The income statement may be used to do all of the following except:
evaluate profitability and assess the return on investment.
evaluate management's performance.
obtain a snapshot of the company's financial position at a moment in time.
assess the company's operating capability and financial performance for the current period.
An income statement provides information that is useful
to investors, creditors, and other external users.
for evaluating financial performance.
for predicting future cash flows.
for all of these choices.
Which of the following would not be found on a single-step income statement?
Which of the following make up cost of goods sold?
the cost of inventory available for sale
the cost of inventory that was actually sold
the operating expenses incurred in generating sales
all of these
Basic earnings per share (EPS) is computed as
all earnings divided by all shares of stock.
all earnings divided by outstanding shares of common stock.
net income available to common shareholders divided by weighted average outstanding shares of common stock.
dividends to preferred shareholders divided by weighted average outstanding shares of preferred stock.
Basic earnings per share (EPS) is used by investors and analysts in evaluating
the book value of the company's assets.
the value of a share of the company's common stock.
the value of a share of the company's preferred stock.
the risk factor of the company's dilutive securities.
Which of the following is not an element of the income statement?
When should revenues be recognized?
at the point of agreement regarding the transaction price
when performance obligations can be identified
when payment is received
when performance obligations have been satisfied
The three major sections of the statement of cash flows are:
net income, adjustments to net income, and other activities.
operating activities, investing activities, and financing activities.
indirect activities, investing activities, and operating activities.
operating activities, financing activities, and other activities.
Using the indirect method, depreciation expense would appear on the statement of cash flows
in the operating activities section as an addition to reverse out the effects of a non-cash transaction.
in the operating activities section as a deduction because it represents a non-cash transaction.
in the investing activities because it is related to investments in property, plant, and equipment.
in the other activities section, because it is a non-cash transaction.
Which of the following would not appear in the financing activities section of the statement of cash flows?
receipts from the issuance of bonds
receipts from the issuance of common stock
payments for the purchase of factory equipment
payments of dividends
is the change in equity of a company during a period from transactions, other events, and circumstances relating to nonowner sources.
is measured as revenues - expenses + gains - losses.
measure and report the efforts or sacrifices made to conduct business activities.
Management's salaries and most selling and administrative costs are recognized using the principle because the costs provide no discernible future benefits.
Which of the following items are included in a company's operating income?
cost of goods sold
all the choices are correct
involves allocating a corporation's total income tax obligation as an expense across various accounting periods because of temporary (timing) differences between its taxable income and pretax financial income.
is necessary to give a fair presentation of the after-tax impact of the major components on net income and retained earnings. The portion of the income tax expense applicable to results from discontinued operations and each extraordinary item is or to the financial statements.
Which of the following items are included in a company’s results from discontinued operations?
I. Gain or loss on the sale of the discontinued component.
II. Income or loss from the operations of a discontinued component
I and II.
Neither I nor II.
A loss from the write-down of obsolete inventories is not deemed an extraordinary item
is deemed an extraordinary item( is not deemed an extraordinary item, is deemed an extraordinary item ) and is reported on the income statement as a component of income from continuing operations.
In its most basic form, earnings per share is computed by dividing the available to by the weighted average number of outstanding throughout the year. Diluted earnings per share takes into account potentially dilutive contingent claims on equity.
Currently, under U.S. GAAP, which of the following items are excluded from a company's other comprehensive income?
Unrealized gains or losses in the fair value of its investments in available-for-sale securities.
Translation adjustments from converting the financial statements of its foreign operations into U.S. dollars.
Certain gains or losses resulting from events or transactions that are either unusual in nature or infrequent in occurrence, but not both.
Certain gains and losses on derivative financial instruments that hedge future cash flows.
Differences between IFRS and U.S. GAAP in regard to a company's presentation and content of the income statement include all of the following except:
IFRS prohibit the reporting of items that are unusual in nature and infrequent in occurrence as extraordinary items.
IFRS terminology may differ, for instance "turnover" can be used to refer to sales.
The definition of a component of an operation is defined much more broadly under IFRS than under U.S. GAAP.
IFRS require the multiple-step format for the income statement.
What are the three determinants of a company's rate of return on common equity?
Earnings quality, interest coverage ratio, and operating capability.
Interest coverage ratio, profitability, and operating capability.
Leverage, earnings quality, and profitability.
Operating capability, profitability, and leverage.
enables users to identify which items on the income statement are growing quickly or slowly over time.
The indicates a company's ability to generate revenues and control the costs of producing and delivering its products and services.
Under the indirect method, the net cash provided by operating activities is determined by reporting net income first, then adjusting net income by .
In which section of the cash flow statement will the following transactions appear?
1. Purchases of goods for sale
Investing( Operating activity, Financing, Investing )
2. Repayment of loan
Investing activity( Financing activity, Operating activity, Investing activity )
3. Purchase and sale of fixed assets, eg. plant
Operating Activity( Investing activity, Financing activity, Operating Activity )
When used with a company's other financial statements, the statement of cash flows helps external users assess all of the following except:
The differences between the company's net income and associated cash receipts and payments.
The company's profitability and the return on investment in the company.
The company's ability to meet its obligations.
The company's capital raised from external financing sources and repayments of external financing.
The primary purpose(s) of a statement of cash flows is to:
Report the resources of a firm and the claims on the firm as of a specific date.
Provide relevant information about a company's cash receipts and cash payments during the period.
Inform stakeholders so they can evaluate profitability and assess the return on investment in the company and assess the company's operating capability and financial performance for the current period and over time.
All of the choices are correct.
What of the following alternatives does a company have for reporting its comprehensive income under U.S. GAAP and IFRS?
I. Present net income in the income statement and present comprehensive income in a separate, but consecutive, statement of comprehensive income.
II. Present net income in the income statement and present comprehensive income in a footnote to the financial statements.
III. Present net income and comprehensive income in a single continuous performance statement.
I and II only.
I, II and III.
II and III only.
I and III only.
A loss from the write-down of obsolete inventories is not
is( is not, is ) deemed an extraordinary item and is reported on the income statement as a component of income from continuing operations.