BUSA 312-CH 4 (MC) Exam 2026
Questions and Answers
The major elements of the income statement are
a. revenue, cost of goods sold, selling expenses, and general expense.
b. operating section, nonoperating section, discontinued operations, extraordinary
items, and cumulative effect.
c. revenues, expenses, gains, and losses.
d. all of these. - Correct answer-C
Information in the income statement helps users to
a. evaluate the past performance of the enterprise.
b. provide a basis for predicting future performance.
c. help assess the risk or uncertainty of achieving future cash flows.
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,d. all of these. - Correct answer-D
Limitations of the income statement include all of the following except
a. items that cannot be measured reliably are not reported.
b. only actual amounts are reported in determining net income.
c. income measurement involves judgment.
d. income numbers are affected by the accounting methods employed. - Correct
answer-D
Which of the following would represent the least likely use of an income statement
prepared for a business enterprise?
a. Use by customers to determine a company's ability to provide needed goods and
services.
b. Use by labor unions to examine earnings closely as a basis for salary
discussions.
c. Use by government agencies to formulate tax and economic policy.
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, d. Use by investors interested in the financial position of the entity. - Correct
answer-D
The income statement reveals
a. resources and equities of a firm at a point in time.
b. resources and equities of a firm for a period of time.
c. net earnings (net income) of a firm at a point in time.
d. net earnings (net income) of a firm for a period of time. - Correct answer-D
The income statement information would help in which of the following tasks?
a. Evaluate the liquidity of a company.
b. Evaluate the solvency of a company
c. Estimate future cash flows
d. Estimate future financial flexibility - Correct answer-C
Which of the following is an example of managing earnings down?
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Questions and Answers
The major elements of the income statement are
a. revenue, cost of goods sold, selling expenses, and general expense.
b. operating section, nonoperating section, discontinued operations, extraordinary
items, and cumulative effect.
c. revenues, expenses, gains, and losses.
d. all of these. - Correct answer-C
Information in the income statement helps users to
a. evaluate the past performance of the enterprise.
b. provide a basis for predicting future performance.
c. help assess the risk or uncertainty of achieving future cash flows.
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,d. all of these. - Correct answer-D
Limitations of the income statement include all of the following except
a. items that cannot be measured reliably are not reported.
b. only actual amounts are reported in determining net income.
c. income measurement involves judgment.
d. income numbers are affected by the accounting methods employed. - Correct
answer-D
Which of the following would represent the least likely use of an income statement
prepared for a business enterprise?
a. Use by customers to determine a company's ability to provide needed goods and
services.
b. Use by labor unions to examine earnings closely as a basis for salary
discussions.
c. Use by government agencies to formulate tax and economic policy.
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, d. Use by investors interested in the financial position of the entity. - Correct
answer-D
The income statement reveals
a. resources and equities of a firm at a point in time.
b. resources and equities of a firm for a period of time.
c. net earnings (net income) of a firm at a point in time.
d. net earnings (net income) of a firm for a period of time. - Correct answer-D
The income statement information would help in which of the following tasks?
a. Evaluate the liquidity of a company.
b. Evaluate the solvency of a company
c. Estimate future cash flows
d. Estimate future financial flexibility - Correct answer-C
Which of the following is an example of managing earnings down?
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