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

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Question 21

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Required: Prepare a multiple-step income statement with earnings per share disclosure.

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Question 22

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Each of the following would be reported as items of other comprehensive income except:

A) Foreign currency translation gains.
B) Unrealized gains on investments accounted for as securities available for sale.
C) Deferred gains from derivatives.
D) Gains from the sale of equipment.

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

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Question 23

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International Financial Reporting Standards require a company to classify expenses in an income by function.

Presented below is an excerpt ($ in millions) from the 2011 annual report to shareholders of Microsoft Corporation. Explain how the shareholder should interpret the difference between the net income and total comprehensive income for Microsoft in 2011.

Paris Company reported the following items in its December 31, 2013, year-end adjusted trial balance: Paris is subject to a 40% income tax rate. Required: Prepare the December 31, 2013, income statement for Paris Company starting with income from continuing operations before income taxes.

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 regarding disposal of long-lived assets. How should Claxton report the sale in its 2013 income statement?

In a statement of cash flows prepared under International Financial Reporting Standards, each of the following items is typically classified as a financing cash flow except:

In a recent press release, Foot Locker Inc. reported that its fiscal first-quarter net income fell 46% due to losses related to discontinued operations, but earnings from continuing operations jumped 19% amid a modest increase in sales. The specialty athletic retailer said net income was $20 million for the quarter ended May 4, compared with net income of $37 million a year earlier. The latest results included a loss of $18 million from discontinued operations. Last year, the company had earnings of $5 million, or four cents a share, from discontinued operations. Foot Locker said earnings from continuing operations were $38 million, compared with $32 million a year earlier. Discuss how Foot Locker's press release relates to its earnings quality.

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

What is Misty's net income for the current year?

An extraordinary event for financial reporting purposes is both:

Comprehensive income is the change in equity from:

Reporting comprehensive income according to International Financial Reporting Standards can be accomplished by each of the following methods except:

Rowdy's would report net cash inflows (outflows) from investing activities in the amount of:

Canton Corporation reported the following items in its adjusted trial balance for the year ended December 31, 2013: Canton is subject to a 30% tax rate. Required: Prepare the December 31, 2013, income statement for Canton Corporation, starting with income from continuing operations before income taxes.

Required: Prepare a 2013 single, continuous statement of comprehensive income for Rollins Inc.

Gains, but not losses, from discontinued operations must be separately reported in an income statement.

Required: Prepare a 2013 multiple-step income statement for Rollins Inc. with basic earnings per share disclosure.

The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities.

Income statements prepared according to both U.S. GAAP and International Financial Reporting Standards require the separate reporting, as an extraordinary item, of material gains and losses from events that are both unusual and infrequent.