Income Multiple-Choice Questions Selected from Gleim Sections 3.1 - 3.4

1. Income Multiple-Choice QuestionsSelected from Gleim Sections 3.1 - 3.4 Circle the best answer to each of the following non-computational questions:

2. 3.1 Comprehensive Income

3. 3.2 Income from Continuing Operations

4. 3.2 Income from Continuing Operations Net income for year 1 Assets = Liabilities + Owners’ Equity Owners’ Equity = Assets – Liabilities  = $178,000 – $62,000 = $116,000 Contributed Capital: Capital stock $125,000  Additional paid-in capital 17,000 $142,000 Retained Earnings: Net income $  – Dividends (34,000) _______ Owners’ Equity $116,000

5. 3.2 Income from Continuing Operations

6. 11. In Baer Food Co.'s year 3 single-step income statement,  the section titled Revenues consisted of the following:

7. Henderson Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance on December 31 included the following expense and loss accounts:

8. Carlisle Co.’s income statement for the year ended December 31, year 1 reported net income of $148,200. The auditor raised questions about the following amounts that had been included in net income: Unrealized holding loss on available-for-sale securities $(10,800) Gain on early retirement of bonds payable (net of $22,000 tax effect) 44,000 Adjustment to profits of prior years for errors in depreciation (net of $7 ,500 tax effect) (15,000) Loss from fire (net of $14,000 tax effect) (28,000) The loss from the fire was an infrequent but not unusual occurrence in Carlisle's line of business. Carlisle's December 31, year 1 income statement should report net income of A. $130,000 B. $132,200 C. $163,200 D. $174,000

9. 3.3 Discontinued Operations On April 30, year 1, Deer Corp. committed to a plan to sell a component of the entity. As a result, the component's operations and cash flows will be eliminated from the entity's operations, and the entity will have no significant continuing post-disposal involvement in the component's operations. For the period January 1 through April 30, year 1, the component had revenues of $500,000 and expenses of $800,000. The assets of the component were sold on October 15, year 1, at a loss for which no tax benefit is available. In its income statement for the year ended December 31, year 1, how should Deer report the component's operations from January 1 to April 30, year 1? $500,000 and $800,000 should be included with revenues and expenses, respectively, as part of continuing operations.  $300,000 should be reported as part of the loss on disposal of a component.  $300,000 should be reported as an extraordinary loss.  $300,000 should be included in the determination of income or loss from operations of a discontinued component. 

10. 20. On January 1, year 2, Dart, Inc. entered into an agreement to sell the assets and product line of its Jay Division, which met the criteria for classification as an operating segment.

11. 20. During January year 1, Doe Corp. agreed to sell the assets and product line of its Hart division.

12. 3.4 Extraordinary Items 30. Kent Co. incurred the following infrequent losses during the current year: A $300,000 loss was incurred on disposal of one of four dissimilar factories. A major currency devaluation caused a $120,000 foreign currency transaction loss on an amount remitted by a customer. Inventory valued at $190,000 was made worthless by a competitor's unexpected product innovation. In its current-year income statement, what amount should Kent report as losses that are not considered extraordinary? A. $610,000 B. $490,000 C. $420,000 D. $310,000

13. 31. Nikoto Steel Co. had the following unusual financial events occur during the current year: Bonds payable were retired 5 years before their scheduled maturity, resulting in a $260,000 gain. Nikoto has frequently retired bonds early when interest rates declined significantly. A steel forming plant suffered $255,000 in losses from hurricane damage. This was the fourth similar loss sustained in a 5-year period at that location. Nikoto's steel transportation operating segment was sold at a net loss of $350,000. This transaction was Nikoto's first divestiture of one of its component units. Before income taxes, what amount should be reported as the gain (loss) from extraordinary items in the current year? $0 $5,000 $(90,000) $(350,000)

14. The End Click here for non-computational multiple choice questions