Income Statement

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If you have difficulty answering the following questions, learn more about this topic by reading our Income Statement Explanation.

1.	Which of the following names is NOT associated with the income statement?
P & L              Statement of Financial Position              Statement of Operations

2.	The income statement heading will specify which of the following?
a POINT in time              a PERIOD of time

3.	Amounts earned by a company in its main operating activities are
revenues              gains

4.	A company disposes of equipment that it no longer uses in its business. The amount received by the company is more than the amount the asset is carried at in the accounting records. The company will report a(n)
expense              gain              loss              revenue

5.	On December 1 a company borrowed $100,000 at 12% per year. The interest will be paid quarterly, with the first payment due on March 1. What should the company report on its income statement for December?
nothing              Interest Expense of $1,000

6.	Is a retailer's Interest Expense an operating expense or a non-operating expense?
operating expense              non-operating expense

7.	The income statement line gross profit will appear on which income statement format?
single-step              multiple-step

8.	The income statement format that segregates the operating revenues and expenses from the non-operating revenues and expenses is the
single-step              multiple-step

9.	Interest earned on investments would appear in which section of a multiple-step income statement?
non-operating              operating              would not appear

10.	Under the accrual basis of accounting, revenues are recognized in the accounting period in which
cash is received              revenues are earned

11.	Net Sales minus the Cost of Goods Sold equals
gross profit              income from operations              net income

12.	The combination of Selling Expenses and Administrative Expenses is referred to as
general expenses              operating expenses              total expenses

13.	Which basis of accounting best measures profitability during a short time interval?
accrual basis              cash basis

14.	Gross Profit minus Operating Expenses is best defined as
net income              net sales              operating income

15.	When an entire division of a company is eliminated, it is referred to as a(n)
discontinued operation              extraordinary item              change in accounting principle

16.	A gain or loss that is unusual in nature and infrequent in occurrence is a(n)
discontinued operation              extraordinary item              change in accounting principle

17.	When a company changes its book depreciation from an accelerated method to the straight-line method, it is considered to be a(n)
discontinued operation              extraordinary item              change in accounting principle

18.	If a company's stock is publicly traded, is it a requirement that the earnings per share appear on the income statement?	Yes	No
19.	Are the notes to the financial statements considered to be an integral part of the financial statements?	Yes	No
20.	Is it acceptable that some of the expenses reported on the income statement be estimates?	Yes	No

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