Short Exam 1 - Fall 2022

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Bellevue University *

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618

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Accounting

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Jan 9, 2024

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docx

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Sharonda McDaniel Professor Heidi Deden Accounting Theory AC 618 September 23, 2022 Take Home Exam – Chapters 1-6 Multiple Choice – 1 point each (My answers are the highlighted ones) 1. The statement, net income should reflect all items that affected the net increase or decrease in stockholders’ equity during the period is consistent with which of the following concepts of income? a. Economic b. All inclusive c. Current operating performance d. Money 2. A transaction that is material in amount, unusual in nature, but not infrequent in occurrence should be presented separately as a (an) a. Component of income from continuing operations, but not net of applicable income taxes b. Component of income from continuing operations, net of applicable income taxes c. Extraordinary item, net of applicable income taxes d. Prior period adjustment, but not net of applicable income taxes 3. Antidilutive securities would generally be used in the calculation of Basic Diluted Earnings per share Earnings per share a. Yes Yes b. No Yes c. No No d. Yes No 4. The installment method of recognizing revenue is now acceptable for financial reporting if a. The collectability of the sales price is reasonably assured b. The installment period is less than 12 months c. The method is applied to only a portion of the total d. Collection is seriously in doubt such that an estimate of collections cannot be reasonably made. 5. Under what condition is it proper to recognize revenues prior to the sale of the merchandise? a. When the ultimate sale of the goods is at an assured sales price

b. When the revenue is to be reported as an installment sale c. When the concept of internal consistency (of amounts of revenue) must be complied with d. When management has a long-established policy to do so 6. Overstating sales returns or warranty costs in good times and using these overstatements in bad times to reduce similar charges, is the definition of which of the following earnings management techniques? a. Taking a bath b. Creative acquisition accounting c. Creating “cookie jar” reserves d. Abusing the materiality concept 7. Income from continuing operations would not include a. Bad debt expense b. Loss from the sale of equipment c. Extraordinary gain/loss d. Cumulative effect of change in accounting principal 8. Primary EPS is changed to fully diluted EPS for outstanding convertible bonds by a. Adding to the denominator the shares the bonds can be converted into b. Adding to the numerator the interest expense on the bonds, net of tax savings from the bonds interest expense c. Convertible bonds are not considered when computing fully diluted EPS d. Both a and b are used in the computation of fully diluted EPS 9. Which of the following is considered a pervasive constraint by Statement of Financial Accounting Concepts No. 8 a. Costs of providing the disclosure b. Conservatism c. Timeliness d. Verifiability 10. In the transactions approach to income determination, income is measured by subtracting the expenses resulting from specific transactions during the period from revenues of the period also resulting from transactions. Under a strict transactions approach to income measurement, which of the following would not be considered a transaction? a. Sale of goods on account at 20 percent markup b. Exchange of inventory at a regular selling price for equipment c. Adjustment of inventory in lower of cost or market inventory valuations when market is below cost. d. Payment of salaries

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