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All of the following are true regarding a high quality balance sheet except:


A) It should portray the economic resources that can be reasonably expected to generate future economic benefits.
B) It should provide a complete and fair portrayal of all of the firm's obligations at a point in time,including the present value of long-term liabilities for future payments.
C) It should minimize measurement error and bias.
D) It should be optimistic in terms of accounting numbers.

E) B) and C)
F) A) and D)

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Quality accounting information seeks to maximize relevance and economic faithfulness,subject to the constraints of the ____________________ of the measurements.

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Which of the following items is consistent with earnings being informative about current performance and informing the analyst that level of current earnings is sustainable?


A) The firm recognizes an unexpected gain
B) The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.
C) The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.
D) The firm experiences a large jump in sales and earnings as a result of successful research and development of new products.

E) A) and B)
F) A) and C)

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On the income statement the disposal of a segment of a business should be shown _________ .

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net of app...

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When evaluating the quality of accounting information the user should consider the reasonableness of the ____________________ made in applying GAAP.

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A company may try to paint a favorable picture of itself by accelerating the timing of revenues or estimating the collectible amounts too aggressively.In these cases the quality of accounting information declines because it does not represent the company's true economic condition and may not be sustainable.List four conditions which might suggest that a company is recognizing revenues too early?

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____________________ represents the concept of being able to compare financial statement data across years for any particular firm.

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Which of the following are characteristics of an extraordinary item?


A) Unusual in nature
B) Infrequent in occurrence
C) Material in amount
D) All of the above

E) All of the above
F) A) and D)

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Banks Corp.reported net income of $595,000 in 2012.During 2012 Banks reported a loss of $87,435 from a peripheral activity.The loss was included as part of income from continuing operations.Assuming that the loss is a one-time event and that Banks has an effective tax rate of 35%,calculate Banks' adjusted net income.Show all of your calculations for credit. In addition,discuss why analysts might make an adjustment of this type.

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blured image The analyst may decide to adjust income...

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How is a disposal of a segment of the business reported?


A) separately stated item on the income statement
B) balance sheet
C) statement of cash flows
D) statement of retained earnings

E) None of the above
F) A) and B)

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Achieving comparability in financial reporting is important to the analysis of multinational firms.However,the data from the reconciliation of foreign firm's financial statement to U.S.GAAP must be carefully interpreted.What types of things complicate the analysis of multinational firms?

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Financial analysis of multinational firm...

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When evaluating the quality of accounting information,an analyst should consider all of the following except:


A) reliability of the measurements made
B) adequacy of disclosures
C) comparability of estimates
D) economic faithfulness of the measurements made

E) None of the above
F) A) and C)

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Which of the following items is consistent with earnings not being informative about current performance but are informative about future earnings?


A) The firm recognizes an unexpected gain
B) The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.
C) The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.
D) The firm experiences a large jump in sales and earnings as a result of successful research and development of new products.

E) All of the above
F) C) and D)

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One definition of earnings management is that it occurs when managers use:


A) judgment in financial reporting to alter financial reports to mislead stakeholder.
B) an accounting method that is inconsistent with other industry members.
C) more conservative accounting estimates than other companies.
D) pro forma accounting results as opposed to GAAP results.

E) C) and D)
F) All of the above

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Some firms attempt to maximize the amount of restructuring charge in a particular year;analysts refer to this as the _________________________ approach.

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Which one of the following is an example of sustainable earnings?


A) A gain from corporate restructuring.
B) A loss from debt retirement.
C) A settlement paid by the company for a class action suit.
D) Earnings from repeat customers.

E) A) and B)
F) B) and C)

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Quality accounting information should be informative as to both the __________________________________________________ of the current period's earnings and the long-run sustainability of profits.

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economic v...

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The best measure of a firm's sustainable income is:


A) net income.
B) income from continuing operations.
C) income before extraordinary items.
D) income before extraordinary item and change in accounting principle.

E) A) and D)
F) B) and C)

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On the income statement,income from discontinued operations is shown:


A) as an accounting principle change.
B) without any income tax effect.
C) as a separate section of income from continuing operations.
D) net of taxes after income from continuing operations.

E) All of the above
F) A) and C)

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A change in the useful life of an asset is treated as a(n)_____________

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change in ...

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