Q1. Changes in asset lives and salvage value are changes in accounting:

A)   principle and specific disclosures are required.

B)   estimates and specific disclosures are required.

C)   estimates and no specific disclosures are required.

Q2. Retrospective presentation is least likely required for a change:

A)   from percentage-of-completion to completed contract revenue recognition.

B)   from LIFO to average cost inventory valuation.

C)   from zero salvage value to positive salvage value.

Q3. All the following items are reported net of taxes below net income from continuing operations on the income statement

EXCEPT:

A)       unusual or infrequent items.

B)      extraordinary items.

C)      expropriations by foreign governments.

Q4. Which of the following is least likely reported net of tax on the income statement under U.S. GAAP?

A)   Income from discontinued operations.

B)   Interest expense.

C)   Extraordinary items.

Q5. Which of the following statements is regarding the income statement is least accurate?

A)   Items that are unusual in nature or infrequent in occurrence appear below income from continuing operations on a pretax basis.

B)   Extraordinary items are both unusual in nature and infrequent in occurrence. Extraordinary items are disclosed net of taxes after income from continuing operations in the income statements.

C)   The results of discontinued operations are reported below income from continuing operations on the income statement net of taxes.

答案和详解如下：

Q1. Changes in asset lives and salvage value are changes in accounting:

A)   principle and specific disclosures are required.

B)   estimates and specific disclosures are required.

C)   estimates and no specific disclosures are required.

Correct answer is C)

Changes in asset lives and salvage value are changes in accounting estimates and are not considered changes in accounting principle. No specific disclosures are required.

Q2. Retrospective presentation is least likely required for a change:

A)   from percentage-of-completion to completed contract revenue recognition.

B)   from LIFO to average cost inventory valuation.

C)   from zero salvage value to positive salvage value.

Correct answer is C)

Changes in accounting principle require retrospective presentation. A change in the salvage value of an asset is a change in accounting estimate, which does not apply retrospectively.

Q3. All the following items are reported net of taxes below net income from continuing operations on the income statement

EXCEPT:

A)       unusual or infrequent items.

B)      extraordinary items.

C)      expropriations by foreign governments.

Correct answer is A)

Unusual or infrequent items appear as a component of net income from continuing operations and are reported "above the line." Extraordinary items, such as expropriations, are unusual and infrequent and appear "below the line."

Q4. Which of the following is least likely reported net of tax on the income statement under U.S. GAAP?

A)   Income from discontinued operations.

B)   Interest expense.

C)   Extraordinary items.

Correct answer is B)

Interest expense would be considered an expense that is incurred from continuing operations and, therefore, is listed prior to subtracting the income tax expense on the income statement. Income from discontinued operations and extraordinary items are included on the income statement after the net income from continuing operations is reported and after the income tax expense from continuing operations is reported. Therefore, these latter accounts are reported net of tax.

Q5. Which of the following statements is regarding the income statement is least accurate?

A)   Items that are unusual in nature or infrequent in occurrence appear below income from continuing operations on a pretax basis.

B)   Extraordinary items are both unusual in nature and infrequent in occurrence. Extraordinary items are disclosed net of taxes after income from continuing operations in the income statements.

C)   The results of discontinued operations are reported below income from continuing operations on the income statement net of taxes.

Correct answer is A)

The key word here is "or." Unusual or infrequent items are unusual or infrequent, but NOT both. These items are reported (as a separate line item) as a component of net income from continuing operations.

Examples of unusual or infrequent items include:

§           Gains or losses from the disposal of a business segment (employee separation costs, plant shutdown costs, etc.)

§           Gains or losses from the sale of assets or investments in subsidiaries

§           Provisions for environmental remediation

§           Impairments, write-offs, write-downs, and restructuring costs

§           Integration expenses associated iwth businesses that have been recently acquired.

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