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Exam 4: The Income Statement and Statement of Cash Flows

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Question 61

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What would be Misty's net income for the current year?

A) $148.
B) $168.
C) $112.
D) None of the amounts given are correct.

E) A) and B)
F) All of the above

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Question 62

Multiple Choice

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Changes in accounting estimates are reported:

A) Currently and prospectively.
B) Retroactively and currently.
C) Retroactively, currently, and prospectively.
D) By restating prior years.

E) B) and D)
F) A) and B)

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Question 63

Multiple Choice

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Tropical Tours reported revenue of $400,000 for its year ended December 31, 2009. Accounts receivable at December 31, 2008 and 2009, were $35,000 and $32,000, respectively. Using the direct method for reporting cash flows from operating activities, Tropical Tours would report cash collected from customers of:

Intraperiod tax allocation is the process of associating income tax effects with the income statement components that create those effects.

The principal benefit of separately reporting discontinued operations and extraordinary items is to enhance:

Paris Company reported the following items in its December 31, 2009, year-end adjusted trial balance: Paris is subject to a 40% income tax rate. Required: Prepare the December 31, 2009, income statement for Paris Company starting with income from continuing operations before income taxes. $\begin{array}{lc}\text { Income from continuing operations before income taxes } & \$ 320,000 \\\text { Extraordinary gain on disposal of non-operating assets } & 60,000 \\\text { Extraordinary flood loss } & (18,000)\end{array}$

Many income statement numbers are based on estimates. Explain the reporting required when the income effect of a change in estimate is material.

Elmore Co. purchased an offset press on January 1, 2006, at a cost of $120,000. The press had an estimated eight-year life with no residual value. Elmore uses straight-line depreciation. At December 31, 2009, Elmore estimated that the press would have only two more years of remaining life with no residual value. For 2009, Elmore would report depreciation of:

The definition of what constitutes an extraordinary item should be independent of the operating environment.

Each of the following would be reported as items of other comprehensive income except:

In its December 31, 2009 financial statements, E-Z Prices estimated that losses on its current receivables would be $10.2 million. During 2010, E-Z Prices determined that the losses on the Dec. 31, 2009, receivables were actually $12.4 million. Ignoring taxes, E-Z Prices would report, in its 2010 financial statements, the additional $2.2 million loss on receivables as: