Income Statement
Which of the following items would be reported net of tax on the face of the income statement?
a)Prior period adjustment
b)Unusual gain
c)Cumulative effect of a change in an accounting principle
d)Discontinued operations
d)Discontinued operations
Adjusting entries are necessary to: (Which of these are right)
1. obtain a proper matching of revenue and expense.
2. achieve an accurate statement of assets and equities.
3. adjust assets and liabilities to their fair market value.
1 and 2
In order to be classified as an extraordinary item in the income statement, an event or transaction should be
unusual in nature, infrequent, and material in amount
A journal entry to record the sale of inventory on account will include a(Debit entry)
debit to accounts receivable.
Jim Yount, M.D., keeps his accounting records on the cash basis. During 2013, Dr. Yount collected $300,000 from his patients. At December 31, 2012, Dr. Yount had accounts receivable of $40,000. At December 31, 2013, Dr. Yount had accounts receivable of $70,000 and unearned revenue of $10,000. On the accrual basis, how much was Dr. Yount's patient service revenue for 2013?
$320,000
When an item of revenue is collected and recorded in advance, it is normally called a(n) ___________ revenue.
unearned
Prophet Corporation has an extraordinary loss of $600,000, an unusual gain of $420,000, and a tax rate of 40%. At what amount should Prophet report on Extraordinary loss/ gain and unusual loss/gain?
(36,000) loss ; 420,000 gain
Income taxes are allocated to
a)extraordinary items.
b)discontinued operations.
c)prior period adjustments.
d) all of these.
d) all of these.: (extraordinary items, discontinued operations, prior period adjustments)
Gross billings for merchandise sold by Lang Company to its customers last year amounted to $12,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Company were
12,175,000
Pappy Corporation received cash of $18,000 on September 1, 2012 for one year’s rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The
December 31, 2012 adjusting entry is
debit Unearned Rent Revenue and credit Rent Revenue, $6,000.
Under which of the following conditions would material flood damage be considered an extraordinary item for financial reporting purposes?
a)Only if floods in the geographical area are unusual in nature and occur infrequently.
b)Only if the flood damage is material in amount and could have been reduced by prudent management.
c)Under any circumstances as an extraordinary item.
d)Flood damage should never be classified as an extraordinary item.
a)Only if floods in the geographical area are unusual in nature and occur infrequently.
A correction of an error in prior periods' income will be reported
In the income statement Net of tax
a) Yes Yes
b)No No
c)Yes No
d) No Yes
d) No Yes
In 2012, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2012, Esther had a weighted average of 200,000 common shares outstanding. Compute Esther's 2012 earnings per share.
2.25
A company receives interest on a $40,000, 8%, 5-year note receivable each April 1. At December 31, 2012, the following adjusting entry was made to accrue interest receivable:
Interest Receivable .................................... 2,400
Interest Revenue ....................................... 2,400 Assuming that the company does not use reversing entries, what entry should be made on April 1, 2013 when the annual interest payment is received?
Cash ..................................3,200
Interest Receivable .......................2,400
Interest Revenue .............................800
Manning Company has the following items: write-down of inventories, $360,000; loss on disposal of Sports Division, $555,000; and loss due to strike, $339,000. Ignoring income taxes, what total amount should Manning Company report as extraordinary losses?
0
If plant assets of a manufacturing company are sold at a gain of $1,640,000 less related taxes of $500,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose these effects as
a gain of $1,640,000 and an increase in income tax expense of $500,000
During 2012, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of $1,800,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of taxes, were $2,100,000 in 2012. How should these facts be reported in Lopez's income statement for 2012?
Total Amount to be Included in Income from Results of Continuing Operations and Discontinued Operations.
0 ; 300,000 loss
At Ruth Company, events and transactions during 2012 included the following. The tax rate for all items is 30%.
1.Depreciation for 2010 was found to be understated by $60,000.
2.A strike by the employees of a supplier resulted in a loss of $50,000.
3.The inventory at December 31, 2010 was overstated by $80,000.
4.A flood destroyed a building that had a book value of $1,000,000. Floods are very uncommon in that area.
The effect of these events and transactions on 2012 net income net of tax would be
($735,000).
Starr Corporation loaned $150,000 to another corporation on December 1, 2012 and received a 3-month, 8% interest-bearing note with a face value of $150,000. What adjusting entry should Starr make on December 31, 2012?
Debit Interest Receivable and credit Interest Revenue, $1,000.
An income statement shows “income before income taxes and extraordinary items” in the amount of $2,740,000. The income taxes payable for the year are $1,440,000, including $480,000 that is applicable to an extraordinary gain. Thus, the “income before extraordinary items” is
$1,780,000.
(2740,000+1440,000-480,000)
In November and December 2012, Lane Co., a newly organized magazine publisher, received $75,000 for 1,000 three-year subscriptions at $25 per year, starting with the January 2013 issue. Lane included the entire $75,000 in its 2012 income tax return. What amount should Lane report in its 2012 income statement for subscriptions revenue?
$0.