Ch5
Q1
According to FASB, initial franchise fees should be recognized as income when:
the franchiser has substantially performed or satisfied all material services
and conditions.
Q2
All other things being equal, when comparing expensing or capitalizing the R&D
expenditures (with straight-line depreciation), return on assets:
will increase over time using capitalization
Q3
As a general rule, revenue is normally recognized when it is:
realizable and earned.
Q4
Assume a company that normally expenses advertising costs was to capitalize and
amortize these costs over 3 years instead. After the third year net income would:
be higher only if advertising costs were increasing
Q5
Based on GAAP, which of the following is true of comprehensive income?
It can be reported as part of statement of shareholders' equity
Q6
Compared with companies that expense costs, firms that capitalize costs can be
expected to report:
higher asset levels and higher equity levels
Q7
Differences in taxable income and pretax accounting income that will not be offset
by corresponding differences or "turn around" in future periods are called:
permanent differences
Q8
If a company estimates that its expected return on pension plan assets will increase
to 9.5% from 9.0%, this would be considered:
a change in accounting estimate.
Q9
The capitalization of interest cost during construction:
increases net income during construction phase
Q10
The intrinsic value approach ignores two types of costs:
interest cost and option cost.
Q11
Which of the following is not a reason for economic income and accounting
income to differ?
The monetary assumption
Q12
Which of the following items is not included in the calculation of net income but is
included in the calculation of comprehensive income?
Unrealized holding gain on available-for-sale marketable securities
Q13
Which of the following measures of accounting income is typically reported in an
income statement?
Continuing income, Comprehensive income, Net income
Q14
Which of the following overall accounting concepts has a number of exceptions
under GAAP?
Historical cost
Q15
Which of the following statements concerning deferred taxes is correct?
Deferred taxes arising from the depreciation of a specific asset will ultimately
reduce to zero as the item is depreciated.
Q16
Which of the following statements is incorrect?
Employee stock options will not affect the share price of a company when
exercised.
Q17
Q18
Q19
Q20
Q21
Q22
Q23
Q24
Q25
Q26
Q27
Q28
Q29
Q30
Q31
