According to SFAC 5, the condition(s) that must be met for revenue recognition to take place is
A. the ability to measure the revenue amount.
B. there must be no remaining significant contingent obligation that pertains to the sale.
C. the verbal or written agreement of the sale.
D. the ability to recognized when the revenue actually takes place.
E. the completion of the earnings process and assurance of payment.
The following financial statement depicts only one point in time:
A. Income Statement
B. Statement of Cash Flows
C. Statement of Retained Earnings
D. Balance Sheet
An increase in accounts payable would be considered ________.
A. a non-cash charge to income
B. an adjusting entry
C. a use of cash
D. a source of cash
Which of the following statements about ratios is false?
A. Analysis of ratios can identify areas that require further investigation.
B. All of these answers are true.
C. A ratio expresses a mathematical relation between two, or more, economically important quantities.
D. The advantage of ratio analysis is that very little skill is required in interpreting the meaning of the ratios.
E. Ratios must be interpreted with care since factors affecting the numerator can correlate with those affecting the denominator.
The primary purpose of the statement of cash flows is to:
A. measure the change in the company's assets
B. state the company's financial position at period-end
C. provide information about a company's cash receipts and cash payments during the accounting period
D. analyze net income during the accounting period
Goodwill should:
A. be expensed in the period in which it is purchased from another company or organization.
B. not be amortized as it will be a benefit to the company over its entire life. Companies are assumed to have an indefinite life.
C. written off over a 40 year period even if the superior earning power justifying its existence disappears.
D. be amortized to income over a period not exceeding 40 years.
Firm A uses Sum-of-digits and Firm B uses straight-line method of depreciation. In the first year, which of the following is/are TRUE?
I. A shows higher equity than B.
II. A shows lower assets than B.
III. A shows a higher debt-to-equity ratio than B.
IV.
A shows a higher debt-to-asset ratio.
A.
III only
B.
I and III
C.
II, III and IV
D.
I and IV
At the end of the fiscal period, the account debited to show the estimated amount of uncollectible accounts is
A. Allowance for Uncollectible Accounts
B. None of these answers is correct.
C. Accounts Receivable
D. Bad Debt Expense
E. Unearned Revenue
Under US GAAP accounting, RandD expenses cannot be capitalized. They must be expensed as and when incurred. Which of the following is NOT a reason to support this practice?
A. Most RandD activities represent intangible benefits which are hard to evaluate objectively from an accounting perspective.
B. In most cases, there is a significant lag between RandD expenses and the determination of the potential success of the research.
C. There remains a high uncertainty about the ultimate benefits to be derived from the RandD activities on which the expenses are incurred.
D. RandD expenses are difficult to measure and hence, must be expensed in accordance with accrual accounting principles.
The following is true about the price earnings ratio
A. all of these answers are correct
B. the ratio is calculated based on the expected earnings per share for the next period
C. stocks have low PE ratios if they are less than five to eight and are considered underpriced
D. it is the ratio between the company's current market value and its earnings per share
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