Exam 12: The Income Statement

Under the current-operating concept, increases in equity from peripheral or incidental transactions (transactions other than sales of products, merchandise, or services) are referred to as:

Research on the smoothing of year-to-year income suggests that operating income is better predicted by operating rather than all-inclusive income.

Which of the following is the primary criterion for revenue recognition applied in practice?

The elimination of primary earnings per share by SFAS No. 128 is a case of less information leading to more usefulness.

The expense recognition model based on historical cost, as well as the model based on current value, must allocate the costs incurred.

A troubled debt restructuring occurs when a creditor, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The FASB appears to be continuing to take a revenue-expense approach to financial statements.

All empirical evidence supports the all-inclusive income concept.

Recognition of a past event is sometimes governed by whether a "one-event view" or a "two-event view" is held.

Which one of the following summary indicators is the most used?

Prior period adjustments are accounting changes that should be accounted for in comprehensive income on the income statement of the period of change.

According to the "big bath theory," when firms disclose bad news, there is a positive response by the market because the firm has recognized in the financial statements that a major problem exists and is moving to redress the problem.

Describe how the reporting of extraordinary items is a good example of the shift away from finite uniformity to rigid uniformity in accounting standards.

What are nonqualified stock options and incentive stock options, and how does expense recognition differ for these two types of stock options?

The current operating school of thought holds that:

Return on investment is the most-used summary indicator to date.

Which of the following is a definition of expenses that clearly represents an asset-liability approach?

Although there are exceptions, revenue is generally recognized at the time cash is collected.

Discuss the effect, if any, each of the following should have on the recognition of future events: a. The probabilistic nature of future events b. Management intent c. Conservatism d. Future economic conditions e. Future legal requirements

Which of the following should be considered first in applying the matching concept?