Question :
Multiple Choice Questions
35.Extraordinary items found the income statement:
A. Before discontinued operations.
B. Af : 1259487
Multiple Choice Questions
35.Extraordinary items are found on the income statement:
A. Before discontinued operations.
B. After discontinued operations.
C. Before income from continuing operations.
D. After prior period adjustments.
36.Doogle Corporation sold a segment of its operations in 2014 and suffered an extraordinary loss in 2015. Which of the following would be the most useful in attempting to predict Doogle’s performance for 2016?
A. Doogle’s income from continuing operations in 2014 and 2015.
B. Doogle’s net income in 2014 and 2015.
C. Doogle’s total assets at the end of 2015.
D. Doogle’s retained earnings at the end of 2015.
37.Execucomp Corporation’s financial statements in the current year show a loss from discontinued operations, a prior period adjustment, and an extraordinary gain. If Execucomp’s income statement is prepared according to generally accepted accounting principles (as illustrated in your text), which of the following four items would appear second in sequence in the income statement?
A. Prior period adjustment.
B. Income from continuing operations.
C. Loss from discontinued operations.
D. Extraordinary gain.
38.Of the items listed, which would appear closest to the bottom of the income statement?
A. Extraordinary items.
B. Prior period adjustment.
C. Income from continuing operations.
D. Discontinued operations.
39.The purpose of developing the subtotals “Income before Extraordinary Items” and “Income from Continuing Operations” in an income statement is to:
A. Assist investors in forecasting future operating results.
B. Increase the amount of reported net income.
C. Decrease the amount of income subject to income taxes.
D. Provide investors with the information necessary to compute earnings per share.
40.To qualify as an extraordinary item, a gain or loss must:
A. Affect the income of a prior period.
B. Be larger in amount than any other item in the income statement.
C. Be material in amount, unusual in nature, and not expected to recur.
D. Be associated with a segment of the business that has been discontinued during the current period.
41.Which of the following would be classified as an extraordinary item?
A. A large gift given to the company.
B. A loss from obsolete inventory.
C. A loss from a natural disaster that affects the company at infrequent intervals.
D. A loss from an enacted law that made inventory unsalable.
42.An example of an extraordinary gain or loss is:
A. A large loss arising from inability to collect an account receivable from a bankrupt customer.
B. A large gain from disposal of a segment of the business.
C. A gain or loss from sale of an expensive machine no longer needed in the business.
D. A loss due to the expropriation of assets by a foreign government.
43.Which of the following items would be included in the discontinued operations section of the income statement?
A. Income or loss from operating the segment prior to its disposal.
B. The gain or loss on disposal of the segment.
C. Both the income or loss from operating the segment prior to its disposal, and the gain or loss on disposal of the segment.
D. Only losses and not gains on the disposal of a segment.
44.Family Fashions Corporation discontinued Kid-Choice, its entire line of children’s clothing, in November of 2015. Prior to the disposal, Kid-Choice generated a loss of $600,000 (net of tax) for the period from January through the sale date. Because of the value of the real estate and machinery, there was a gain of $850,000 (net of tax) on the actual sale. How should this situation be reported in the financial statements of Family Fashions for 2015?
A. A $250,000 gain should be included in the 2015 income statement as an extraordinary item.
B. A $600,000 loss should be included in income from operations and a $850,000 gain should be reported in the “discontinued operations” section of the income statement.
C. A $250,000 adjustment to beginning retained earnings should be in the statement of retained earnings.
D. A $250,000 gain should be in the “discontinued operations” section of the income statement.
