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| 1 | |
The first caption in most income statements in annual reports is: |
| | A) | gross sales. |
| | B) | net sales. |
| | C) | earned revenues. |
| | D) | sales, less sales returns and allowances. |
| | E) | none of the above. |
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| 2 | |
Gains differ from revenues because gains: |
| | A) | do not have to be realized. |
| | B) | are reported as income from operating activities. |
| | C) | do not involve any offsetting costs or expenses. |
| | D) | are normally recognized as an application of accounting conservatism. |
| | E) | are not a result of the entity's ongoing, central operations. |
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| 3 | |
Under most circumstances, in order to recognize revenue: |
| | A) | cash must have been received. |
| | B) | the entity must expect to receive cash in the future. |
| | C) | the entity must have paid for all expenses incurred in generating the revenue. |
| | D) | the revenue must be realized or realizable, and earned. |
| | E) | all of the above. |
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| 4 | |
The gross profit ratio is useful to the manager for each of the following purposes except that: |
| | A) | it can be used to determine the selling price to set for an item. |
| | B) | it can be used to estimate the amount of inventory lost in a fire. |
| | C) | it can be used to determine the amount available from a given amount of revenue to cover operating expenses. |
| | D) | it can be used to estimate the amount of operating expenses for a period. |
| | E) | it can be used for all of the above. |
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| 5 | |
Because of their importance to financial statement users, certain items are normally ported as separate items on the income statement (especially when significant in amount). Which of the following is not normally reported as a separate item? |
| | A) | Advertising Expense. |
| | B) | Cost of Goods Sold. |
| | C) | Interest Expense. |
| | D) | Income Tax Expense. |
| | E) | Net Income Attributable to Noncontrolling Interest. |
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| 6 | |
When the periodic inventory system is used: |
| | A) | operating profit from the sale of an item of inventory is known when the item is sold. |
| | B) | gross profit from the sale of an item of inventory is known when the item is sold. |
| | C) | a physical inventory must be taken in order to estimate the cost of goods sold. |
| | D) | ending inventory includes the cost of goods sold. |
| | E) | cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and purchases. |
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| 7 | |
Income from operations is: |
| | A) | sometimes called the "bottom line." |
| | B) | sometimes used in the ROI calculation. |
| | C) | usually used in the ROE calculation. |
| | D) | usually calculated after income tax expense. |
| | E) | equal to net income plus other comprehensive income (loss). |
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| 8 | |
Earnings per share calculations are required on the income statement for: |
| | A) | Cost of Goods Sold, Noncontrolling Interest, and Income from Continuing Operations. |
| | B) | Discontinued Operations, Operating Income, and Net Income. |
| | C) | Discontinued Operations, Extraordinary Items, and Net Income. |
| | D) | Income Tax Expense, Extraordinary Items, and Net Income. |
| | E) | Cost of Goods Sold, Discontinued Operations, and Extraordinary Items. |
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| 9 | |
The major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities section(s)? |
| | A) | The investing activities and financing activities sections. |
| | B) | The investing activities section only. |
| | C) | The operating activities and financing activities sections. |
| | D) | The operating activities section only. |
| | E) | The operating, investing, and financing activities sections. |
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| 10 | |
Which of the following transactions would not be shown under the operating activities category of the statement of cash flows (using the direct method): |
| | A) | cash received from customers. |
| | B) | cash paid to purchase land. |
| | C) | cash paid for interest and taxes. |
| | D) | cash paid to merchandise suppliers. |
| | E) | cash paid to employees for salaries. |
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