Question

Which of the following statements is (are) correct?
(x) The balance sheet shows the book value of common stock and paid-in surplus.
(y) Net plant and equipment is listed on the balance sheet as an asset and the income statement includes the depreciation on the plant and equipment as an expense.
(z) Common stock and retained earnings are listed on the income statement but not the balance sheet.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

Which of the following statements is (are) correct?
(x) The income statement shows the total revenues that a firm earns and the total expenses the firm incurs
to generate those revenues over a specific period of time—generally one year.
(y) The income statement shows the total revenues and expenses that a firm experiences and gross profit is calculated, on the income statement, as total revenue minus costs of goods sold.
(z) The income statement shows both earnings before interest expense and taxes (EBIT) and net income, which is EBIT minus interest expense and taxes.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Answer 1

1) B. (X) and (y) are correct

(x) Balance sheet shows the book value of equity, paid in surplus and retained earnings on the Equity and liabilities side

(y) Property, plant and equipment amount is always shows in the balance sheet on net basis (gross property, plant and equipment and accumulated depreciation). Depreciation on the property, plant and equipment is shown as expense in income statement

2. A. all (x), (y) and (z) are correct

Income statement shows both revenue and expense for which specific period. Generally they are for 1 year, but period can be quarter, half year depending on the policy followed by the company.

Gross profit is revenue minus COGS. Net income is EBIT less interest and tax