Question

1.

Intraperiod tax allocation requires a corporation's total income tax expense to be allocated to all of the following except

a. prior-period adjustments.

b. discontinued operations.

c. any items of other comprehensive income.

d. other revenues and expenses.

2. Together with the cash flow statement, the income statement enables the investors to determine the rate of return the company is generating relative to the amount of capital invested.

True

False

3. When is a company not required to report comprehensive income?

a. when it has no liability items

b. when it has no other comprehensive income items

c. when it has a net operating loss

d. when it has no prior period adjustments

Answer 1

1. (C) any other item of other comprehensive income.

Other Comprehensive incomes can be reported in either of the two ways. In the income statement after computation of net income or it can be reported separately in an other statement named..statement of comprehensive income.. comprehensive income are the incomes which are not yet realized. They are reported in full. Tax is not allocated to the comprehensive income.

However, the other items such as discontinued operations and other revenue and gains are reported net of tax in the income statement. Prior period items are reported in the statement of retained earnings net of tax.

2. False.

Income statement help to determine the rate of return the company is generating on its capital employed. Capital employed is taken from the balance sheet . Therefore, the income statement together with the balance sheet and not with the cash flow statement enables the entity to determine the rate of return the company is generating on it's capital employed. Therefore this statement is false.

3.(b) when it has no other comprehensive income items.

Other Comprehensive income is required to be reported either in the income statement under one statement approach or under separate account named comprehensive income statement under two statement approach. It is the unrealized income such as unrealized gain on available for sale investment. Comprehensive income is required to be reported when the company has unrealized income.