Kershner Says: "Our Income Statement Should Be Looking Good This

question 80

Multiple Choice

Kershner says: "Our income statement should be looking good this year. We've been doing excellent business this year, so we have a lot of gross sales. The company should be in good shape." Michaels replies: "It remains to be seen how our income statement will look overall. In spite of strong sales revenue, the overall income statement might not be as good as we might hope."
Which of the following does Michaels assume?

• A) Revenues this year were not as high as last year's.
• B) Revenues are not as high as Kershner thinks they are.
• C) Selling expenses exceeded administrative expenses this year.
• D) Other factors must be taken into account to arrive at an income statement.
• E) Income taxes will be high this year.

---

Definitions:

Common Stock

A type of equity ownership in a corporation, where holders have voting rights and potentially receive dividends.

Capital Surplus

funds raised by a company through issuing shares at a price above their par value.

Marginal Tax Rates

The rate of tax applied to your next dollar of income, indicating the percentage of tax imposed on additional income.

Interest Income

Earnings generated from assets that pay interest, such as savings accounts, bonds, and loans.