Reference no: EM13511082

MULTIPLE CHOICE

1. Which of the following best describes “comprehensive income”?

a. Comprehensive income is the amount resulting from the deduction from revenues, or from operating revenues, of cost of goods sold, other expenses, and losses.

b. Comprehensive income is the excess (deficit) of revenue over expenses for an accounting period.

c. Comprehensive income is the change in equity of an entity during a period of transactions and other events and circumstances, from non-owner sources. 

d. Comprehensive income is the change in equity of an entity during a period of transactions and other events and circumstances, from owner and non-owner sources.

2. Comprehensive income as displayed on the income statement represents.

a. An asset-liability approach 

b. A revenue-expense approach

c. A current operating approach

d. None of the above

3. Which of the following is a definition of revenue that clearly represents an asset-liability approach?

a. Revenue results from the sale of goods and rendering of services and is measured by the charge made to customers, clients, or tenants for goods and services furnished to them.

b. Revenue represents gross increases in assets and gross decreases in liabilities measured in conformity with generally accepted accounting principles that result from those types of profit-directed activities.

c. Revenue should be identified with the period during which the major economic activities necessary to the creation and disposition of goods and services has been accomplished.

d. Revenues are the inflow or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations. 

4. Under the current-operating concept, increases in equity from peripheral or incidental transactions (transactions other than sales of products, merchandise, or services) are referred to as:

a. Gains 

b. Revenue

c. Comprehensive income

d. Accruals

5. Which of the following best describes when revenues are generally recognized?

a. At the completion of production

b. At the point of sale when legal title is transferred 

c. When cash is collected

d. During production

6. Which of the following is the primary criterion for revenue recognition applied in practice?

a. Cash collection

b. Completion of the production process

c. Completion of the earnings process 

d. When sales price is measurable

7. Which of the following suggested bases of recognizing revenue is not permitted by authoritative literature?

a. During production for long-term construction contracts if reliable estimates of the extent of progress and of the cost to complete can be made and if reasonable assurance of collectibility exists.

b. At the completion of production if immediate marketability at a quoted price exists for a product whose units are interchangeable

c. On an accretion basis where product marketability at known prices exists and it is desirable to recognize changes in assets, such as growing timber 

d. On a cash basis if no reasonable basis exists for estimating collectibility

8. Which of the following represents the attribute(s) that must be measurable before revenue is recognized?

a. Sales price and cash collections

b. Sales price

c. Cash collections

d. Sales price, cash collections, and future costs 

9. Which of the following is a definition of expenses that clearly represents an asset-liability approach?

a. Expenses are outflows or other using up of assets or incurrences of liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s major or central operations. 

b. Expenses are costs directly associated with the revenue of the period.

c. Expenses are gross decreases in assets or gross increases in liabilities recognized and measured in conformity with generally accepted accounting principles that result from those types of profit-directed activities of an enterprise.

d. Expenses in the broadest sense include all expired costs, which are deductible from revenues.

10. Which of the following should be considered first in applying the matching concept?

a. Costs should be matched against the revenue directly produced. 

b. Costs should be matched to revenue in a rational and systematic manner.

c. Costs should be recognized as period expenses when incurred.

d. Costs should be recognized as expenses when cash is paid.

11. Which of the following is a true statement?

a. When arbitrary allocations are used, income statements have very little information content.

b. The calculation aspects of most expense measurements are easily resolved under historical cost accounting.

c. When arbitrary allocations are used, income statements still have information content. 

d. Capital market research has shown that the usefulness of accounting numbers is best resolved using the deductive logic of the allocation problem.

12. Which of the following is the major problem underlying future events and their impact upon event recognition?

a. Management intent

b. The probabilistic nature of future events 

c. The perception of the past event

d. Future economic conditions

13. Which of the following statements applies to the two-event view of past event recognition?

a. It would recognize a transaction as occurring when an offer of early retirement is made to employees.

b. It would be more reliant upon probabilistic estimates than the one-event view.

c. It is faster than the one-event view.

d. It is consistent with the asset and liability views of SFAC No. 6.