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What are three limitations of the income statement thatoften lead to misconceptions?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter2: Income Tax Concepts

Section: Chapter Questions

Problem 10DQ

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Which of the following statements about accounting income and economic income is (are) correct? I. Accounting income ignores many unrealized gains/losses of assets and liabilities, but economic income fully recognizes unrealized gains/losses. II. Accounting income does not consider all the costs (e.g., opportunity costs), whereas economic income account for all types of costs. III. Income and capital gains/losses are treated different in the calculation of accounting income, while they are treated the same in the calculation of economic income. Group of answer choices a.I and II b. I and III c. II and III d. I, II and III
Which measure is limited by the fact that it uses accounting income? a. ROI b. RI c. EVA d. All of the above
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What items are not presented on the income statement?
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QUESTION How much shall be presented as profit/loss on the face of the income statement? USE NEGATIVE SIGN IF LOSS
In order to be classified as an extraordinary item in the income statement, an event or transaction should be: a. unusual in nature, infrequent, and material in amount. b. unusual in nature and infrequent, but it need not be material. c. infrequent and material in amount, but it need not be unusual in nature. d. unusual in nature and material, but it need not be infrequent.
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