Matching Questions
1.Indicate whether each event listed below in
1
through
6
is reported as a discontinued operation (D), extraordinary item (E), a change in accounting principle (A), or a component of continuing operations (C), by placing the letter of your choice in the space provided. If an item does not fall into one of these categories, place an X in the blank.
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1.Gain on disposal of one of the company’s four corporate office buildings
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2.Retired bonds early and incurred a loss
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3.Received dividends on stock investments
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4.Changed from straight-line to double declining-balance depreciation
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5.Tornado damage to the corporate head office that cost $1 million to repair
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6.Estimated uncollectible accounts at year-end
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2.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
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a.Income from continuing operations section of the income statement
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b.Discontinued operations section of the income statement
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c.Extraordinary items section of the income statement
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d.Cumulative effect of a change in accounting principle section of the income statement
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e.A separate comprehensive income item
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f.Not reported on the income statement or comprehensive income statement
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_____1.A loss incurred by Maranda Corporation due to a strike by employees of the company
_____2.A large loss of inventory incurred by a meat-packing factory due to a government FDA inspection which found dangerously high levels of bacteria; no previous situations in the company’s history
_____3.Manufacturing circuits were determined obsolete and had to be written down to a nominal scrap value due to an improved manufacturing process
_____4.A loss due to a decline in market value on an available-for-sale investment
_____5. Losses due to a hurricane damage
_____6.Financial impacts of the adoption of a new FASB standard on goodwill.
_____7.The financial effects of outsourcing the company’s industrial product division