Which of the Following Is an Argument Supporting the "Current

question 24

Multiple Choice

Which of the following is an argument supporting the "current operating" income recognition school of thought?

• A)Most financial statement users look only to bottom-line net income to assess current performance and to make predictions regarding subsequent years' performance.
• B)Under this approach, management makes the decision on whether or not an item is extraordinary and therefore excluded from the income statement.
• C)The summation of all income displayed on the income statement for a period of years should reflect the reporting entity's net income for that period.
• D)Proper classification within the income statement allows both normal recurring items and unusual, infrequently occurring items to be displayed separately within the same statement.

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Definitions:

Normal Good

A type of good for which demand increases as the income of the consumer increases.

Popcorn

A type of corn kernel which expands and puffs up when heated, commonly seasoned and served as a snack.

DVDs

Digital Versatile Discs, a type of optical storage media used for storing data, including movies and software.

Luxury Good

A good for which demand increases more than proportionally as income rises, often perceived as status symbols.