21) Which of the following items affects total shareholders' equity without being reported on the income statement?
A) discontinued operations
B) extraordinary items
C) sale of common stock at a price above par
D) purchase of property, plant and equipment in exchange for a long-term note
22) Which of these could a retailing business in the Midwest classify as an extraordinary item?
A) a loss from employee embezzlement
B) a loss from a lower-of-cost-or market inventory write-down
C) a loss from selling a delivery truck at less than its book value
D) none of these are extraordinary items
23) Acme, Inc. has been profitable since its first day of operations, until the recent economic downturn. This year, for the first time in fifty years, Acme has expenses that are greater than its revenues. This loss should be reported on Acme's income statement as ________.
A) an operating loss
B) an extraordinary loss
C) a loss from discontinued operations
D) a non-recurring loss
24) Earnings, or net income, is the focus of financial reporting.
25) The FASB has defined three items that need to be separated from the regular earnings of a business: discontinued operations, other income and expenses, and extraordinary items.
26) The FASB has defined two items that need to be separated from the regular earnings of a business and reported net of taxes: discontinued operations and extraordinary items.
27) Any part of a company that is sold off or otherwise eliminated is referred to as discontinued operations.
28) Discontinuing a business segment is considered part of normal business operations.
29) Earnings, or net income, are important because they are used to evaluate the performance of a firm and to predict its future performance.
30) Discontinuing a particular business segment is a non-recurring event, so this item should be reported separately on the income statement.