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TOA - COMPREHENSIVE INCOME

Multiple Choice
Identify the choice that best completes the statement or answers the question.

1. It is the change in equity during a period resulting from transactions and other events, other than
changes resulting from transactions with owners in their capacity as owners.
a. Comprehensive income. c. Profit or loss.
b. Other comprehensive income. d. Retained earnings.

2. It is the total of income less expenses, excluding the components of other comprehensive income.
a. Comprehensive income. c. Accounting income.
b. Profit or loss. d. Economic income.

3. This term comprises items of income and expense that are not recognized in profit or loss as required or
permitted by PFRS.
a. Comprehensive income. c. Profit or loss.
b. Other comprehensive income. d. Retained earnings.

4. Comprehensive income includes

a. Profit or loss only
b. Other comprehensive income only
c. Both profit or loss and other comprehensive income
d. Neither profit or loss nor other comprehensive income

5. Other comprehensive income includes all of the following except

a. Unrealized gain on available for sale financial asset
b. Loss from translating the financial statements of a foreign operation
c. Actuarial gain on defined benefit plan that is fully recognized
d. Share premium

6. An entity shall present all items of income and expense recognized in a period.

I. In a single statement of comprehensive income.

II. In two statements, one statement displaying the components of profit or loss, and the second
statement beginning with profit or loss and displaying components of other comprehensive income.

a. I only c. Either I or II
b. II only d. Both I or II

7. The expenses are classified according to their function, as part of cost of sales, distribution costs,
administrative activities and other operating activities.
a. Cost of sales method c. Account form
b. Nature of expense method d. Report form

8. Conceptually, net income is a measure of

a. Wealth c. Capital maintenance
b. Change of wealth d. Cash flow

9. The transaction approach in determining income is a concept in which

a. Income is measured as the amount that an entity could consume during a period
and be as well off at the end of that period as it was at the beginning.
b. Market values adjusted for the effects of inflation or deflation are used to calculate
income.
c. The financial statement effects of business events are classified as revenue,
gains, expenses and losses, which are used to measure and define income.
d. Income equals the change in market value of the entity’s outstanding share capital
for the period.

10. Information in the income statement helps users to

a. evaluate the past performance of the enterprise.
b. provide a basis for predicting future performance.
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c. help assess the risk or uncertainty of achieving future cash flows.

d. All of these.

11. Limitations of the income statement include all of the following except
a. items that cannot be measured reliably are not reported.
b. only actual amounts are reported in determining net income.
c. income measurement involves judgment.
d. income numbers are affected by the accounting methods employed.

12. 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.

13. The income statement information would help in which of the following tasks?
a. Evaluate the liquidity of a company.
b. Evaluate the solvency of a company.
c. Estimate future cash flows.
d. Estimate future financial flexibility.

14. The income statement provides investors and creditors information that helps them predict
a. the amounts of future cash flows.
b. the timing of future cash flows.
c. the uncertainty of future cash flows.
d. All of the above.

15. Investors and creditors use income statement information for each of the following
except to
a. evaluate the future performance of the company.
b. provide a basis for predicting future performance.
c. help assess the risk and uncertainty of achieving future cash flows.
d. All of the above.

16. The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the
definition of
a. quality of earnings.
b. earnings management.
c. smoothing of earnings.
d. earnings averaging.

17. Which method of income measurement is used in the preparation of the income statement?
a. Capital maintenance approach.
b. Transaction approach.
c. Cash-flow approach.
d. Income components approach.

18. The definition of expenses includes

a. losses only.
b. expenses and losses.
c. expenses only.
d. expenses, losses and unrealized losses on available-for-sale securities.

19. PFRS requires that a single amount be disclosed within the income statement for
a. the post-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal
of discontinued operational assets.
b. the pre-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal
of discontinued operational assets.
c. the pre-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal of
discontinued operational assets.
d. the post-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal
of discontinued operational assets.
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20. Which of the following is not a selling expense?

a. Advertising expense.
b. Office salaries expense.
c. Freight-out.
d. Store supplies consumed.

21. If a company prepares a consolidated income statement, PFRS requires that net income be reported for
a. the majority interest only.
b. the minority interest only.
c. both the majority interest and the minority interest.
d. as a single amount only.

22. Which of the following is a required disclosure in the income statement when reporting the disposal of a
component of the business?
a. The gain or loss on disposal should be reported as an other income item.
b. Results of operations of a discontinued component should be disclosed immediately below
income from operations.
c. Earnings per share from both continuing operations and net income should be disclosed on
the face of the income statement.
d. The gain or loss on disposal should not be segregated, but should be reported together with
the results of continuing operations.

23. When a company discontinues an operation and disposes of the discontinued operation (component),
the transaction should be included in the income statement as a gain or loss on disposal reported as
a. a prior period adjustment.
b. an other income and expense item.
c. an amount after continuing operations and before net income.
d. a bulk sale of plant assets included in income from continuing operations.

24. Which of the following does not appear on a statement of retained earnings?
a. Net loss.
b. Prior period adjustments.
c. Preference share dividends.
d. Other comprehensive income.

25. Which of the following would appear first in a statement of retained earnings?
a. Net income.
b. Prior period adjustment.
c. Cash dividends.
d. Share dividends.

26. Which of the following items will not appear in the retained earnings statement?
a. Net loss.
b. Prior period adjustment.
c. Discontinued operations.
d. Dividends.

27. 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.

28. Comprehensive income includes all of the following except

a. dividend revenue.
b. losses on disposal of assets.
c. investments by owners.
d. unrealized holding gains.
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29. Comprehensive income includes all of the following, except

a. revenues and gains.
b. expenses and losses.
c. preference share dividends.
d. unrealized gains and losses on available-for-sale securities.

30. Under PFRS other comprehensive income must be displayed (reported) in

a. the equity section of the statement of financial position.
b. a second income statement.
c. the income statement.
d. retained earnings the statement.
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TOA - COMPREHENSIVE INCOME

Answer Section

MULTIPLE CHOICE

1. A
2. B
3. B
4. C
5. D
6. C
7. A
8. B
9. C
10. D
11. B
12. D
13. C
14. D
15. A
16. B
17. B
18. B
19. D
20. B
21. C
22. C
23. C
24. D
25. B
26. C
27. B
28. C
29. C
30. B