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

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Question 31

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Which of the following profit amounts usually will be listed in both the single-step and multiple-step formats of the income statement?

A) Gross profit.
B) Operating income.
C) Income before taxes.
D) Net nonoperating income.

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

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Question 32

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For the statement of cash flows, short-term Treasury bills would be included as:

A) Operating activities.
B) Investing activities.
C) Financing activities.
D) Cash equivalents.

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

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Question 33

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In a recent press release, Estee Lauder Co. reported "a fiscal fourth-quarter loss due to a restructuring charge but said it expects to see earnings growth in its fiscal second through fourth quarters." The New York skin care and cosmetics company reported a net loss of $25.4 million, or 13 cents a share, for the quarter ended June 30, compared with net income of $20.4 million, or six cents a share, a year earlier. Excluding the restructuring charge of $76.9 million, or 32 cents a share, the company said profit would have been $51.5 million, or 19 cents a share. Discuss how Estee Lauder's press release relates to its earnings quality.

Are differences between McDonald's and the industry likely driven by differences in size between McDonald's and the average company in its industry peer group? Explain briefly.

Shady Lane's income tax payable account decreased from $14 million to $12 million during 2018. If its income tax expense was $80 million, what was shown as an operating cash flow under the direct method?

Income from continuing operations sometimes includes gains from nonoperating activities.

On October 28, 2018, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2018, the end of the company's fiscal year. The division's loss from operations for 2018 was $2,000,000. The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $3,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement?

Misty Company reported the following before-tax items during the current year: -Misty's effective tax rate is 40%. What is Misty's income from continuing operations?

On October 28, 2018, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2018, the end of the company's fiscal year. The division's loss from operations for 2018 was $2,000,000. The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement?

In the DuPont formula, return on assets equals:

In a statement of cash flows prepared under International Financial Reporting Standards (IFRS), interest received is most often classified as an operating cash flow.

When a material error is discovered in prior financial statements:

The single-step format of the income statement first lists all the revenues and gains included in income from continuing operations.

The following information is provided in the 2018 annual report to shareholders of The BizStore: Required: Compute items U-Z in the table above.

The trial balance of Lakewood Inc. included the following accounts as of December 31, 2018: Lakewood Inc. had 100,000 shares of stock outstanding throughout the year. Income tax expense has not yet been accrued. The effective tax rate is 30%. -Required: Prepare a multiple-step income statement with earnings per share disclosure.

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

The Claxton Company manufactures children's toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to GAAP. How should Claxton report the sale in its 2018 income statement?

Popson Inc. incurred a material loss that was unusual in character. This loss should be reported as:

Comprehensive income is the total change in shareholders' equity that occurred during the period.

The following information (in $ millions) comes from the Annual Report of Saratoga Springs Co. for the year ending 12/31/2018: Required: Compute the following amounts for Saratoga Springs Co. -Its average days in inventory for 2018. Round your final answer to one decimal place.