3.Given below are several items (1
through
4) that will be reported on a company’s financial statements. Select the letter of the proper financial statement reporting section listed as
a
through
f.
You may use each letter more than once or not at all.
Financial Statement Reporting Sections
|
a.Income from continuing operations section of the income statement
|
b.Discontinued operations section of the income statement
|
c.Extraordinary items section of the income statement
|
d.Cumulative effect of a change in accounting principle section of the income statement
|
e.A separate comprehensive income item
|
f.Not reported on the income statement or comprehensive income statement
|
_____1.A gain due to an early payoff of debt that had a high interest rate
_____2.Another loss of plant assets incurred by a company whose distribution warehouse is located on an island that has experienced severe flooding three times in the past 5 years
_____3.A $1 billion loss due to a permanent shutdown of the company’s only subsidiary, Coastal, Inc, triggered by poor product development
_____4.A foreign currency translation gain at yearend
4.Select the financial statement section (a
through
f) in which each of the items listed in
1
through
6
would be reported by writing the letter of the best answer in the space provided.
Financial Statement Sections
|
a.Income from continuing operations section of the income statement
|
b.Discontinued operations section of the income statement
|
c.Extraordinary items section of the income statement
|
d.Cumulative effect of a change in accounting principle section of the income statement
|
e.Balance sheet
|
f.Not necessary to report on a financial statement
|
1.____Government expropriation of plant location in Venezuela
2.____Financial effects of the adoption of a new FASB standard regarding post-retirement benefits
3.____Financial effects of dropping a company’s domestic product division
4.____Unusual and infrequent gain from a plant explosion
5.____Unrealized gain/loss from trading securities
6.____Interest revenue
5.Select the financial statement section (a
through
g) in which each of the items listed in
1
through
5
below would properly be reported by writing the letter of the best answer in the space provided.
Financial Statement Sections
|
a.
|
Income from continuing operations section of the income statement
|
b.
|
Discontinued operations section of the income statement
|
c.
|
Extraordinary items section of the income statement
|
d.
|
Cumulative effect of a change in accounting principle section of the income statement
|
e.
|
Statement of shareholders’ equity
|
f.
|
Balance sheet
|
g.
|
Not necessary to report on a financial statement
|
|
|
1._____Declared cash dividends for the first time in the history of the corporation
2. _____Incurred a gain on the sale of four Preston franchise stores, but held onto the Little Steps chain
3. _____Incurred a huge loss from a hurricane that destroyed the company’s Louisiana packaging plant; no previous hurricanes have occurred at this location
4. _____Recorded interest income for the year
5. _____Incurred $14,000 to replace the company’s office products (letterhead, envelopes, pens, etc.) with a new logo to promote a new product line