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tbch04 - CHAPTER 4 The Income Statement MULTIPLE CHOICE...

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C HAPTER 4 The Income Statement M ULTIPLE C HOICE Q UESTIONS Theory/Definitional Questions 1 Transaction approach to determining income 2 Financial statement elements 3 Multiple-step income statement 4 Material loss reported separately from continuing operations 5 Ordering of items in the income statement 6 Single-step income statement format 7 Extraordinary losses 8 When a business segment is discontinued 9 The measurement date for the disposal of a business segment 10 Matching expenses with revenue 11 Restructuring charges 12 Change in an accounting principle 13 Single-step income statement 14 Income reported for tax purposes 15 Treatment of discontinued business segment 16 Income measurement approaches 17 Revenue recognition--earnings process complete 18 Recognition criteria--point of sale 19 Revenue recognition--goods delivered 20 Hurricane damage--when considered extraordinary 21 Basis for recognition of expenses 22 Immediate recognition of expenses 23 Comprehensive income definition 24 Bad debts--expense recognition principles 25 Depreciation as example of systematic and rational allocation 26 Change in estimate--when reported 27 Error correction--items not included in present financial statements 28 How a change of accounting principle is reported 29 Components of income shown net of taxes on income statement 30 Definition of measurement date--when phase-out of segment decided on 31 Gain/loss on disposal of segment--dates measured from 32 Examples of extraordinary items 101
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102 Chapter 4 The Income Statement 33 Material items shown separately net of taxes--debt extinguishment 34 Examples of extraordinary items 35 Change of accounting principle--how reported 36 Conceptual definition--earnings 37 Definition--code law country 38 Definition of comprehensive income 39 Allowance for doubtful accounts--application of matching principle 40 Determining the basis for a forecast 41 Forecasting the effect of an increase in sales 42 Financing a business expansion 43 Components of comprehensive income 44 Usefulness of accrual-basis net income Computational Questions 45 Income before extraordinary items 46 Income on a multiple-step format income statement 47 Computation for discontinued operations 48 Computation of gain/loss on discontinued segment 49 Computation of net income 50 Computation of net sales 51 Gain on disposal of plant assets 52 Computation of general and administrative expenses 53 Computation of extraordinary loss 54 The effect of accounting errors on net income 55 The effect of accounting errors on net income 56 Infrequent versus extraordinary losses 57 The effect of accounting errors on current assets 58 Computation of gain on disposal of a manufacturing division 59 Computation of cost of goods sold 60 Computation of selling expenses 61 Computation of general and administrative expenses 62 Computation of extraordinary loss 63 Computation of price earnings ratio 64 Computation of price earnings ratio P ROBLEMS 1 Computation of purchases and income given markup and necessary data 2
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