ACG 3131 EoC Practice Ch 4 Review Questions and Correct Answers
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Course
ACG 3131
Institution
ACG 3131
The income statement can be used to assess
A. liquidity. B. solvency. C. creditworthiness. D. All of these answer choices are correct. C. The business and investment community uses the income statement to determine profitability, investment value, and creditworthiness.
The ________ approach focus...
ACG 3131 EoC Practice Ch 4 Review
Questions and Correct Answers
The income statement can be used to assess
A.
liquidity.
B.
solvency.
C.
creditworthiness.
D.
All of these answer choices are correct. ✅C.
The business and investment community uses the income statement to determine
profitability, investment value, and creditworthiness.
The ________ approach focuses on the income-related activities that have occurred
during the period.
A.
transaction.
B.
capital maintenance.
C.
earnings quality.
D.
classification. ✅A.
The transaction approach focuses on the income-related activities that have occurred
during the period. These activities include revenue and expense transactions, and gain
and loss transactions.
Which of the following occur from peripheral or incidental transactions?
A.
Sales revenue.
B.
Cost of goods sold.
C.
Gain on the sale of equipment.
D.
Operating expenses. ✅C.
Gains and losses result from peripheral or incidental transactions.
, In the single-step income statement:
A.
interest revenue and rental revenue are reported as other revenues and gains.
B.
just two groupings exist - revenues and expenses.
C.
expenses are classified by functions, such as merchandising, selling and administration.
D.
an income from operations figure is presented. ✅B.
Just two groupings exist in the single-step income statement - revenues and expenses.
Which of the following is an acceptable method of presenting the income statement?
A.
A classified income statement.
B.
A current operating performance income statement.
C.
A condensed income statement.
D.
None of these answer choices are correct. ✅C.
Acceptable presentations of the income statement include a single-step income
statement, a multiple-step income statement, and a condensed income statement.
How should an unusual event not meeting the criteria for an extraordinary item be
disclosed in the financial statements?
A.
Shown as a separate item in operating revenues or expenses if material and
supplemented by a footnote if deemed appropriate.
B.
Shown in operating revenues or expenses if material but not shown as a separate item.
C.
Shown net of income tax after ordinary net earnings but before extraordinary items.
D.
Shown net of income tax after extraordinary items but before net earnings. ✅A.
Shown as a separate item in operating revenues or expenses if material and
supplemented by a footnote if deemed appropriate.
Which of the following is not considered an irregular item on the income statement?
A.
Income tax expense.
B.
Extraordinary gains.
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