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Exam 4: The Income Statement, Comprehensive Income, and the Statement of Cash Flows

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Question 71

Multiple Choice

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Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions) : - Dowling's average inventory balance for 2018 is (rounded) :

A) 11.
B) 12.
C) 11.5.
D) 12.5.

E) A) and B)
F) None of the above

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Question 72

Multiple Choice

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Which of the following is not true about EPS?

A) It must be reported by all corporations whose stock is publicly traded.
B) It must be reported separately for discontinued operations.
C) It must be reported on operating income.
D) None of these answer choices are correct.

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

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Question 73

Multiple Choice

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Stinley Co. paid utilities of $134,000 during 2018. At the end of 2018, utilities payable equals $17,000 and utilities expense equals $145,000. What was the balance of utilities payable at the beginning of 2018?

On November 1, 2018, Jamison Inc. adopted a plan to discontinue its barge division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by April 30, 2019. On December 31, 2018, the company's year-end, the following information relative to the discontinued division was accumulated: In its income statement for the year ended December 31, 2018, Jamison would report a before-tax loss on discontinued operations of:

A primary advantage of the multiple-step format of the income statement over the single-step format is that the multiple-step format:

The following income statement items appeared on the adjusted trial balance of Foxworthy Corporation for the year ended December 31, 2018 ($ in 000s): sales revenue, $22,300; cost of goods sold, $14,500; selling expenses, $2,300; general and administrative expenses, $1,200; dividend revenue from investments, $200; interest expense, $300. Income taxes have not yet been accrued. The company's income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company's income statement every year. The company's controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2018 ($ in 000s). All transactions are material in amount. 1. Investments were sold during the year at a loss of $300. Foxworthy also had unrealized holding losses of $200 for the year on investments. 2. One of the company's factories was closed during the year. Restructuring costs incurred were $2,000. 3. During the year, Foxworthy completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP regarding discontinued operations. The division had incurred operating income of $800 in 2018 prior to the sale, and its assets were sold at a loss of $1,800. 4. A positive foreign currency translation adjustment for the year totaled $600. Required: Prepare Foxworthy's single, continuous statement of comprehensive income for 2018, including earnings per share disclosures. Use a multiple-step income statement format. Two million shares of common stock were outstanding throughout the year.

The difference between single-step and multiple-step income statements is primarily an issue of:

Change statements include a:

Calstone, Inc., prepares a single, continuous statement of comprehensive income. The following situations occurred during the company's 2018 fiscal year: 1. Land that had been held as an investment was sold and a gain was recognized. 2. There was a negative foreign currency translation adjustment at December 31, 2018. 3. Interest revenue was recognized. 4. A division was sold that qualifies as a separate component according to GAAP regarding discontinued operations. 5. There were unrealized holding losses on investments during the year. 6. Restructuring costs were incurred due to downsizing and reorganization of a manufacturing facility. Required: For each situation, identify the appropriate reporting treatment from the list below (consider each event to be material). a. As a component of operating income. b. As a nonoperating income item (other income or expense). c. As a discontinued operation. d. As an item of other comprehensive income.

Rowdy's Restaurants Cash Flow ($ in millions) -Rowdy's would report net cash inflows (outflows) from operating activities in the amount of:

On September 1, 2018, Jacob Furniture Mart enters into a tentative agreement to sell the assets of its office equipment division. This division qualifies as a component of the entity according to GAAP regarding discontinued operations. The division's contribution to Jacob's operating income for 2018 was a $3 million loss before taxes. Jacob has an average tax rate of 30%. Required: Consider independently the appropriate accounting by Jacob under the three scenarios below. -Scenario 1: Assume that Jacob sold the division's assets on December 31, 2018, for $24 million. The book value of the division's assets was $19 million at that date. Under these assumptions, what would Jacob report in its 2018 income statement regarding the office equipment division? Explain where this information would be presented.

The trial balance of Rollins Inc. included the following accounts as of December 31, 2018: Rollins had 100,000 shares of stock outstanding throughout the year. Income tax expense has not yet been accrued. The effective tax rate is 40%. -Required: Prepare a 2018 separate statement of comprehensive income for Rollins Inc.

Net income, often referred to as "the bottom line," is not always a good predictor of future income. Explain this statement.

Martel Co. had supplies of $24,000 and $33,000 at the end of 2017 and 2018, respectively. During 2018, Howard paid $128,000 for supplies. Supplies expense in the 2018 income statement was:

Briefly define discontinued operations and explain how they are reported according to U.S. GAAP.

In a statement of cash flows prepared under International Financial Reporting Standards (IFRS) , each of the following items is typically classified as a financing cash flow except:

Excerpts from Hulkster Company's December 31, 2018 and 2017, financial statements are presented below: -Hulkster's 2018 return on shareholders' equity is (rounded) :

Missoula Inc. reported the following selected financial statement data: -Required: Compute the inventory turnover ratio for 2018.

Rowdy's Restaurants Cash Flow ($ in millions) - Rowdy's would report net cash inflows (outflows) from financing activities in the amount of:

Missoula Inc. reported the following selected financial statement data: -Required: Compute the average days in inventory for 2018.