Financial Reporting - Financial Statements

Expenses on the income statement may be grouped by:

• nature, but not by function.

• function, but not by nature.

• either function or nature.

Fairplay had the following information related to the sale of its products during 2009, which was its first year of business:

Revenue = $1,000,000

Returns of goods sold = $100,000

Cash collected = $800,000

Cost of goods sold = $700,000

Under the accrual basis of accounting, how much net revenue would be reported on Fairplay’s 2009 income statement?

• $200,000.

• $900,000.

• $1,000,000.

Under IFRS, income includes increases in economic benefits from:

• increases in liabilities not related to owners’ contributions.

• enhancements of assets not related to owners’ contributions.

• increases in owners’ equity related to owners’ contributions.

For 2009, Flamingo Products had net income of $1,000,000. At 1 January 2009,

there were 1,000,000 shares outstanding. On 1 July 2009, the company issued

100,000 new shares for $20 per share. The company paid $200,000 in dividends

to common shareholders. What is Flamingo’s basic earnings per share for 2009?

• $0.80

• $0.91

• $0.95

Cell Services Inc. (CSI) had 1,000,000 average shares outstanding during all

of 2009. During 2009, CSI also had 10,000 options outstanding with exercise

prices of $10 each. The average stock price of CSI during 2009 was $15. For purposes of computing diluted earnings per share, how many shares would be used in the denominator?

• 1,003,333.

• 1,006,667.

• 1,010,000.

During 2009, Accent Toys Plc., which began business in October of that year,

purchased 10,000 units of a toy at a cost of ₤10 per unit in October. The toy

sold well in October. In anticipation of heavy December sales, Accent purchased

5,000 additional units in November at a cost of ₤11 per unit. During

2009, Accent sold 12,000 units at a price of ₤15 per unit. Under the first in, first

out (FIFO) method, what is Accent’s cost of goods sold for 2009?

• ₤120,000.

• ₤122,000.

• ₤124,000.

Apex Consignment sells items over the internet for individuals on a consignment basis. Apex receives the items from the owner, lists them for sale on the internet, and receives a 25 percent commission for any items sold. Apex collects the full amount from the buyer and pays the net amount after commission to the owner. Unsold items are returned to the owner after 90 days. During 2009, Apex had the following information:

●Total sales price of items sold during 2009 on consignment was €2,000,000.

●Total commissions retained by Apex during 2009 for these items was €500,000.

How much revenue should Apex report on its 2009 income statement?

• €500,000.

• €2,000,000.

• €1,500,000.

Under IFRS, a loss from the destruction of property in a fire would most likely

be classified as:

• continuing operations.

• discontinued operations.

• other comprehensive income.

Shareholders’ equity reported on the balance sheet is most likely to differ from

the market value of shareholders’ equity because:

• historical cost basis is used for all assets and liabilities.

• some factors that affect the generation of future cash flows are excluded.

• shareholders’ equity reported on the balance sheet is updated continuously.

The information provided by a balance sheet item is limited because of uncertainty regarding:

• measurement of its cost or value with reliability.

• the change in current value following the end of the reporting period.

• the probability that any future economic benefit will flow to or from the

  entity.