Question 1

Comprehensive income is the company's change in total stockholders' equity from all sources.

Accepted Answer

A) True 
 B)False

Question 2

In a foreign-currency transaction, foreign currencies must be converted to U.S. dollars for financial reporting purposes.

Accepted Answer

A) True 
 B)False

Question 3

A company with low earnings quality is more likely to report ________ than a company with high earnings quality.

Accepted Answer

A) high earnings in the future 
B) low earnings in the future 
C) high revenue levels in the future 
D) decreasing operating expenses, compared to sales, in the future 
A) high earnings in the future 
B) low earnings in the future 
C) high revenue levels in the future 
D) decreasing operating expenses, compared to sales, in the future

Question 4

Which entity requires companies issuing publicly traded stock to have their financial statements audited by an outside auditor?

Accepted Answer

A) Securities and Exchange Commission 
B) Internal Revenue Service 
C) Committee of Sponsoring Organizations 
D) Financial Accounting Standards Board 
A) Securities and Exchange Commission 
B) Internal Revenue Service 
C) Committee of Sponsoring Organizations 
D) Financial Accounting Standards Board

Question 5

On August 1, Deluka Computers, Inc. purchased thirty computer chips, on account, from a company located in Taiwan for 520,000 Taiwan dollars. On that date the Taiwan dollar is worth $0.038. On September 1, when the Taiwan dollar was worth $0.04, payment was made. Deluka Computers uses the perpetual inventory system. The journal entry on August 1 by Deluka Computers, Inc. would be: (Round your final answer to the nearest dollar.)

Accepted Answer

A) debit Inventory $20,800 and credit Accounts Payable $20,800. 
B) debit Inventory $19,760 and credit Accounts Payable $19,760. 
C) debit Inventory $19,760, credit Foreign-Currency Transaction Gain -$1040, and credit Accounts Payable $20,800. 
D) debit Inventory $19,760 and credit Cash $19,760. 
A) debit Inventory $20,800 and credit Accounts Payable $20,800. 
B) debit Inventory $19,760 and credit Accounts Payable $19,760. 
C) debit Inventory $19,760, credit Foreign-Currency Transaction Gain -$1040, and credit Accounts Payable $20,800. 
D) debit Inventory $19,760 and credit Cash $19,760.

Question 6

The loss incurred as a result of the impairment of goodwill should be reported as:

Accepted Answer

A) part of discontinued operations. 
B) an operating expense. 
C) other expenses and losses. 
D) an extraordinary item. 
A) part of discontinued operations. 
B) an operating expense. 
C) other expenses and losses. 
D) an extraordinary item.

Question 7

Footnote 1 of every public company's financial statements contains all of the following EXCEPT:

Accepted Answer

A) The company's revenue recognition policy. 
B) How the company determines its fiscal year reporting period. 
C) The impact of recently issued accounting principles that might impact comparability of reported income and that might have required accounting changes. 
D) The amount of compensation (including bonuses)paid to the company's CEO and CFO. 
A) The company's revenue recognition policy. 
B) How the company determines its fiscal year reporting period. 
C) The impact of recently issued accounting principles that might impact comparability of reported income and that might have required accounting changes. 
D) The amount of compensation (including bonuses)paid to the company's CEO and CFO.

Question 8

Earnings per share is calculated:

Accepted Answer

A) only for preferred stock. 
B) only for common stock. 
C) for common and preferred stock. 
D) only for treasury stock. 
A) only for preferred stock. 
B) only for common stock. 
C) for common and preferred stock. 
D) only for treasury stock.

Question 9

Westside Corporation had an investment in available-for-sale securities of $70,000. This investment experienced an unrealized loss of $5000 during the year. Westside Corporation had a balance in its available-for-sale account of $169,000 at year end. Ignoring income taxes, the effect of this loss on comprehensive income will be:

Accepted Answer

A) $70,000 increase. 
B) $65,000 decrease. 
C) $104,000 increase. 
D) $5000 decrease. 
A) $70,000 increase. 
B) $65,000 decrease. 
C) $104,000 increase. 
D) $5000 decrease.

Question 10

A U.S.-based company purchases merchandise on account from a company in Mexico. The purchase contract is denominated in pesos. If the peso decreases in value relative to the dollar, the purchaser will record a ________. The peso ________ relative to the dollar.

Accepted Answer

A) Foreign Currency Transaction Loss; weakens 
B) Foreign Currency Transaction Loss; strengthens 
C) Foreign Currency Transaction Gain; weakens 
D) Foreign Currency Transaction Gain; strengthens 
A) Foreign Currency Transaction Loss; weakens 
B) Foreign Currency Transaction Loss; strengthens 
C) Foreign Currency Transaction Gain; weakens 
D) Foreign Currency Transaction Gain; strengthens

Question 11

Corporations with convertible securities outstanding such as convertible preferred stock report:

Accepted Answer

A) basic and diluted EPS. 
B) basic EPS only. 
C) diluted EPS only. 
D) no EPS figures. 
A) basic and diluted EPS. 
B) basic EPS only. 
C) diluted EPS only. 
D) no EPS figures.

Question 12

A company with a payable denominated in a foreign currency wants the dollar to become weaker because the payment then costs fewer dollars when the transaction is settled.

Accepted Answer

A) True 
 B)False

Question 13

Income tax payable appears on the:

Accepted Answer

A) statement of retained earnings. 
B) statement of stockholders' equity. 
C) income statement. 
D) balance sheet. 
A) statement of retained earnings. 
B) statement of stockholders' equity. 
C) income statement. 
D) balance sheet.

Question 14

Management states that it has conducted an assessment of internal controls over financial reporting based on the framework established by the Sarbanes-Oxley Act of 2002.

Accepted Answer

A) True 
 B)False

Question 15

Income tax expense is a component of income from operations.

Accepted Answer

A) True 
 B)False

Question 16

A sign of decreasing earnings quality is:

Accepted Answer

A) declining cost of goods sold/sales ratio. 
B) declining gross margin/sales ratio. 
C) declining operating expenses/sales ratio. 
D) increasing operating income/sales ratio. 
A) declining cost of goods sold/sales ratio. 
B) declining gross margin/sales ratio. 
C) declining operating expenses/sales ratio. 
D) increasing operating income/sales ratio.

Question 17

Foreign-currency transaction losses can be avoided if international transactions are settled in U.S. dollars instead of the foreign currency.

Accepted Answer

A) True 
 B)False

Question 18

Comprehensive income is:

Accepted Answer

A) used to determine earnings per share only. 
B) used to determine net income only. 
C) not used to determine net income or earnings per share. 
D) used to determine net income or earnings per share. 
A) used to determine earnings per share only. 
B) used to determine net income only. 
C) not used to determine net income or earnings per share. 
D) used to determine net income or earnings per share.

Question 19

The net of foreign-currency transaction gains and losses will appear on the income statement.

Accepted Answer

A) True 
 B)False

Question 20

On June 15, Blonski Computer Company sold twenty-five computers on account to a company located in Argentina for 2,600,000 pesos. On that date, the peso is worth $0.084. On July 15, when the peso was worth $0.080, payment was received. Blonski Computer Company uses the perpetual inventory system. Ignoring Cost of Goods Sold, the journal entry on June 15 by Blonski Computer Company would be:

Accepted Answer

A) debit Accounts Receivable $218,400 and credit Sales Revenue $218,400 
B) debit Accounts Receivable $208,000 and credit Sales Revenue $208,000 
C) debit Accounts Receivable $208,000, debit to Foreign-Currency Transaction Loss $10,400 and credit Sales Revenue $218,400 
D) debit Accounts Receivable $218,400, credit Sales $208,000, and credit Foreign Currency Transaction Gain $10,400 
A) debit Accounts Receivable $218,400 and credit Sales Revenue $218,400 
B) debit Accounts Receivable $208,000 and credit Sales Revenue $208,000 
C) debit Accounts Receivable $208,000, debit to Foreign-Currency Transaction Loss $10,400 and credit Sales Revenue $218,400 
D) debit Accounts Receivable $218,400, credit Sales $208,000, and credit Foreign Currency Transaction Gain $10,400

Comprehensive income is the company's change in total stockholders' equity from all sources.

In a foreign-currency transaction, foreign currencies must be converted to U.S. dollars for financial reporting purposes.

A company with low earnings quality is more likely to report ________ than a company with high earnings quality.

Which entity requires companies issuing publicly traded stock to have their financial statements audited by an outside auditor?

The loss incurred as a result of the impairment of goodwill should be reported as:

Footnote 1 of every public company's financial statements contains all of the following EXCEPT:

Earnings per share is calculated:

A U.S.-based company purchases merchandise on account from a company in Mexico. The purchase contract is denominated in pesos. If the peso decreases in value relative to the dollar, the purchaser will record a . The peso relative to the dollar.

Corporations with convertible securities outstanding such as convertible preferred stock report:

A company with a payable denominated in a foreign currency wants the dollar to become weaker because the payment then costs fewer dollars when the transaction is settled.

Income tax payable appears on the:

Management states that it has conducted an assessment of internal controls over financial reporting based on the framework established by the Sarbanes-Oxley Act of 2002.

Income tax expense is a component of income from operations.

A sign of decreasing earnings quality is:

Foreign-currency transaction losses can be avoided if international transactions are settled in U.S. dollars instead of the foreign currency.

Comprehensive income is:

The net of foreign-currency transaction gains and losses will appear on the income statement.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 11: Evaluating Performance: Earnings Quality, the Income Statement, Statement of Comprehensive Income

Comprehensive income is the company's change in total stockholders' equity from all sources.

In a foreign-currency transaction, foreign currencies must be converted to U.S. dollars for financial reporting purposes.

A company with low earnings quality is more likely to report ________ than a company with high earnings quality.

Which entity requires companies issuing publicly traded stock to have their financial statements audited by an outside auditor?

The loss incurred as a result of the impairment of goodwill should be reported as:

Footnote 1 of every public company's financial statements contains all of the following EXCEPT:

Earnings per share is calculated:

A U.S.-based company purchases merchandise on account from a company in Mexico. The purchase contract is denominated in pesos. If the peso decreases in value relative to the dollar, the purchaser will record a ________. The peso ________ relative to the dollar.

Corporations with convertible securities outstanding such as convertible preferred stock report:

A company with a payable denominated in a foreign currency wants the dollar to become weaker because the payment then costs fewer dollars when the transaction is settled.

Income tax payable appears on the:

Management states that it has conducted an assessment of internal controls over financial reporting based on the framework established by the Sarbanes-Oxley Act of 2002.

Income tax expense is a component of income from operations.

A sign of decreasing earnings quality is:

Foreign-currency transaction losses can be avoided if international transactions are settled in U.S. dollars instead of the foreign currency.

Comprehensive income is:

The net of foreign-currency transaction gains and losses will appear on the income statement.

The Financial Statements

Transaction Analysis

Accrual Accounting Income

Internal Control Cash

Short-Term Investments Receivables

Inventory Cost of Goods Sold

Plant Assets, Natural Resources, Intangibles

Long-Term Investments the Time Value of Money

Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Filters

A U.S.-based company purchases merchandise on account from a company in Mexico. The purchase contract is denominated in pesos. If the peso decreases in value relative to the dollar, the purchaser will record a . The peso relative to the dollar.