Financial Statement Analysis Chp006

4811 Words Nov 12th, 2013 20 Pages
Chapter 06
Analyzing Operating Activities

Multiple Choice Questions 1. Which of the following is not a reason for economic income and accounting income to differ?
A. Transaction basis
B. The monetary assumption
C. Conservatism
D. Earnings management 2. As a general rule, revenue is normally recognized when it is:
A. measurable and earned.
B. measurable and received.
C. realizable and earned.
D. realizable. 3. Which of the following measures of accounting income is typically reported in an income statement?
A. Net income
B. Comprehensive income
C. Continuing income
D. All of the above 4. According to FASB, initial franchise fees should be recognized as income when:
A. the franchiser has substantially performed or satisfied
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$185M
B. $172M
C. $158M
D. $157M 16. If software refinement had been capitalized each year and amortized over a three year period beginning in the year the cost was incurred, net income for fiscal 2007 would have been:
A. $31.7M
B. $29.75M
C. $21.95M
D. $14.95M 17. If the software refinement had been capitalized and amortized over a three year period beginning in the year the cost was incurred, but was expensed for tax purposes, the deferred tax position at the end of fiscal 2005 would have been:
A. A deferred tax credit of $2.8M
B. A deferred tax credit of $3.5M
C. A deferred tax credit of $5.2M
D. A deferred tax debit of $4M 18. If a company that normally expenses advertising costs was to capitalize and amortize these costs over 3 years instead:
A. after the third year net income would always be higher if it is capitalized.
B. after the third year net income would always be lower if it is capitalized.
C. after the third year net income would be higher (if it is capitalized) only if advertising costs were increasing.
D. after the third year net income would be lower (if it is capitalized) only if advertising costs were increasing. 19. Compared with companies that expense costs, firms that capitalize costs can be expected to report:
A. higher asset levels and lower equity levels.
B. higher
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