Exam 6: Accounting Quality

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

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

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.

Which of the following are characteristics of an extraordinary item?

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

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

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?

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

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

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

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

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

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

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

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

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

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

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?

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

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?