Final exam
Question 1 One concept of income suggests that income be
measured by determining the net change over time in the discounted present
value of net cash flow expected to be received by the firm. Under this concept
of income, which of the following, ignoring income taxes, would not affect the
amount of income for a period?
Question 1 options:
Windfall gains and losses due to external causes
Providing services to outsiders and investments of the funds
received
The method used to depreciate property, plant, and equipment
Production of goods or services not yet sold and not yet
delivered to customers or clients
Question 2 The one-time overstatement of restructuring
charges to reduce assets, which reduces future expenses, is the definition of
which of the following earnings management techniques?
Question 2 options:
Taking a bath
Creative acquisition accounting
Creasing “cookie jar” reserves
Abusing the materiality concept
Question 3 If year one sales equal $800,000, year two sales
equal $840,000 and year three sales equal $896,000, the percentage to be
assigned for year two in a sales trend analysis, assuming that year one is the
base year, is:
Question 3 options:
105%.
89%.
100%.
112%.
Question 4 The phrase events and transactions that are
distinguished by both their unusual nature and their
infrequency of occurrence describes:
Question 4 options:
extraordinary items.
changes in accounting principles.
prior period adjustments.
prior period adjustments.
Question 5 The valuation basis used in conventional
financial statements is:
Question 5 options:
original cost.
market value.
replacement cost.
a mixture of costs and values.
Question 6 A basic objective of the statement of cash flows
is to:
Question 6 options:
disclose changes during the period in all asset and all
liability accounts.
disclose the change in working capital during the period.
provide essential information in financial statements for those making
economic decisions.
supplant the income statement and balance sheet.
Question 7 The calculation net income/average total assets
is the formula for which of the following ratios?
Question 7 options:
Profit margin
Asset turnover
Asset usage
Return on assets
Question 8 Under the residual equity theory:
Question 8 options:
equities are viewed as restrictions on assets.
a business is viewed as a social institution.
a manager’s goals are considered as important as those of
the common stockholders.
management is responsible for maximizing the wealth of
common stockholders.
Question 9 As a
minimum, how large in relation to total outstanding shares may a stock
distribution be before it should be accounted for as a stock split instead of a
stock dividend?
Question 9 options:
No less than 2 to 5
percent
No less than 20 to 25
percent
No less than 10 to 15
percent
No less than 45 to 50
percent
Question 10 Which of the following should be disclosed in
the Summary of Significant Accounting Policies?
Composition of plant
assets
Maturity dates of long-term debt
Basis of consolidation
Pro forma effect of
retroactive application of an accounting change
Question 11 List and
discuss the types of information commonly disclosed in the footnotes to
corporate financial statements. Focus on the following:
a. Accounting policies
b. Schedules and exhibits
c. Explanation of financial statement items
d. General information about the company
ScholarMatic: Explanation & Answer
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