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NEW QUESTION: 1
A material loss should be presented separately as a component of income from continuing operations
when it is:
A. An extraordinary item.
B. Not unusual in nature but infrequent in occurrence.
C. Unusual in nature and infrequent in occurrence.
D. A cumulative effect type change in accounting principle.
Choice "d" is correct. Gains or losses that are unusual in nature or occur infrequently but not both, are
presented as a component of income from continuing operations. Choice "a" is incorrect. Extraordinary
items are shown net of tax in a separate section of the income statement after income from continuing
operations. Choice "b" is incorrect. Cumulative effects of changes in accounting principle are now shown
net of tax as an adjustment to the opening balance of retained earnings in the retained earnings statement.
This treatment is called retrospective application. There really are no longer any cumulative effect types of
changes in accounting principle. The cumulative effect is merely how the amount of the change is
Choice "c" is incorrect. This is the definition of an extraordinary item.
NEW QUESTION: 2
The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series ofadjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.
The basic formula for Caribou's income statement is
A. Sources of Funds - Uses of Funds = Net Change in Cash
B. Assets = Liabilities + Owners' Equity
C. Cash Inflows - Cash Outflows = Net Cash Inflow (Outflow)
D. Revenues - Expenses = Net Income (Net Loss)