Ch.3 Quiz

Instructions
Please read the questions carefully.

This assessment is worth 100 points.

  1. Income from continuing operations sometimes includes gains from nonoperating activities.   (2 points)

      
      

  2. Income from continuing operations is an after-tax number consisting of revenues, expenses, gains, and losses.   (2 points)

      
      

  3. Income from continuing operations equals net income only in the absence of separately reported items.   (2 points)

      
      

  4. Intraperiod tax allocation is the process of associating income tax effects with the income statement components that create those effects.   (2 points)

      
      

  5. If the effective tax rate is 40%, a $200,000 before-tax extraordinary gain would increase net income by $120,000.   (2 points)

      
      

  6. If General Motors ceased production of the Corvette, it would report any material gains or losses that would result under discontinued operations.   (2 points)

      
      

  7. Discontinued operations require reclassification of prior years' income statements but no change in prior years' net income.   (2 points)

      
      

  8. Operating income or loss from discontinued operations up to the disposal date is separately reported.   (2 points)

      
      

  9. The measurement and disposal dates of discontinued operations must fall within the same fiscal year.   (2 points)

      
      

  10. If an overall loss from discontinued operations is expected, then the loss is reported in the year in which the measurement date falls.   (2 points)

      
      

  11. Estimated gains from discontinued operations can be reported in the measurement year only to the extent of estimated losses.   (2 points)

      
      

  12. An item must meet the subjective criteria of being both unusual and infrequent to be reported as extraordinary.   (2 points)

      
      

  13. The definition of what constitutes an extraordinary item should be independent of the operating environment.   (2 points)

      
      

  14. Material restructuring costs are reported as an element of income from continuing operations.   (2 points)

      
      

  15. The cumulative effect of a change in accounting principle is the difference between the ending balance in retained earnings and what the balance would have been had the new method been applied all year.   (2 points)

      
      

  16. A change in reporting entity is shown separately on the income statement in the year of the change.   (2 points)

      
      

  17. All corporations must disclose EPS.   (2 points)

      
      

  18. EPS disclosure is required for all items reported net of tax on the income statement.   (2 points)

      
      

  19. Net income is the starting point in disclosing comprehensive income.   (2 points)

      
      

  20. Quality of earnings refers to the ability of reported earnings or income to predict future earnings.   (2 points)

      
      

  21. The distinction between operating and nonoperating income relates to:   (2 points)

    a.  
    b.  
    c.  
    d.  

  22. The principal benefit of separately reporting discontinued operations, extraordinary items, and cumulative effects of changes in accounting principles is to enhance:   (2 points)

    a.  
    b.  
    c.  
    d.  

  23. Interperiod income tax allocation relates primarily to the principle of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  24. An extraordinary event for financial reporting purposes is both:   (2 points)

    a.  
    b.  
    c.  
    d.  

  25. The cumulative effect of a change in accounting principle is reported as:   (2 points)

    a.  
    b.  
    c.  
    d.  

  26. The amount reported for the cumulative effect of a change in accounting principle is the net-of-tax difference between:   (2 points)

    a.  
    b.  
    c.  
    d.  

  27. The financial statement presentation of the cumulative effect of a change in accounting principle is most similar to that of reporting:   (2 points)

    a.  
    b.  
    c.  
    d.  

  28. In its Dec. 31, 2000 financial statements, MisterCard estimated that losses on its current receivables would be $18.2 million. During 2001, MisterCard determined that the losses on the Dec. 31, 2000 receivables were actually $19.4 million. Ignoring taxes, MisterCard would report, in its 2001 financial statements, the additional $1.2 million loss on receivables as:   (2 points)

    a.  
    b.  
    c.  
    d.  

  29. Which of the following is not true about EPS?   (2 points)

    a.  
    b.  
    c.  
    d.  

  30. The Gargas Corporation's income statement includes net income, extraordinary items, and the cumulative effect of a change in accounting principle. Earnings per share information would be provided for:   (2 points)

    a.  
    b.  
    c.  
    d.  

  31. A reconciliation between net income and comprehensive income would include:   (2 points)

    a.  
    b.  
    c.  
    d.  

  32. Operating cash flows would exclude:   (2 points)

    a.  
    b.  
    c.  
    d.  

  33. The statement of cash flows reports cash flows from the activities of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  34. Cash flows from financing activities include:   (2 points)

    a.  
    b.  
    c.  
    d.  

  35. Changes in accounting estimates are reported:   (2 points)

    a.  
    b.  
    c.  
    d.  

  36. Precepts Inc. incurred a material loss which was not unusual in character, but was clearly an infrequent occurrence. This loss should be reported as:   (2 points)

    a.  
    b.  
    c.  
    d.  

  37. Sulvane Co. reports 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 year's income statement, Sulvane would show the following line-item amounts for income tax expense and net income:   (2 points)

    a.  
    b.  
    c.  
    d.  

  38. LeFever Construction Co.'s 2000 income from continuing operations before income taxes was $280,000. LeFever reported a before-tax extraordinary gain of $50,000. All tax items are subject to a 40% tax rate. In its income statement for 2000, LeFever would show the following line-item amounts for before-tax net income and income tax expense:   (2 points)

    a.  
    b.  
    c.  
    d.  

  39. Northridge Printers purchased an offset press on January 1, 1997 at a cost of $120,000. The press had an estimated eight-year life with no residual value Northridge uses straight-line depreciation. At December 31, 2000, Northridge estimated that the press would have only two more years of remaining life with no residual value. For 2000, Northridge would report depreciation expense of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  40. Triptic Travel reported revenue of $300,000 for its year ended December 31, 2000. Accounts receivable at December 31, 1999 and 2000 were $32,000 and $35,500, respectively. During 2000, accounts totaling $1,500 were deemed to be uncollectible and were written off. Using the direct method for reporting cash flows from operating activities, Triptic would report cash collected from customers of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  41. Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. Arrow would report cash outflows from activities, as follows:   (2 points)

    a.  
    b.  
    c.  
    d.  

  42. Parvo Dog Food Co. reported net income of $45,000 for the year ended December 31, 2000. January 1 balances in accounts receivable and accounts payable were $23,000 and $26,000 respectively. Year-end balances in these accounts were $22,000 and $28,000, respectively. Assuming that all relevant information has been presented, Parvo's cash flows from operating activities would be:   (2 points)

    a.  
    b.  
    c.  
    d.  

  43. Anthrax Beef Processors reported net income of $216,000 for its year ended December 31, 2000. Purchases totaled $152,000. Accounts payable balances at the beginning and end of the year were $36,000 and $33,000, respectively. Beginning and ending inventory balances were $44,000 and $46,000, respectively. Assuming that all relevant information has been presented, Anthrax would report operating cash flows of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  44. In Case B, Alpha would report a gain or (loss) from disposal in 2000 of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  45. In Case C, Alpha would report a (loss) from disposal in 2000 of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  46. What would be Misty's net income for the current year?   (2 points)

    a.  
    b.  
    c.  
    d.  

  47. In Case B, Omega would report a gain from disposal in 2000 of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  48. In Case C, Omega would report a gain from disposal in 2000 of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  49. In Case D, Omega would report a gain (loss) from disposal in 2000 of:   (2 points)

    a.  
    b.  
    c.  
    d.  

  50. Rallod would report net cash inflows (outflows) from investing activities in the amount of:   (2 points)

    a.  
    b.  
    c.  
    d.  



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