ACC Exam Questions with Correct
Solutions
List three things that are true about a multistep income statement - Answer-Shows income, or loss from
operations after the gross margin and operating expense lines but before revenues and gains.
Which of the following items is NOT required to be reported related to discontinued operations on the
statement of net income? - Answer-Separate income tax provision line item for the total of the
discontinued operating gain or loss.
Which of the following represents the correct order of performance measures as reported on the
statement of net income? - Answer-Gross profit, Operating income, Income before tax, Income from
continuing operations, Net income, Earnings per share
Tried & True Television aggregates and summarizes accounts into line items on the statement of net
income, using the nature approach to accomplish this aggregation. Tried & True recently incorporated
and is preparing its initial annual report for submission to the SEC.
Is the aggregation approach used by Tried & True on the statement of net income acceptable for the
annual report? - Answer-No, while GAAP allows aggregating and summarizing using the nature
approach, the SEC requires corporations to report using the function approach.
A portion of the annual report of each public company includes a statement of independent opinion on
whether the financial statements are presented fairly and in compliance with U.S. GAAP.
Solutions
List three things that are true about a multistep income statement - Answer-Shows income, or loss from
operations after the gross margin and operating expense lines but before revenues and gains.
Which of the following items is NOT required to be reported related to discontinued operations on the
statement of net income? - Answer-Separate income tax provision line item for the total of the
discontinued operating gain or loss.
Which of the following represents the correct order of performance measures as reported on the
statement of net income? - Answer-Gross profit, Operating income, Income before tax, Income from
continuing operations, Net income, Earnings per share
Tried & True Television aggregates and summarizes accounts into line items on the statement of net
income, using the nature approach to accomplish this aggregation. Tried & True recently incorporated
and is preparing its initial annual report for submission to the SEC.
Is the aggregation approach used by Tried & True on the statement of net income acceptable for the
annual report? - Answer-No, while GAAP allows aggregating and summarizing using the nature
approach, the SEC requires corporations to report using the function approach.
A portion of the annual report of each public company includes a statement of independent opinion on
whether the financial statements are presented fairly and in compliance with U.S. GAAP.
