ACG 3131- Exam #2 Questions and 100% Correct Answers
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ACG 3131
Income statement This statement measures the success of a companies operations for a given period of time. It helps investors and creditors predict the amounts, timing, and uncertainty of cash flows
Revenues this element of the income statement is defined as- inflows or other enhancements of asset...
ACG 3131- Exam #2 Questions and 100%
Correct Answers
Income statement ✅This statement measures the success of a companies operations
for a given period of time. It helps investors and creditors predict the amounts, timing,
and uncertainty of cash flows
Revenues ✅this element of the income statement is defined as- inflows or other
enhancements of assets of an entity or settlements of its liabilities during a period from
delivering or producing goods, rendering services, or other activities that constitute the
entity's ongoing major or central operations.
Expenses ✅this element of the income statement is defined as- outflows or other
using-up of assets or incurrences of liabilities during a period from delivering or
producing goods, rendering services, or carrying out other activities that constitute the
entity's ongoing major or central operations.
Gains ✅this element of the income statement is defined as- increases in equity (net
assets) from peripheral or incidental transactions of an entity except those that result
from revenues or investments by owners.
Losses ✅this element of the income statement is defined as- decreases in equity (net
assets) from peripheral or incidental transactions of an entity except those that result
from expenses or distributions to owners.
Revenues and expenses ✅These two elements of the income statement are displayed
as gross inflows/outflows of net assets
Gains and losses ✅These two elements of the income statement are displayed as net
inflows/outflows
Operating section, non operating section, income taxes, discontinued operations, and
earnings per share ✅In the proper order, what are the 5 sections of a multi-step
income statement (excluding non controlling interest)
Sales Revenue
(COGS)
=Gross Profit
(Selling Expenses)
(Admin Expenses)
=Operating Income
Other Revenues/Gains
, (Other Expenses/Losses)
= Earnings Before Taxes
(Income Tax)
=Earnings from Cont. Operations
(Discontinued Operations)
=Net Income
Earnings per Share= ✅What is the correct format of a multi-step income statement
(Net Income- Preferred Div)/# common stock outstanding ✅What is the formula for
earnings per share?
Discontinued operations ✅This section of the income statement is shown as "net of
tax" and shows the material gains/losses resulting from disposal of a component of a
business- must be significant to be included
Unusual nature ✅The underlying event or transaction should possess a high degree of
abnormality and be of a type clearly unrelated to, or only incidentally related to, the
ordinary and typical activities of the company, taking into account the environment in
which it operates
Infrequency of occurrence ✅This type of transaction that would not reasonably be
expected to recur i the foreseeable future, taking into account the environment in which
the entity operates
F ✅T/F Unusual gains/losses are reported as net of tax
Unusual or infrequent gains/losses ✅What section should this transaction be included
in:
A) Writedown or writeoff of receivables, inventories, property, plant, and equipment,
goodwill or other intangible assets
(b) Restructuring charges.
(c) Other gains or losses from sale or abandonment of property, plant, or equipment
Used in the business.
(d) Effects of a strike, including those against competitors and major suppliers.
(e) Gains or losses from redemption or extinguishments of debt.
(f) Gains and losses related to casualties such as fires, floods, and earthquakes
(g) Gains or losses from sale of investment securities
Discontinued operation is recognized ✅These two things occur for what to happen?
1. A company eliminates the results of operations of a component of the business. A
component comprises operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes.
2. The elimination of a component that represents a strategic shift having a major effect
on the company's operations and financial results. A strategic shift generally includes
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