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Unformatted text preview: Chapter 4 The Income Statement True/False Questions 1. Income from continuing operations sometimes includes gains from nonoperating activities. Answer: True Learning Objective: 2 Level of Learning: 1 2. Intraperiod tax allocation is the process of associating income tax effects with the income statement components that create those effects. Answer: True Learning Objective: 2 Level of Learning: 1 3. Comprehensive income reports an expanded version of income to include four types of gains and losses not included in traditional income statements. Answer: True Learning Objective: 5 Level of Learning: 2 4. Gains, but not losses, from discontinued operations may be separately reported in an income statement. Answer: False Learning Objective: 5 Level of Learning: 1 5. An item must meet the subjective criteria of being either unusual or infrequent to be reported as extraordinary. Answer: False Learning Objective: 6 Level of Learning: 1 6. The definition of what constitutes an extraordinary item should be independent of the operating environment. Answer: False Learning Objective: 6 Level of Learning: 1 7. Material restructuring costs are reported as an element of income from continuing operations. Answer: True Learning Objective: 2 Level of Learning: 1 8. Changes in accounting estimates require disclosure of their effects, if material, on current year net income and EPS but do not require restatement of prior years' financial statements. Answer: True Learning Objective: 8 Level of Learning: 1 9. A change in reporting entity is shown separately on the income statement in the year of the change. Answer: False Learning Objective: 8 Level of Learning: 1 10. EPS disclosure is required only for income from continuing operations. Answer: False Learning Objective: 9 Level of Learning: 1 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 113 Chapter 4 The Income Statement 11. The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities. Answer: False Learning Objective: 11 Level of Learning: 1 12. Earnings quality refers to the ability of reported earnings (income) to predict future earnings. Answer: True Learning Objective: 3 Level of Learning: 1 Matching Pair Questions Use the following to answer questions 13-17: 13-17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. Terms: A. Change in accounting estimate B. Income from discontinued operations C. Income from continuing operations D. Intraperiod tax allocation E. Matching principle F. Operating activities (income statement) G. Prior period adjustment H. Provision for income tax I. Taxable income J. Transitory earnings Phrases: 13. _____ Also known as income tax expense....
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This note was uploaded on 02/04/2011 for the course ACCT 3110 taught by Professor Holmes during the Spring '10 term at University of North Texas Health Science Center.
- Spring '10
- Income Statement