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Exam 4: The Income Statement, Comprehensive Income, and the Statement of Cash Flows

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Question 41

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Rowdy's would report net cash inflows (outflows) from financing activities in the amount of:

A) $1,100.
B) $(1,100) .
C) $820.
D) $900.

E) A) and B)
F) B) and D)

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Question 42

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The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2013 income statement?

A) $2,000,000 loss.
B) $2,500,000 loss.
C) None.
D) $500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations.

E) All of the above
F) A) and B)

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Question 43

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Briefly define extraordinary items and explain how they are reported according to U.S. GAAP.

Income from continuing operations sometimes includes gains from nonoperating activities.

The chief accountant for Julius Co. provides you with the company's most recent income statement and comparative balance sheets below. The accountant has asked for your help in preparing part of the company's 2013 statement of cash flows. Required: In the space provided below, determine the cash flow from operating activities for Julius Co., using the direct method.

Operating cash outflows would include:

An item must meet the subjective criteria of being either unusual or infrequent to be reported as extraordinary.

Suppose that the Footwear Division's assets had not been sold by December 31, 2013, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In the 2013 income statement for Foxtrot Co., it would report a loss from discontinued operations of:

Bird Brain Co. reported net income of $45,000 for the year ended December 31, 2013. January 1 balances in accounts receivable and accounts payable were $23,000 and $26,000 respectively. Year-end balances in these accounts were $22,000 and $28,000, respectively. Assuming that all relevant information has been presented, Bird Brain's cash flows from operating activities would be:

Suppose that the Footwear Division's assets had not been sold by December 31, 2013, but were considered held for sale. Assume that the fair value of these assets at December 31 was $80 million. In the 2013 income statement for Foxtrot Co., under discontinued operations it would report a:

The statement of cash flows reports cash flows from the activities of:

Scenario 3: Assume that Jacob had not yet sold the office furniture division by the end of 2013. Further, assume that the fair value less costs to sell of the division's assets at December 31, 2013, was $12 million and was expected to remain the same when the assets are sold in 2014. The book value of the division's assets was $19 million at the end of the year. Under these assumptions, what would Jacob report in its 2013 income statement regarding the office equipment division? Explain where this information would be presented.

Briefly explain why the income statement is referred to as a change statement.

Major Co. reported 2013 income of $300,000 from continuing operations before income taxes and a before-tax extraordinary loss of $80,000. All income is subject to a 30% tax rate. In the 2013 income statement, Major Co. would show the following line-item amounts for income tax expense and net income:

Scenario 2: Assume that Jacob had not yet sold the division's assets by the end of 2013. Further, assume that the fair value less costs to sell of the division's assets at December 31, 2013, was $24 million and was expected to remain the same when the assets are sold in 2014. The book value of the division's assets was $19 million at the end of the year. Under these assumptions, what would Jacob report in its 2013 income statement regarding the office equipment division? Explain where this information would be presented.

Freda's Florist reported the following before-tax income statement items for the year ended December 31, 2013: All income statement items are subject to a 40% income tax rate. In its 2013 income statement, Freda's separately stated income tax expense and total income tax expense would be:

Shively Mfg. Co. sold for $18,000 equipment that cost $40,000 and had a book value of $30,000. Shively would report:

Rowdy's would report net cash inflows (outflows) from operating activities in the amount of:

Cash flows from investing do not include cash flows from:

The following information is for Redwood Inc. for the year ended December 31, 2013. Redwood had a cash and cash equivalents balance of $5,200 on January 1, 2013. Required: Prepare a statement of cash flows for the year using the direct method for operating activities.