Consider the following two separate events for a company during the year:
1. Loss on sale of investments = $20.
2. Unrealized gain on investment from increase in fair value = $30.
The company reports the unrealized gain as a component of other comprehensive income. By how much would these two events affect the balance of retained earnings, ignoring tax effects?
Answer
Decrease of $20.
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Which financial statement provides information for a point in time only?
Multiple Choice
Balance sheet.
Statement of cash flows.
Income statement.
Statement of shareholders’ equity.
Answer
Balance sheet.
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The difference between single-step and multiple-step income statements is primarily an issue of:
Multiple Choice
Valuation.
Consistency.
Presentation.
Measurement.
Answer
Presentation.
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On October 28, 2021, a 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, 2021, the end of the company's fiscal year. The division's loss from operations for 2021 was $1,950,000.
The division's book value and fair value less cost to sell on December 31 were $3,100,000 and $2,470,000, respectively. What before-tax amount(s) should the company report as loss on discontinued operations in its 2021 income statement?
Multiple Choice
$1,950,000 loss.
$630,000 impairment loss included in continuing operations and a $1,950,000 loss from discontinued operations.
No loss would be reported.
$2,580,000 loss.
Answer
$2,580,000 loss.
Explanation
$1,950,000 loss from discontinued operations and $630,000 impairment loss = $2,580,000.
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Cash equivalents would not include:
Multiple Choice
Commercial paper.
Cash not available for current operations.
Money market funds.
U.S. treasury bills.
Answer
Cash not available for current operations.
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Cash flows from investing activities do not include:
Multiple Choice
cash outflows from acquiring land.
payment for the purchase of equipment.
proceeds from the sale of marketable securities.
proceeds from issuing bonds.
Answer
Proceeds from issuing bonds.
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Shively Mfg. Co. sold for $18,000 equipment that cost $40,000 and had a book value of $30,000. Shively would report:
Multiple Choice
Investing cash inflows of $18,000.
Financing cash inflows of $18,000.
Operating cash inflows of $18,000.
Operating cash inflows of $8,000.
Answer
Investing cash inflows of $18,000.
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