1. When a company changes its method of accounting for depreciation, what must it do? Why?

2. What is earnings per share and how can it be diluted?

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3. Explain why the historical cost and conservatism concepts are important to income statement users.

1. Why is cost allocation an issue for income statement users?

2. Explain how a company can increase net income by increasing production even though sales remain the same.

3. Explain how cost, revenue, profit, and investment centers, respectively, are evaluated.

1. Why should the income (loss) from discontinued operations be disclosed separately from the gain (loss) on disposal of a segment? Where is this information usually found? Why?

2. Is a Georgia company’s loss from a tornado an extraordinary item? Why?

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