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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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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 2016 income statement?

A) Report it as restructuring costs.
B) Report it as a discontinued operation.
C) Report the income or loss from operations of the division in discontinued operations.
D) Report it as a gain on sale of investments included in income from continuing operations.

E) B) and D)
F) A) and C)

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Question 22

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Howard Co.'s 2016 income from continuing operations before income taxes was $280,000.Howard Co.reported before-tax income on discontinued operations of $50,000.All tax items are subject to a 40% tax rate.In its income statement for 2016,Howard Co.would show the following line-item amounts for net income and income tax expense:

A) $198,000 and $112,000.
B) $230,000 and $92,000.
C) $330,000 and $132,000.
D) $198,000 and $79,000.

E) B) and D)
F) All of the above

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Question 23

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The statement of cash flows reports cash flows from the activities of:

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

Earnings quality refers to the ability of reported earnings (income)to predict future earnings.

Cash flows from investing activities do not include:

Hong Kong Clothiers reported revenue of $5,000,000 for its year ended December 31,2016.Accounts receivable at December 31,2015 and 2016,were $320,000 and $355,000,respectively.Using the direct method for reporting cash flows from operating activities,Hong Kong Clothiers would report cash collected from customers of:

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

Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

Cash flows from investing do not include cash flows from:

Briefly define discontinued operations and explain how they are reported according to U.S.GAAP.

Use the following to answer questions On September 1,2016,Jacob Furniture Mart enters into a tentative agreement to sell the assets of its office equipment division.This division qualifies as a component of the entity according to GAAP regarding discontinued operations.The division's contribution to Jacob's operating income for 2016 was a $3 million loss before taxes.Jacob has an average tax rate of 30%. Required: Consider independently the appropriate accounting by Jacob under the three scenarios below. -Scenario 3: Assume that Jacob had not yet sold the office furniture division by the end of 2016.Further,assume that the fair value less costs to sell of the division's assets at December 31,2016,was $12 million and was expected to remain the same when the assets are sold in 2017.The book value of the division's assets was $19 million at the end of the year.Under these assumptions,what would Jacob report in its 2016 income statement regarding the office equipment division? Explain where this information would be presented.

Pro forma earnings:

Cendant Corporation's results for the year ended December 31,2016,include the following material items: Cendant Corporation's income from continuing operations before income taxes for 2016 is:

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

Schneider Inc.had salaries payable of $60,000 and $90,000 at the end of 2015 and 2016,respectively.During 2016,Schneider recorded $620,000 in salaries expense in its income statement.Cash outflows for salaries in 2016 were:

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

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

The statement of cash flows for the year ended December 31,2016,for Whiteside Incorporated is presented below. Required: Prepare the statement of cash flows assuming that Whiteside prepares its financial statements according to International Financial Reporting Standards.Where IFRS allows flexibility,use the classification used most often in IFRS financial statements.

In the 2016 income statement for Foxtrot Co. ,it would report: