Question : MULTIPLE CHOICE 6.                Comprehensive income includes all of the following : 1370110

MULTIPLE CHOICE

6.                Comprehensive income includes all of the following except:

A)gains

B)expenses

C)distributions to owners

D)unrealized gains on investment

7.              Comprehensive income is also referred to as:

A)earnings

B)net income

C)income from continuing operations

D)none of the above

8.              Income tax expense is deducted in determining:

A)total revenue

B)gross margin

C)income from operations

D)income from continuing operations

9.              The gain resulting from a company selling off a component of its business is reported on the company’s income statement as:

A)an extraordinary item

B)discontinued operations

C)a prior period adjustment

D)a cumulative accounting adjustment

10.              For the year ended December 31, 2010, Running, Inc. had a pre-tax extraordinary gain of $395,000, while income before extraordinary items equaled $2,376,000. Assuming Running Inc. had no discontinued operations and an effective tax rate of 40%, the net income reported by the company was:

A)$2,771,000

B)$2,613,000

C)$2,534,000

D)$1,662,600

11.   During prior periods the Rocket Company used the double-declining balance method for

depreciating its equipment, but in 2010 it decided to switch to the straight-line method.

The equipment was purchased in 2008 for $1,000,000 and had a 10 year life.  The

balance in the accumulated depreciation account for equipment at the beginning of 2010

was $360,000. How will 2010’s net income be changed by switching to the new

depreciation if Rocket has an effective tax rate of 40%.

A)$ 60,000 smaller

B)$16,800  larger

C)$28,000  larger

D)$40,000  smaller

Double Declining Balance Depreciation  (1,000,000-$360,000).2 = $128,000

Straight-Line Depreciation                               1,000,000/10 years = $100,000

Difference between old and new depreciation for 2010 is $28,000 smaller making income before tax larger but after tax of 40%  ($28,000).6 net income will increase by $16,800.

12.              Mountain Industries has machinery that cost $100,000, with an estimated salvage value of $15,000 and a 5 year useful life. At the start of the third year of the machinery’s life, the company switched from the straight-line method of depreciation to the double-declining balance method. What will be the new depreciation for the year.

A)$17,000

B)$40,000

C)$24,000

D)$14,400

13.              The effect of a switch from Average Costing to FIFO would affect which section of the income statement:

A)Cost of Goods Sold

B)Net of Tax Adjustment

C)Comprehensive Income

D)cumulative accounting adjustments

14.              The income from operations of a discontinued division would be included in which section of the income statement:

A)Income from operations

B)prior period adjustments

C)Net of tax item

D)Nonoperating section of income statement

15.              A loss on the sale of equipment would be included in which element of net income:

A)operating income

B)prior period adjustments

C)nonoperating section

D)net of tax item