Gross profit equals net sales minus cost of goods sold.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Blooms: Remember Difficulty: Easy Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #50 Topic Area: A Closer Look At Financial Statement Format And Notes
51. Which of the following best describes income from operations?
A. It includes the results of discontinued operations.
B. It includes extraordinary items.
C. It is sales minus cost of goods sold and income tax expense.
D. It is net sales minus cost of goods sold and operating expenses.
Income from operations equals net sales minus cost of goods sold and operating expenses.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Blooms: Remember Difficulty: Easy Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #51 Topic Area: A Closer Look At Financial Statement Format And Notes
52. The Callie Company has provided the following information:
• Operating expenses were $231,000;
• Cost of goods sold was $376,000;
• Net sales were $940,000;
• Interest expense was $32,000;
• Gain on sale of a building was $76,000;
• Income tax expense was $151,000.
What was Callie's gross profit?
A. $564,000 B. $188,000 C. $333,000 D. $232,000
Gross profit ($564,000) equals net sales ($940,000) minus cost of goods sold ($376,000).
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Blooms: Apply Difficulty: Easy Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #52 Topic Area: A Closer Look At Financial Statement Format And Notes
53. The Callie Company has provided the following information:
• Operating expenses were $231,000;
• Cost of goods sold was $376,000;
• Net sales were $940,000;
• Interest expense was $32,000;
• Gain on sale of a building was $76,000;
• Income tax expense was $151,000.
What was Callie's income from operations?
A. $333,000 B. $188,000 C. $156,000 D. $232,000
Income from operations ($333,000) equals net sales ($940,000) minus the sum of cost of goods sold ($376,000) and operating expenses ($231,000).
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Blooms: Apply Difficulty: Medium Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #53 Topic Area: A Closer Look At Financial Statement Format And Notes
54. The Callie Company has provided the following information:
• Operating expenses were $231,000;
• Cost of goods sold was $376,000;
• Net sales were $940,000;
• Interest expense was $32,000;
• Gain on sale of a building was $76,000;
• Income tax expense was $151,000.
What was Callie's income before taxes?
A. $564,000 B. $188,000 C. $377,000 D. $232,000
Income before taxes ($377,000) equals net sales ($940,000) minus cost of goods sold ($376,000), minus operating expenses ($231,000), minus interest expense ($32,000), plus gain on sale ($76,000).
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Blooms: Apply Difficulty: Medium Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #54 Topic Area: A Closer Look At Financial Statement Format And Notes
55. Which of the following is not reported as an operating expense on the income statement?
A. Administrative expenses
B. Research and development expense C. Interest expense
D. Selling expenses
Interest expense is a deduction from income from continuing operations.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Blooms: Remember Difficulty: Easy Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #55 Topic Area: A Closer Look At Financial Statement Format And Notes
56. The Nellie Company has provided the following information:
• Operating expenses were $115,000;
• Gross profit was $629,000;
• Cost of goods sold was $470,000
• Interest expense was $17,000;
• Extraordinary loss was $29,000;
• Income tax expense was $199,000.
What was Nellie's operating income?
A. $514,000 B. $54,000 C. $497,000 D. $298,000
Operating income ($514,000) equals gross profit ($629,000) minus operating expenses ($115,000).
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Blooms: Apply Difficulty: Medium Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #56 Topic Area: A Closer Look At Financial Statement Format And Notes
57. The Nellie Company has provided the following information:
• Operating expenses were $115,000;
• Gross profit was $629,000;
• Cost of goods sold was $470,000
• Interest expense was $17,000;
• Extraordinary loss was $29,000;
• Income tax expense was $199,000.
What was Nellie's income before taxes?
A. $514,000 B. $54,000 C. $497,000 D. $298,000
Income before taxes ($497,000) equals gross profit ($629,000) minus operating expenses ($115,000) and interest expense ($17,000).
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Blooms: Apply Difficulty: Medium Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #57 Topic Area: A Closer Look At Financial Statement Format And Notes
58. The Willie Company has provided the following information:
• Operating expenses were $345,000;
• Income from operations was $215,000;
• Net sales were $1,100,000;
• Interest expense was $71,000;
• Discontinued operations loss was $87,000;
• Income tax expense was $58,000.
What was Willie's cost of gross profit?
A. $540,000 B. $469,000 C. $618,000 D. $560,000
Gross profit ($560,000) equals operating expenses ($345,000) plus income from operations ($215,000).
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Blooms: Apply Difficulty: Hard Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #58 Topic Area: A Closer Look At Financial Statement Format And Notes
59. The Willie Company has provided the following information:
• Operating expenses were $345,000;
• Income from operations was $215,000;
• Net sales were $1,100,000;
• Interest expense was $71,000;
• Discontinued operations loss was $87,000;
• Income tax expense was $58,000.
What was Willie's income before taxes?
A. $144,000 B. $57,000 C. $215,000 D. $539,000
Income before taxes ($144,000) equals income from operations ($215,000) minus interest expense ($71,000).
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement Blooms: Apply Difficulty: Medium Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #59 Topic Area: A Closer Look At Financial Statement Format And Notes
60. Which of the following would not be a component of income from operations?
A. Gross profit
B. Selling and administrative expenses C. Dividend income
D. Research and development expense
Dividend income is reported as nonoperating revenue.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Blooms: Remember Difficulty: Medium Learning Objective: 05-03 Recognize and apply the different financial statement and disclosure formats used by companies in practice.
Libby - Chapter 05 #60 Topic Area: A Closer Look At Financial Statement Format And Notes
61. Which of the following statements regarding earnings per share is false?
A. It can be reported on the income statement.
B. It increases when net income increases.
C. It is based on the average number of common shares outstanding.