1. On the income statement, extraordinary items are reported
A. immediately after the continuing operations section.
B. before the operating income section.
C. immediately before the discontinued operations section.
D. net of income tax or net of income tax savings.
2. _______ is added back to net income in the operating section of an indirect cash flow statement.
A. An increase in accounts receivable
B. A decrease in accounts payable
C. Depreciation
D. An increase in inventory
3. A journal entry for the sale of $10 par-common stock for $18 per share would include a
A. debit to Common Stock.
B. debit to Paid-In Capital in Excess of Par–Common Stock.
C. credit to Cash.
D. credit to Paid-In Capital in Excess of Par–Common Stock.
4. For the years 2011, 2012, and 2013, the sales of Red Line, Inc. are $40,000, $60,000 and $80,000, respectively. If 2011 is the base year, the trend percentage for 2012 was
A. 150%.
B. 0%.
C. 133%.
D. 200%.
1. To determine where extraordinary items are reported on the income statement, we can refer to a financial accounting textbook or an authoritative accounting literature source such as the Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). These sources provide guidelines on the proper presentation and disclosure of financial information.
According to GAAP, extraordinary items are reported separately on the income statement, after the continuing operations section. Therefore, the correct answer is A. immediately after the continuing operations section.
2. To determine what is added back to net income in the operating section of an indirect cash flow statement, we need to understand the concept of cash flow from operations. Cash flow from operations includes adjustments to net income to arrive at the net cash provided by or used in operating activities.
Among the given options, depreciation is typically added back to net income in the operating section of an indirect cash flow statement. Depreciation represents a non-cash expense that reduces net income but does not involve an outflow of cash. Therefore, the correct answer is C. Depreciation.
3. To determine the correct journal entry for the sale of $10 par-common stock for $18 per share, we need to understand the basic principles of accounting for stock issuance. When common stock is sold, the proceeds from the issuance are recorded in the company's accounts.
In this case, since the stock is sold above par value, the difference between the sale price and par value represents additional paid-in capital. Therefore, the correct journal entry would include a credit to Common Stock for the par value ($10) and a credit to Paid-In Capital in Excess of Par–Common Stock for the remaining amount ($18 - $10 = $8).
Therefore, the correct answer is D. credit to Paid-In Capital in Excess of Par–Common Stock.
4. To calculate the trend percentage for 2012, we need to compare the sales for 2012 with the sales for the base year (2011). The formula to calculate the trend percentage is: (Current year sales / Base year sales) * 100.
Using the given information, the base year sales are $40,000 and the sales for 2012 are $60,000. Plugging these values into the formula gives us (60,000 / 40,000) * 100 = 150%.
Therefore, the correct answer is A. 150%.