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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Chap002 Accrual Accounting and Net income determination True/False
[QUESTION]
- Accrual accounting decouples measured earnings from operating cash inflows and
outflows.
Answer: True
Learning Objective: 02-01
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Accrual versus cash basis of accounting
[QUESTION]
- Cash-basis accounting provides the most useful measure of future operating
performance.
Answer: False
Learning Objective: 02-01
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Accrual versus cash basis of accounting
[QUESTION]
- Net asset valuation and net income determination are inextricably intertwined.
Answer: True
Learning Objective: 02-02
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Net assets and Net income interrelationship
[QUESTION]
- While the earnings process is the result of many separate activities, it is generally
acknowledged that there is usually one critical event or key stage considered to be absolutely essential to the ultimate increase in net asset value of the firm.
Answer: True
Learning Objective: 02-02
Difficulty: 2 Medium
AACSB: Reflective Thinking
Financial Reporting and Analysis 7th Edition Revsine Test Bank Visit TestBankDeal.com to get complete for all chapters
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
AICPA: FN Measurement
Blooms: Understand
Topic: Net assets and Net income interrelationship
[QUESTION]
- The matching principle says that expenses are matched to the revenue recognized
during the period, not that revenue is matched to the period’s expenses.
Answer: True
Learning Objective: 02-03
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Accrual basis―Expense recognition
[QUESTION]
- Period costs would include costs like advertising or insurance where the linkage
between these costs and individual sales is difficult to establish.
Answer: True
Learning Objective: 02-04
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Income statement―Traceable or period costs
[QUESTION]
- Traditional financial reporting presents forecasted cash flow information.
Answer: False
Learning Objective: 02-05
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic: Income statement―Multiple-step
[QUESTION]
- Gains and losses from continuing operations that are not typical recurring costs are
presented as a separate line in the income from continuing operations section of the income statement.
Answer: True
Learning Objective: 02-06
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Topic: Income statement―Unusual or infrequent items
[QUESTION]
- Each set of EPS numbers includes separately reported numbers for income from
continuing operations and the items that appear below it on the income statement.
Answer: True
Learning Objective: 02-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic: EPS―Earnings per share
[QUESTION]
- The change in equity of an entity during a period from transactions and other events
from non-owner sources is known as comprehensive income.
Answer: True
Learning Objective: 02-10
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic: Comprehensive income
[QUESTION]
- Selected unrealized gains (or losses) sometimes bypass the income statement and are
reported as direct adjustments to a stockholders’ equity account.
Answer: True
Learning Objective: 02-10
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Comprehensive income
[QUESTION]
- The basic accounting equation may be expressed as assets = liabilities – owners’
equity.
Answer: False
Learning Objective: 02-13
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic: T Account analysis
Topic: Transaction analysis and adjusting entries
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
[QUESTION]
- To get revenue and expense account balances to zero an adjusting entry is made.
Answer: False
Learning Objective: 02-13
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic: Transaction analysis and adjusting entries
[QUESTION]
- For each transaction, the dollar total of the debits must equal the dollar total of the
credits.
Answer: True
Learning Objective: 02-13
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic: T Account analysis
Topic: Transaction analysis and adjusting entries
[QUESTION]
- U. S. GAAP permits companies to report components of other comprehensive
income (OCI) as part of the statement of changes in stockholders’ equity.
Answer: False
Learning Objective: 02-10
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic: Comprehensive income
[QUESTION]
- The point within the operating cycle when the company’s net assets have increased is
the point when revenue should be recognized.
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