Financial Statement Analysis Chp006
Chapter 06
Analyzing Operating Activities
Multiple Choice Questions 1. Which of the following is not a reason for economic income and accounting income to differ?
A. Transaction basis
B. The monetary assumption
C. Conservatism
D. Earnings management 2. As a general rule, revenue is normally recognized when it is:
A. measurable and earned.
B. measurable and received.
C. realizable and earned.
D. realizable. 3. Which of the following measures of accounting income is typically reported in an income statement?
A. Net income
B. Comprehensive income
C. Continuing income
D. All of the above 4. According to FASB, initial franchise fees should be recognized as income when:
A. the franchiser has substantially performed or satisfied all material services and conditions.
B. the franchiser has collected the majority of fee in cash.
C. the franchisee shows the ability to pay the fee.
D. the franchiser bills the franchisee. Brierton Company enters a contract at the beginning of year 1 to build a new federal courthouse for a price of $16 million. Brierton estimates that total cost of the project will be $12 million, and will take four years to complete.
5. If Brierton used percentage-of-completion method to account for this project, what would they have reported as profit in year 2?
A. $ 0
B. $ 1.333M
C. $ 1.5M
D. $ 0.667M 6. If Brierton used cash accounting to account for this project, what would they have reported as profit (loss) in year 2?
A. $ 0
B. $ 1.333M
C. $ (2M)
D. $ (4M) 7. Hurik Company reports the following
Based upon this information which of the following is most correct:
A. Cost of goods sold is a permanent cost.
B. Cost of goods sold is an economic cost.
C. Cost of goods sold is a totally variable cost.
D. Cost of goods sold is a period expense. 8. Which of the following combinations of accounting practices will lead to the highest reported earnings in an inflationary environment?
A. Choice A
B. Choice B
C. Choice C
Analyzing Operating Activities
Multiple Choice Questions 1. Which of the following is not a reason for economic income and accounting income to differ?
A. Transaction basis
B. The monetary assumption
C. Conservatism
D. Earnings management 2. As a general rule, revenue is normally recognized when it is:
A. measurable and earned.
B. measurable and received.
C. realizable and earned.
D. realizable. 3. Which of the following measures of accounting income is typically reported in an income statement?
A. Net income
B. Comprehensive income
C. Continuing income
D. All of the above 4. According to FASB, initial franchise fees should be recognized as income when:
A. the franchiser has substantially performed or satisfied all material services and conditions.
B. the franchiser has collected the majority of fee in cash.
C. the franchisee shows the ability to pay the fee.
D. the franchiser bills the franchisee. Brierton Company enters a contract at the beginning of year 1 to build a new federal courthouse for a price of $16 million. Brierton estimates that total cost of the project will be $12 million, and will take four years to complete.
5. If Brierton used percentage-of-completion method to account for this project, what would they have reported as profit in year 2?
A. $ 0
B. $ 1.333M
C. $ 1.5M
D. $ 0.667M 6. If Brierton used cash accounting to account for this project, what would they have reported as profit (loss) in year 2?
A. $ 0
B. $ 1.333M
C. $ (2M)
D. $ (4M) 7. Hurik Company reports the following
Based upon this information which of the following is most correct:
A. Cost of goods sold is a permanent cost.
B. Cost of goods sold is an economic cost.
C. Cost of goods sold is a totally variable cost.
D. Cost of goods sold is a period expense. 8. Which of the following combinations of accounting practices will lead to the highest reported earnings in an inflationary environment?
A. Choice A
B. Choice B
C. Choice C