Multiple Choice: Reporting Income Select the best answer for each of the following:

1. Which of the following is not reported in the income statement?

a. Cash received from operations.

b. Dividend income from investments.

c. Provision for income taxes.

d. Cost of goods sold.

Net sales are derived by deducting from gross sales:

a. The cost of all items sold this period.

b. Interest expense and other financing costs.

c. Sales returns and allowances.

d. Manufacturing costs not included in cost of goods sold.

A cumulative adjustment is reported in an income statement when:

a. A highly unusual event occurs and a gain or loss results.

b. A long-lived asset is sold and a gain or loss results.

c. A major segment of the business is sold and a gain or loss results.

d. A change in accounting principle occurs.

An extraordinary item is reported in the income statement when:

a. An unusual and infrequent event occurs.

b. A major segment of a business is sold.

c. A significant price reduction is given to a customer as a result of shipping the wrong product.

d. A warehouse is sold at a significant loss.

5. In computing earnings per share:

a. Net income is divided by the total number of shares of common and preferred stock actually outstanding.

b. Net income is reduced by the amount of dividends paid to common shareholders before it is divided by the weighted average number of common shares outstanding.

c. Net income is reduced by the amount of dividends paid to preferred shareholders before it is divided by the weighted average number of preferred shares outstanding.

d. Net income is reduced by the amount of dividends paid to preferred shareholders before it is divided by the weighted average number of common shares outstanding.