QUESTION 1

1. Which of the following would represent the least likely use of an income statement prepared for a business enterprise?

   	a.	Use by customers to determine a company's ability to provide needed goods and services.
   	b.	Use by labor unions to examine earnings closely as a basis for salary discussions.
   	c.	Use by government agencies to formulate tax and economic policy.
   	d.	Use by investors interested in the financial position of the entity.

QUESTION 2

1. An event or transaction which is unusual in nature and infrequent in occurrence

   	a.	Earnings per share.
   	b.	Comprehensive Income.
   	c.	Prior period adjustment.
   	d.	Extraordinary item.
   	e.	Discontinued operations.

QUESTION 3

1. A company is not required to report a per share amount on the face of the income statement for which of the following items?

   	a.	Net income
   	b.	Prior period adjustment
   	c.	Extraordinary item
   	d.	Discontinued operations

QUESTION 4

1. Companies use intraperiod tax allocation for all of the following items except

   	a.	Discontinued operations.
   	b.	Extraordinary items.
   	c.	Changes in accounting estimates.
   	d.	Income from continuing operations.

QUESTION 5

1. Classification as an extraordinary item on the income statement would be appropriate for the

   	a.	gain or loss on disposal of a component of the business.
   	b.	substantial write-off of obsolete inventories.
   	c.	loss from a strike.
   	d.	Tornado loss in Glassboro, NJ.

QUESTION 6

1. Which of the following is included in comprehensive income?

   	a.	Investments by owners.
   	b.	Unrealized gains on available-for-sale securities.
   	c.	Distributions to owners.
   	d.	Changes in accounting principles.

QUESTION 7

1. Net income minus preferred dividends divided by the weighted average of shares outstanding is called

   	a.	Earnings per share.
   	b.	Comprehensive Income.
   	c.	Prior period adjustment.
   	d.	Extraordinary item.
   	e.	Discontinued operations.

QUESTION 8

1. Which one of the following types of losses is excluded from the determination of net income in income statements?

   	a.	Material losses resulting from transactions in the company's investments account.
   	b.	Material losses resulting from unusual sales of assets not acquired for resale.
   	c.	Material losses resulting from the write-off of intangibles.
   	d.	Material losses resulting from correction of errors related to prior periods.

QUESTION 9

1. Which of these is generally an example of an extraordinary item?

   	a.	Loss incurred because of a strike by employees.
   	b.	Write-off of deferred marketing costs believed to have no future benefit.
   	c.	Gain resulting from the devaluation of the U.S. dollar.
   	d.	Gain resulting from the state exercising its right of eminent domain on a piece of land used as a parking lot.

QUESTION 10

1. In 2010, Esther Corporation reported net income of $1,000,000. It declared and paid preferred stock dividends of $250,000 and common stock dividends of $100,000. During 2010, Esther had a weighted average of 200,000 common shares outstanding. Compute Esther's 2010 earnings per share.

   	a.	$3.25
   	b.	$3.75
   	c.	$5.00
   	d.	$6.25