Question 2 Which of the following is not a purpose of the income statement? O used to evaluate management's performance O predicts the company's füture assets and liabilities O used to compare performance against other companies assesses the company's risk
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- Match (by letter) the following items with the description or example that best fits. Each letter is used only once.Terms_____ 1. Vertical analysis._____ 2. Horizontal analysis._____ 3. Liquidity._____ 4. Solvency._____ 5. Discontinued operations._____ 6. Quality of earnings._____ 7. Conservative accounting practices._____ 8. Aggressive accounting practices.Descriptionsa. A company’s ability to pay its current liabilities.b. Accounting choices that result in reporting lower income, lower assets, and higher liabilities.c. Accounting choices that result in reporting higher income, higher assets, and lower liabilities.d. The ability of reported earnings to reflect the company’s true earnings as well as the usefulness of reported earnings to help investors predict future earnings.e. A tool to analyze trends in financial statement data for a single company over time.f. The sale or disposal of a significant component of a company’s operations.g. A means to express each item in a financial…Do solve asap True and False questions - Indicate True or False 1. A negative net present value is acceptable. 2. Sunk costs are relevant past expenditures. 3. The liquidity ratio tests the solvency of the company.The primary purpose of showing special types of eventsseparately in the income statement is to:a. Increase earnings per share.b. Assist users of the income statement in evaluating theprofitability of normal, ongoing operations. c. Minimize the income taxes paid on the results of ongo-ing operations. d. Prevent unusual losses from recurring.
- 3 While preparing the statement of financial performance, the directors of a company exaggerate profit figure than its actual figure to show colorful picture of the entity. This act of the director is termed as_____________ a. All the options b. Table dressing c. Door dressing d. Window dressingQuestion: Which of the following accounting qualitative characteristics was violeted? a) Relevance, b) Neutrality, c) Verifiability, d) Timeliness, e) Faithful representation, f) Comparability, or g) Understandability. 1. Kit Ltd. purposely recorded revenue in 2020 for sales made in 2021 in order to guarantee that management would earn its incentives, which were based on profits.Reporting a company's income from operations separately from non-recurring income is useful because: Question 6 options: income from operations has greater significance for investors in predicting future performance. non-recurring income is subject to potential management bias. non-recurring income is not material. income from operations is always changing. If, during an accounting period, an expense has been incurred, but not yet paid for or recorded, then the adjusting entry would include: Question 7 options: a debit to a revenue account. a credit to a liability account. a debit to an asset account. a credit to an expense account.
- A company is experiencing a period of strong fi nancial performance. In order to increasethe likelihood of exceeding analysts’ earnings forecasts in the next reporting period, thecompany would most likely undertake accounting choices that:A . infl ate reported revenue in the current period.B . delay expense recognition in the current period.C . accelerate expense recognition in the current period.Which of the following statements most likely describes a situation that would motivate amanager to issue low-quality fi nancial reports?A . Th e manager’s compensation is tied to stock price performance.B . Th e manager has increased the market share of products signifi cantly.C . Th e manager has brought the company’s profi tability to a level higher thancompetitors.Studypug.com Which of the following statements is not true of horizontal analysis? a.Each item on a financial statement is compared with a total amount from the same statement. b.It can be useful in analyzing trends. c.Each item on a current financial statement is compared to the same item on an earlier statement. d.It can be useful in interpreting the financial performance of a company.
- If the revenues are correctly reported and the gross profit of a company is understated, what is the effect on stockholders' equity? a. understated b. correctly stated c. overstated d. None of these choices are correct.Which of the following assumptions is embodied in the AFN equation? a. All balance sheet accounts are tied directly to sales. b. Common stock and long-term debt are tied directly to sales. c. Last year's total assets were not optimal for last year's sales. d. Fixed assets, but not current assets, are tied directly to sales. e. Accounts payable and accruals are tied directly to sales.Drop in company's bad debt expense estimate indicates an improvement in collectability from customers where it is also consider expense was subject to estimates from management. Anaylze that the decrease must be interpreted as either a positive or negative indicator.