61. Which financial statement reports operating performance for a specific period of time?
A. Balance sheet
B. Income statement
C. Statement of changes in shareholders' equity
D. Statement of retained earnings
E. Statement of Cash Flows
62. Under accrual accounting, revenues are recognized when
A. the firm has performed all, or most of, the services it expects to provide.
B. the firm has received cash, or some other asset such as a receivable, whose cash-equivalent value it can measure with reasonable precision.
C. the firm has significant uncertainty about the amount and timing of the cash inflows and outflows from the sales transaction.
D. both a and b must be present.
E. none of the above.
63. Over sufficiently long time periods, the amount of net income equals
A. cash inflows minus cash outflows from operating activities.
B. cash inflows minus cash outflows from operating and investing activities.
C. cash inflows minus cash outflows from operating, investing, and debt servicing activities.
D. cash inflows minus cash outflows from operating and debt servicing activities.
E. cash inflows minus cash outflows from investing and debt servicing activities.
64. Recognition of revenue usually occurs when
A. the firm pays for the related expenses.
B. the revenue is earned, such as at the time of the sale or delivery of the goods.
C. a signed, legally binding contract is received.
D. an advance payment for the goods is received.
E. none of the above.
65. Shareholders of Forest Glen Corporation have received $35,000 in dividends in the current year. At year end the corporation has total assets of $500,000, total liabilities equal to $300,000, and contributed capital totaling $100,000. If retained earnings at the beginning of the year was $80,000, what was Forest Glen's net income for the current year?
A. $80,000
B. $215,000
C. $55,000
D. $10,000
E. $45,000
66. The income statement provides information for assessing the operating profitability of a firm. One tool used for analysis is the common-size income statement that expresses
A. each expense and net income as a percentage of revenues.
B. each revenue and net income as a percentage of expenses.
C. each expense and net income as a percentage of total assets.
D. each expense and net income as a percentage of shareholders' equity.
E. each revenue and net income as a percentage of shareholders' equity.
67. Income from continuing operations includes
A. gain on the sales of used equipment that is replaced in the current year.
B. loss from a discontinued operation.
C. loss from an earthquake.
D. gain on a change in accounting principle.
E. loss resulting from prohibitions under new regulations.
68. Which of the following is/are correct?
A. Discontinued operations are shown as the last category after income from continuing operations.
B. The discontinued operations section of the income statement consists only of the gain or loss on disposal of the discontinued component net of the tax effect.
C. The discontinued operations section of the income statement consists only of the income or loss from operating the discontinued component net of the tax effect.
D. The discontinued operations section of the income statement consists of the income or loss from operating the discontinued component net of the tax effect as well as the gain or loss on disposal of the discontinued component net of the tax effect.
E. None of these answer choices is correct.
69. Which of the following most likely would be considered a discontinued operation?
A. Production or marketing functions are shifted from one location to another.
B. A sporting goods manufacturer has a bicycle division that meets FASB's definition of a component of the entity and decides to outsource the manufacture of its bicycles.
C. The unprofitable brands of a beauty products component of an entity that manufactures and sells consumer products are discontinued.
D. An entity that is a franchiser in the quick-service restaurant business also operates company-owned restaurants that are unprofitable in a certain region and, as a result, the entity decides to exit both the quick-service business as well as the company-owned restaurants in that region.
E. None of these answer choices is correct.
70. Which of the following statements regarding discontinued operations is true?
A. The assets and liabilities of a disposal group classified as held for sale by an entity may be offset and shown as a single item on the balance sheet of the entity.
B. The assets and liabilities of a disposal group of an entity must be shown separately in the asset and liabilities sections of the balance sheet of the entity and cannot be offset.
C. An adjustment in a subsequent period to the selling price of a component of an entity sold must be reported as a retroactive adjustment in the prior-period financial statements of the entity in which the discontinued operation was reported.
D. The gain or loss on disposal of a component of an entity classified as a discontinued operation need not be disclosed separately from the loss from operations of the discontinued segment.
E. None of these answers is correct.