Question 1

Recognizing more bad debt expense in a year than is necessary in order to have flexibility in recognizing bad debt expense in a future year is an example of

Accepted Answer

A)  a big bath charge. 
B)  creative acquisition accounting. 
C)  a cookie jar reserve. 
D)  premature recognition of revenue. 
A)  a big bath charge. 
B)  creative acquisition accounting. 
C)  a cookie jar reserve. 
D)  premature recognition of revenue.

Question 2

The practice of carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from one year to the next is called

Accepted Answer

A)  revenue recognition. 
B)  income smoothing. 
C)  restructuring. 
D)  accrual-basis accounting. 
A)  revenue recognition. 
B)  income smoothing. 
C)  restructuring. 
D)  accrual-basis accounting.

Question 3

"Purchased in-process research and development" is typically associated with

Accepted Answer

A)  creative acquisition accounting. 
B)  cookie jar reserves. 
C)  proforma earnings amounts. 
D)  big bath accounting. 
A)  creative acquisition accounting. 
B)  cookie jar reserves. 
C)  proforma earnings amounts. 
D)  big bath accounting.

Question 4

Which of the following is true?

Accepted Answer

A)  Companies can raise common equity only by issuing new shares of common stock. 
B)  There is no opportunity cost associated with use of retained earnings as a source of common equity. 
C)  Most large mature firms issue new shares of common stock on a regular basis. 
D)  Companies can raise common equity by issuing new shares of common stock and through retained earnings. 
A)  Companies can raise common equity only by issuing new shares of common stock. 
B)  There is no opportunity cost associated with use of retained earnings as a source of common equity. 
C)  Most large mature firms issue new shares of common stock on a regular basis. 
D)  Companies can raise common equity by issuing new shares of common stock and through retained earnings.

Question 5

Recording as an asset expenditures that have no future economic benefit is an example of

Accepted Answer

A)  strategic matching. 
B)  change in methods or estimates with full disclosure. 
C)  a fictitious transaction. 
D)  non-GAAP accounting. 
A)  strategic matching. 
B)  change in methods or estimates with full disclosure. 
C)  a fictitious transaction. 
D)  non-GAAP accounting.

Question 6

Which of the following is NOT correct?

Accepted Answer

A)  The after-tax cost of debt for a firm with losses is equal to the interest rate on the debt. 
B)  Firms always pay dividends on their common stock issues because of the ease with which common shareholders can assume control of the firm. 
C)  Flotation costs for preferred stock are higher than for debt. 
D)  Most debt is placed privately and thus there is no flotation cost. 
A)  The after-tax cost of debt for a firm with losses is equal to the interest rate on the debt. 
B)  Firms always pay dividends on their common stock issues because of the ease with which common shareholders can assume control of the firm. 
C)  Flotation costs for preferred stock are higher than for debt. 
D)  Most debt is placed privately and thus there is no flotation cost.

Question 7

Which of the following typically is NOT associated with a change in estimate for accounting purposes?

Accepted Answer

A)  Return on pension fund 
B)  Useful life of a depreciable asset 
C)  Bad debt expense 
D)  Change in calculating depreciation from straight-line to sum-of-the-years'-digit 
A)  Return on pension fund 
B)  Useful life of a depreciable asset 
C)  Bad debt expense 
D)  Change in calculating depreciation from straight-line to sum-of-the-years'-digit

Question 8

Which of the following typically involves the use of non-GAAP accounting?

Accepted Answer

A)  Strategic matching 
B)  A change in accounting estimate that is fully disclosed 
C)  Proforma earnings 
D)  A change in accounting principle that is fully disclosed 
A)  Strategic matching 
B)  A change in accounting estimate that is fully disclosed 
C)  Proforma earnings 
D)  A change in accounting principle that is fully disclosed

Question 9

Excluding some revenues,expenses,gains,losses from the earnings figure calculated using generally accepted accounting principles is an example of

Accepted Answer

A)  income smoothing. 
B)  "big bath" accounting. 
C)  a "cookie jar" reserve. 
D)  proforma earnings. 
A)  income smoothing. 
B)  "big bath" accounting. 
C)  a "cookie jar" reserve. 
D)  proforma earnings.

Question 10

The GAAP Oval best represents the

Accepted Answer

A)  fact that only one true earnings number exists. 
B)  flexibility managers have within GAAP to report one earnings number from among many possibilities. 
C)  philosophy that earnings management within limits is ethical. 
D)  fact that GAAP is not subject to interpretation. 
A)  fact that only one true earnings number exists. 
B)  flexibility managers have within GAAP to report one earnings number from among many possibilities. 
C)  philosophy that earnings management within limits is ethical. 
D)  fact that GAAP is not subject to interpretation.

Question 11

Which of the following is true?

Accepted Answer

A)  Cash flow data is superior to earnings under the accrual basis in predicting long-term performance of an entity. 
B)  Earnings under the accrual basis is superior to cash flow data in predicting short-term performance of an entity. 
C)  Earnings under the accrual basis is superior to cash flow data in predicting long-term performance of an entity. 
D)  Cash flow data is superior to earnings under the accrual basis in predicting both short- and long-term performance of an entity. 
A)  Cash flow data is superior to earnings under the accrual basis in predicting long-term performance of an entity. 
B)  Earnings under the accrual basis is superior to cash flow data in predicting short-term performance of an entity. 
C)  Earnings under the accrual basis is superior to cash flow data in predicting long-term performance of an entity. 
D)  Cash flow data is superior to earnings under the accrual basis in predicting both short- and long-term performance of an entity.

Question 12

Which of the following regarding the weighted-average cost of capital is true?

Accepted Answer

A)  The tax effect of preferred stock dividends should be included in the calculation of weighted-average cost of capital. 
B)  The tax effect of common stock dividends should be included in the calculation of weighted-average cost of capital. 
C)  The tax effect of debt should be included in the calculation of the weighted-average cost of capital. 
D)  Taxes do not affect the weighted-average cost of capital. 
A)  The tax effect of preferred stock dividends should be included in the calculation of weighted-average cost of capital. 
B)  The tax effect of common stock dividends should be included in the calculation of weighted-average cost of capital. 
C)  The tax effect of debt should be included in the calculation of the weighted-average cost of capital. 
D)  Taxes do not affect the weighted-average cost of capital.

Recognizing more bad debt expense in a year than is necessary in order to have flexibility in recognizing bad debt expense in a future year is an example of

The practice of carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from one year to the next is called

"Purchased in-process research and development" is typically associated with

Which of the following is true?

Recording as an asset expenditures that have no future economic benefit is an example of

Which of the following is NOT correct?

Which of the following typically is NOT associated with a change in estimate for accounting purposes?

Which of the following typically involves the use of non-GAAP accounting?

Excluding some revenues,expenses,gains,losses from the earnings figure calculated using generally accepted accounting principles is an example of

The GAAP Oval best represents the

Which of the following is true?

Which of the following regarding the weighted-average cost of capital is true?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 6: Earnings Management

Recognizing more bad debt expense in a year than is necessary in order to have flexibility in recognizing bad debt expense in a future year is an example of

The practice of carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from one year to the next is called

"Purchased in-process research and development" is typically associated with

Which of the following is true?

Recording as an asset expenditures that have no future economic benefit is an example of

Which of the following is NOT correct?

Which of the following typically is NOT associated with a change in estimate for accounting purposes?

Which of the following typically involves the use of non-GAAP accounting?

Excluding some revenues,expenses,gains,losses from the earnings figure calculated using generally accepted accounting principles is an example of

The GAAP Oval best represents the

Which of the following is true?

Which of the following regarding the weighted-average cost of capital is true?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters