4. Chapter 4 Assignment: Income Statement and Related Information Multiple Choice Questions 1. The major elements of the income statement are a revenue, cost of goods sold, selling expenses, and general expense. b. operating section, nonoperating section, discontinued operations, and cumulative effect c. revenues, expenses, gains, and losses. d. revenues, irregular items, and general expenses. 2. Which of the following is not true about the information provided in the income statement? a. It helps in evaluating the past performance of the enterprise. b. It provides a basis for predicting future performance. It helps assess the risk or uncertainty of achieving future cash flows. d. It helps in evaluating working capital 3. The income statement reveals a resources and equities of a firm at a point in time. b. resources and equities of a firm for a period of time c. net earnings (net income) of a firm at a point in time. d. net earnings (net income) of a firm for a period of time The income statement provides investors and creditors with information to predict all of the following except the: a amount of future cash flows. b. sources of future cash flows. c. timing of future cash flows. d. uncertainty of future cash flows. 5. Which of the following is an example of managing earnings down? a Changing estimated bad debts from 3 percent to 25 percent of sales. b. Revising the estimated life of equipment from 10 years to 8 years. c. Not writing off obsolete inventory. d. Reducing research and development expenditures. 6. Which of the following is an example of managing earnings up? a Decreasing estimated salvage value of equipment b. Writing off obsolete inventory. c. Underestimating warranty claims. d. Accruing a contingent liability for an ongoing lawsuit 7. Which of the following is an advantage of the single-step income statement over the multiple-step income statement? a. It reports gross profit for the year. b. Expenses are classified by function c. It matches costs and expenses with related revenues. d. It does not imply that one type of revenue or expense has priority over another. 1