MULTIPLE CHOICE
1.The current operating school of thought holds that:
a.All components of comprehensive income should be in the income statement.
b.The income statement should contain only normal operating components of comprehensive income.
c.Retained earnings should reflect only total earnings as reported in the income statement and dividend distributions, in addition to beginning and ending balances.
d.Unusual or infrequently occurring gains and losses should be reported on the income statement.
2.Which of the following is an argument supporting the “current operating” income recognition school of thought?
a.Most financial statement users look only to bottom-line net income to assess current performance and to make predictions regarding subsequent years’ performance.
b.Under this approach management makes the decision on whether or not an item is extraordinary and therefore excluded from the income statement.
c.The summation of all income displayed on the income statement for a period of years should reflect the reporting entity’s net income for that period.
d.Proper classification within the income statement allows both normal recurring items and unusual, infrequently occurring items to be displayed separately within the same statement.
3.SFAS No. 130 allows all but which of the following regarding comprehensive income?
a.Reporting comprehensive income in a combined statement of financial performance
b.Reporting comprehensive income in a separate statement of comprehensive income which would begin with net income
c.Reporting comprehensive income within a statement of changes in equity
d.Not reporting comprehensive income
4.Which of the following methods of reporting comprehensive income is preferred by the FASB?
a.Reporting comprehensive income in a combined statement of financial performance
b.Reporting comprehensive income in a separate statement of comprehensive income, which would begin with net income
c.Reporting comprehensive income within a statement of changes in equity
d.No reporting comprehensive income
5.Which of the following methods of reporting comprehensive income did the FASB members that dissented from SFAS No. 130 believe most firms would use?
a.Reporting comprehensive income in a combined statement of financial performance
b.Reporting comprehensive income in a separate statement of comprehensive income, which would begin with net income
c.Reporting comprehensive income within a statement of changes in equity
d.Not reporting comprehensive income
6.Which of the following is not true regarding comprehensive income?
a.Comprehensive income includes foreign currency translation adjustments.
b.Comprehensive income includes unrealized holding gains and losses on available-for-sale securities.
c.Comprehensive income includes minimum pension liability adjustments previously classified as intangible assets.
d.Earnings per share should be calculated for comprehensive income.
7.The non-operating section of the income statement includes:
a.Extraordinary items.
b.Extraordinary items and discontinued operations.
c.Extraordinary items, accounting principle changes, and discontinued operations.
d.Extraordinary items, accounting principle changes, discontinued operations, and prior period adjustments.
8.Which of the following is not considered one of the three broad categories of accounting changes?
a.Change in Accounting Principle
b.Change in Accounting Estimate
c.Change in Reporting Entity
d.Change in Accounting Application
9.Which of the following is the date that management commits itself to a formal plan to dispose of a business segment?
a.The measurement date
b.The disposal date
c.The assessment date
d.The transfer date
10.Which of the following is true regarding discontinued operations?
a.If a loss is expected on disposal, the estimated loss is recognized in the financial statements as of the measurement date.
b.If a loss is expected on disposal, the estimated loss is recognized in the financial statements as of the disposal date.
c.If a loss is expected on disposal, recognition is deferred until realization.
d.If a gain is expected on disposal, the estimated gain is recognized in the financial statements as of the measurement date.
11.Which one of the following summary indicators is the most used?
a.Return on investment
b.Earnings per share
c.Debt-to-equity ratio
d.Current ratio
12.Which of the following is not true regarding SFAS No. 128:
a.Users can now comprehend the effect upon EPS of the full amount of dilution without the presence of the artificial and confusing primary earnings per share calculation.
b.It brought the United States into alignment with virtually all other nations in terms of EPS requirements.
c.The elimination of primary earnings per share is a case of more information leading to more usefulness.
d.The FASB and the International Accounting Standards Committee cooperated on the project together.
13.Which of the following is not a true statement regarding accounting for development stage enterprises?
a.SFAS No. 7 requires complete disclosure by the development stage enterprise to avoid misleading financial statement users by heavy initial losses.
b.SFAS No. 7 achieved uniformity on the basis of the nature of the enterprise rather than on the basis of the nature of the transaction.
c.The FASB opted for rigid uniformity in selecting a solution as opposed to finite uniformity, where a relevant circumstance might be viewed as the development stage of the enterprise.
d.SFAS No. 7 requires that costs of a similar nature be accounted for similarly, regardless of the stage of development of the entity incurring the cost.