Question 1

Hook Inc.has an investment in available-for-sale securities of $80,000.This investment experienced an unrealized loss of $5,000 during the current year.Assuming a 35% tax rate, the effect of this loss on comprehensive income will be

Accepted Answer

The unrealized loss of $5,000 on available-for-sale securities decreases comprehensive income by the full amount of the loss, as it is reported in other comprehensive income.

Question 2

Gamble Corporation had beginning inventory $100,000, cost of goods purchased $700,000, and ending inventory $140,000.What was Gamble's inventory turnover?

Accepted Answer

The answer of Gamble Corporation had beginning inventory $100,000, cost...

Question 3

Comparisons of data within a company are an example of the following comparative basis:

Accepted Answer

Intracompany comparisons involve comparing data within the same company, such as comparing financial statements from different years or comparing the performance of different departments within the company. Industry averages would involve comparing the company's data to the standards of the entire industry. Intercompany comparisons involve comparing the data of two different companies, while interregional comparisons involve comparing data from different geographic regions.

Question 4

Eaton, Inc.disposes of an unprofitable segment of its business.The operation of the segment suffered a $360,000 loss in the year of disposal.The loss on disposal of the segment was $180,000.If the tax rate is 30%, and income before income taxes was $2,250,000,

Accepted Answer

The income from continuing operations is calculated as income before income taxes minus the tax expense on that income. The tax expense is $2,250,000 * 30% = $675,000. Therefore, the income from continuing operations is $2,250,000 - $675,000 = $1,575,000.

Question 5

Each of the following is a factor affecting quality of earnings except

Accepted Answer

The answer of Each of the following is a factor...

Question 6

A loss on the write down of obsolete inventory should be reported as

Accepted Answer

The answer of A loss on the write down of...

Question 7

The disposal of a significant component of a business is called

Accepted Answer

Disposal of a significant component of a business refers to the company's decision to discontinue an operation or dispose of a part of the business. This is reported as discontinued operations on the income statement and is shown separately from the company's continuing operations.

Question 8

Wing Company reported income before taxes of $900,000 and an extraordinary loss of $250,000.Assume that the company's tax rate is 30%.What amounts will be reported on the income statement for income before irregular items and extraordinary items, respectively?

Accepted Answer

The answer of Wing Company reported income before taxes of...

Question 9

In 2013 Shum Corporation reported income from operations $180,000, interest expense $50,000, and income tax expense $40,000.Shum's times interest earned ratio was:

Accepted Answer

The answer of In 2013 Shum Corporation reported income from...

Question 10

If an item meets one (but not both) of the criteria for an extraordinary item, it

Accepted Answer

The answer of If an item meets one (but not...

Question 11

Reynolds Company has income before taxes of $360,000 and an extraordinary loss of $80,000.If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of:

Accepted Answer

Income before irregular items = $360,000 - $80,000 = $252,000Extraordinary loss = $80,000 x 30% = $24,000

Question 12

Krug Corporation has income before taxes of $900,000 and an extraordinary gain of $300,000.If the income tax rate is 25% on all items, the income statement should show income before irregular items and extraordinary items, respectively, of

Accepted Answer

The answer of Krug Corporation has income before taxes of...

Question 13

ACME Company reports income before income taxes of $2,400,000 and had an extra-ordinary loss of $800,000.If the tax rate is 30%,

Accepted Answer

Income before extraordinary item = Income before income taxes + Extraordinary loss= $2,400,000 + $800,000= $1,680,000

Question 14

Which one of the following would be classified as an extraordinary item?

Accepted Answer

Expropriation of property by a foreign government is an unusual and infrequent event that is not related to the normal operations of the company and can be classified as an extraordinary item. Losses attributed to a labor strike, write-down of inventories, and gains or losses from sales of equipment are not considered extraordinary items.

Question 15

Comparisons can be made on each of the following bases except

Accepted Answer

Each of the options provided (industry averages, intercompany basis, and intracompany basis) are all valid bases for making comparisons. Therefore, the correct answer is D, indicating that none of the options are excluded as valid bases for comparison.

Question 16

Alpha's Bunny Barn has experienced a $60,000 loss due to tornado damage to its inventory.Tornados have never before occurred in this area.Assuming that the company's tax rate is 30%, what amount will be reported for this loss on the income statement?

Accepted Answer

The loss will be reported net of tax effects. The tax savings from the loss is $60,000 * 30% = $18,000. Therefore, the net loss reported on the income statement is $60,000 - $18,000 = $42,000.

Question 17

The discontinued operations section of the income statement refers to

Accepted Answer

The discontinued operations section of the income statement refers to the disposal of a significant segment of a business. This includes the income or loss on the disposal of the segment as well as any related income or expenses. It is reported separately from continuing operations to provide investors with a better understanding of the ongoing operations of the company. A discontinued operation is a component of the company that has been disposed of or is held for sale, and its cash flows cannot be separately identified from the cash flows of the company as a whole.

Question 18

Each of the following is an extraordinary item except the

Accepted Answer

The answer of Each of the following is an extraordinary...

Question 19

The order of presentation of nontypical items that may appear on the income statement is

Accepted Answer

The answer of The order of presentation of nontypical items...

Question 20

All of the following statements regarding changes in accounting principles are true except:

Accepted Answer

The statement "Most changes in accounting principles are only reported in current periods when the principle change takes place" is false. Most changes in accounting principles require retrospective adjustments to prior periods to ensure consistency and comparability of financial statements.

Quiz 14: Managerial Accounting