CPA Financial Accounting and Reporting (FAR) : Income Statements & Analysis
Study concepts, example questions & explanations for CPA Financial Accounting and Reporting (FAR)
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Example Questions
Example Question #2 : Income Statement
Barr Company had the following account balances at the end of Year 1: sales of $250,000; cost of goods sold of $90,000; salaries and wages of $30,000; rent expense of $15,000; advertising costs of $25,000; fixed assets purchased $50,000. What was Barr's net income for Year 1?
$115,000
$90,000
$160,000
$65,000
$90,000
Net income is calculated by taking sales of $250K - COGS of $90K - salaries of $30K - rent of $15K - advertising of $25K.
Example Question #3 : Income Statement
Colt, Inc had the following account balances at the end of Year 3: consulting revenue of $60,000; rent expense of $15,000; software licensing fees of $5,000; dividends paid of $12,000; and advertising expenses of $25,000. What was Colt's net income in Year ?
$20,000
$15,000
$3,000
$8,000
$15,000
Net income is calculated by taking revenue of $60K - rent of $15K - licensing fees of $5K - advertising of $25K.
Example Question #4 : Income Statement
Which of the following items would not be included in operating income?
Repair and maintenance expense
Gain on available-for-sale securities
Sales revenue
Cost of goods sold
Gain on available-for-sale securities
Operating income only includes revenues and expenses directly related to the company's primary operations.
Example Question #5 : Income Statement
Which of the following items would not be included in income from continuing operations?
Gain on retirement of bonds
Both
Gain on disposal of a business component
Neither
Gain on disposal of a business component
Disposal of a business component would be included in discontinued operations, where as gain on retirement of bonds is a normal part of continuing operations.
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