Exam 6: Financing Activities

Earnings that are high quality would:

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

All of the following are criteria that financial reporting requires before recognizing an obligation as a liability except :

First Bank recognized an extraordinary loss from the settlement of a lawsuit with Fifth Street Bank that it had impeded on a processing patent. The extraordinary loss was in the amount of $4,250,000 and First Bank Corporation has an effective tax rate of 35%. First Bank paid the settlement immediately and recognized the tax benefit as a receivable to offset the current period's taxes. Instructions: a. Prepare the extraordinary item portion of First Bank Corporation's financial statement. b. Using the analytical framework discussed in the text and reprinted below show the effect of following event on First Bank Corporation's financial statements. Analytical Framework:

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

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

When evaluating the quality of accounting information the user should consider the ____________________ of the measurements made.

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

Examples of poor earnings quality that hinder the forecasting of expected future earnings include all of the following except :

All of the following are typically recognized as accounting liabilities except :

When a company makes a change in an estimate that it has used in its financial statements, it should account for the change by:

Gains and losses differ from revenues and expenses in that they are produced by ____________________ activities.

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?

Under new accounting standards passed in 2006 firms must report changes in accounting principle in the current and prior years as if the new accounting principle had been applied all along. The rationale for this change was:

Income or loss from discontinued operations would best be regarded by an analyst as:

In bankruptcy prediction analysis, a type ____________________ error is classifying a firm as nonbankrupt when it ultimately goes bankrupt.

In the empirical research on earnings manipulation discussed in the chapter, a number of firm characteristics are found to be associated with the likelihood of engaging in earnings manipulation. For each of the characteristics listed below, discuss the rationale for their inclusion in the model: a. Gross Margin Index b. Asset Quality Index c. Sales Growth Index d. Depreciation Index e. Leverage Index

Which of the following is not considered a motive to manage earnings?

Which of the following are characteristics of an extraordinary item?

Accounting information should be a fair and complete representation of the firm's economic ____________________, ____________________, and ____________________.