Question

september qato 190 Hoool A company that changes from the declining balance method of depreciation for previously recorded assets to the straight line method should report the change as ain a./ change in accounting principle. ( change in accounting estimate prior period adjustment Ud discontinued item 7. The term "comprehensive income" as defined by the FASB a, must be reported on the face of the income statement includes all changes in equity during a period except those resulting from ✓ nvestments by and distributions to owners. is the net change in owners' equity for the period d. is synonymous with the term "net income." 8. Costs that can be reasonably associated with specific revenues but NOT with specific products should be x charged to expense in the period incurred. allocated to specific products based on the best estimate of the production processing time expensed in the period in which the related revenue is recognized ( capitalized and then amortized over a period not to exceed 60 months. 9. In contrast with a multiple-step income statement, a single-step income statement does not show the amount of a. income taxes on continuing operations O cost of goods sold. gross profit Id. earnings per share. 10. Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period? Direct matching b/ Systematic and rational allocation Immediate recognition Id partial recognition 11. Which of the following items is reported only in current and future periods? a. Prior period adjustment b Change in accounting principle Change in estimate Effects of changing prices

Answer 1

7. Answer: b. includes all changes in equity during a period except those resulting from investments by and distribution to owners.

Comprehensive income thus includes all changes in equity during a period that result from transactions and events by the non-owners.

8. Answer: a. charged to expense in the period incurred.

Costs which cannot be reasonably associated with specific products cannot be considered as product costs and deferred in ending inventory. They are hence charged to expense in the period incurred.

9. Answer: c. gross profit.

A single-step income statement does show the income tax expense, cost of goods sold, and the earnings per share however, it does not show the gross profit separately.

10. Answer: c. Immediate recognition

The administrative and selling expenses cannot be matched to the revenue and nor do they benefit the future periods and are hence immediately recognized on incurrence.