income except: A. Foreign currency translation gains. B. Unrealized gains on investments accounted for as securities available for sale. C. Deferred gains from derivatives. D. Gains from the sale of equipment. 2/50
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