student Center | instructor Center | information Center | Home

Intermediate Accounting: Subtitle Test, 2/e

J David Spiceland, University of Memphis
James F Sepe, Santa Clara University
Lawrence A Tomassini, Ohio State University

The Income Statement and Statement of Cash Flows

Multiple Choice

Enter the letter corresponding to the response that best completes each of the following statements or questions.


1	Which of the following captions would more likely be found in a multiple-step income statement?
		A)	Total expenses.
		B)	Total revenues and gains.
		C)	Gross profit.
		D)	None of the above.


2	An item typically included in the income from continuing operations section of the income statement is:
		A)	Discontinued operations.
		B)	Extraordinary gain.
		C)	Prior period adjustment.
		D)	Restructuring costs.


3	The application of intraperiod income taxes requires that income taxes be apportioned to each of the following items except :
		A)	Income from continuing operations.
		B)	Operating income.
		C)	Discontinued operations.
		D)	Extraordinary gains and losses.


4	For a manufacturing company, all of the following items would be considered a nonoperating activity for income statement purposes except :
		A)	Income from investments.
		B)	Cost of goods sold.
		C)	Interest expense.
		D)	Gain on sale of operating assets.


5	On May 31, 2000, the Arlene Corporation adopted a plan to sell its cosmetics line of business. The assets of the operation were sold on October 13, 2000, for $1,120,000. Operating income from January 1, 2000, through May 31, 2000, totaled $45,000 and an operating loss of $38,000 was incurred from June 1 through October 13, 2000. On its income statement for the year ended December 31, 2000, the company reported a $124,000 before-tax gain on disposal of this discontinued operation. What was the book value of the assets of the cosmetics line of business?
		A)	$958,000
		B)	$1,003,000
		C)	$996,000
		D)	$1,041,000


6	On July 31, 2000, the Foxworthy Corporation adopted a plan to sell a separate line of business. The anticipated disposal date was May of 2001 at which time it was estimated that the assets of the line would be sold at a gain of $150,000. Operating income from January 1, 2000, through July 31, 2000, totaled $65,000 and an operating loss of $70,000 was incurred from August 1 through December 31, 2000. Also, the company estimated a $44,000 loss from operations for the period 1/1/01 through disposal. On its income statement for the year ended December 31, 2000, what amount should the company report as a gain (loss) on disposal of the discontinued operation?
		A)	$70,000 loss.
		B)	$114,000 loss.
		C)	$36,000 gain.
		D)	No gain or loss.


7	The Compton Press Company reported income before taxes of $250,000. This amount included a $50,000 extraordinary loss. The amount reported as income before extraordinary items, assuming a tax rate of 40%, is:
		A)	$250,000
		B)	$180,000
		C)	$120,000
		D)	$150,000


8	Which of the following material items would not be reported as an extraordinary item?
		A)	A loss caused by an unusual and infrequent hurricane.
		B)	A gain from early retirement of debt
		C)	A loss caused by obsolescence of inventory.
		D)	All of the above would be reported as extraordinary items.


9	The Stibbe Construction Company switched from the completed contract method to the percentage-of-completion method of accounting for its long-term construction contracts. This is an example of:
		A)	A change in accounting principle.
		B)	A change in accounting estimate.
		C)	An infrequent but not unusual item.
		D)	An extraordinary item.


10	In 2000, the Perasso Meat Packing Company revised the useful life of its equipment from eight years to six years. Depreciation recorded in prior years on existing equipment was $126,000 applying the eight-year useful life. Depreciation in prior years would have been $186,000 if the six-year useful life had been used. Assuming an income tax rate of 40%, Perasso should report a cumulative effect on the 2000 income statement of:
		A)	$60,000
		B)	$36,000
		C)	$24,000
		D)	Zero.


11	Earnings per share should be reported for each of the following income statement captions except :
		A)	Income from continuing operations.
		B)	Extraordinary gains and losses.
		C)	Operating income.
		D)	Discontinued operations.


12	Income tax expense has not yet been accrued. The company's income tax rate is 40%. What amount should be reported on the company's year 2000 income statement as income before extraordinary items?
		A)	$90,000
		B)	$66,000
		C)	$34,800
		D)	$54,000


13	On the 2000 statement of cash flows, Dunn's should report net cash inflows from financing activities of:
		A)	$260,000
		B)	$265,000
		C)	$60,000
		D)	$256,000


14	Using the information in question 13, Dunn's should report net cash outflows from investing activities of:
		A)	$27,000
		B)	$32,000
		C)	$28,000
		D)	$23,000


15	Which of the following items would not be included as a cash flow from operating activities on a statement of cash flows?
		A)	Collections from customers.
		B)	Interest on note payable.
		C)	Purchase of equipment.
		D)	Purchase of inventory.

2001 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.