41. The income statement is not also called the statement of
A. operations.
B. operating activity.
C. profit and loss.
D. receipts and disbursements.
E. All of the above are different names assigned to the income statement.
42. _____ present an ordered list, grouped by broad categories of revenues and expenses. They begin with revenues followed by a list of expenses.
A. Income Statement
B. Balance Sheets
C. Statement of Retained Earnings
D. Statement of Cash Flows
E. None of the above
43. Common terminology, but not definitions in U.S. GAAP and IFRS, often refers to the difference between sales and cost of sales as gross
A. sales.
B. profit.
C. operations.
D. all of the above
E. none of the above
44. Which of the following is/are true?
A. After cost of sales, the income statement typically shows deductions for other expenses associated with operations (other operating expenses).
B. Many firms present a subtotal called operating income or operating profit, the difference between revenues and expenses associated with core operating activities.
C. two common types of operating expenses are selling, general, and administrative expenses (SG&A) and research and development expenses (R&D).
D. all of the above
E. none of the above
45. Subtraction of total operating expenses from sales yields:
A. net income.
B. gross margin.
C. operating profit.
D. all of the above
E. none of the above
46. Other (nonoperating) items follow operating expenses or the subtotal for operating profit. Most firms reporting under U.S. GAAP separately report financing costs, such as
A. principal payments.
B. interest revenue.
C. interest expense.
D. principal receipts.
E. none of the above
47. A firms decision to sell its headquarters building at a gain
A. would increase income in the year of sale.
B. is not part of the core business.
C. would be aggregated with other noncore, nonoperating items.
D. reported below operating income, probably as Other Income.
E. all of the above
48. Subtracting nonoperating expenses from operating income yields:
A. income tax expense
B. profit before income taxes
C. net income
D. gross profit
E. none of the above
49. U.S. GAAP and IFRS require separate income statement display of income from continuing operations and _____earnings that will not continue because the firm either sold, or made a decision to sell, a portion of its business). Such a requirement aids users of the income statement in predicting future earnings.
A. income from discontinued operations
B. extraordinary items
C. changes in accounting principles
D. sale of individual assets
E. none of the above
50. Revenue recognition is among the most complex issues in financial reporting. The quantity and complexity of the authoritative guidance for recognizing revenues result(s) from
A. misreporting of revenues.
B. reporting revenues before the firm earns them.
C. reporting nonexistent revenues.
D. firms bundling products and services and selling them in multiple-element arrangements.
E. all of the above.