The following questions dealing with the income statement are adapted from questions that previously appeared on Certified Management Accountant (CMA) examinations. The CMA designation sponsored by the Institute of Management Accountants (www.imanet.org) provides members with an objective measure of knowledge and competence in the field of management accounting. Determine the response that best completes the statements or questions.
1. Which one of the following items is included in the determination of income from continuing operations?
a. Discontinued operations.
b. Extraordinary loss.
c. Cumulative effect of a change in an accounting principle.
d. Unusual loss from a write-down of inventory.
2. In a multiple-step income statement for a retail company, all of the following are included in the operating section except
b. Cost of goods sold.
c. Dividend revenue.
d. Administrative and selling expenses.
3. When reporting extraordinary items,
a. Each item (net of tax) is presented on the face of the income statement separately as a component of net income for the period.
b. Each item is presented exclusive of any related income tax.
c. Each item is presented as an unusual item within income from continuing operations.
d. All extraordinary gains or losses that occur in a period are summarized as total gains and total losses, then offset to present the net extraordinary gain or loss.