ACG 3131 Exam 2 Study Questions and Correct Answers
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Course
ACG 3131
Institution
ACG 3131
Amount/timing/uncertainty The income statement is important because it provides investors and creditors with information that helps them predict the _______, ________, and ___________ of future cash flows. It helps investors and creditors predict future cash flows in a number of different ways.
In...
ACG 3131 Exam 2 Study Questions and
Correct Answers
Amount/timing/uncertainty ✅The income statement is important because it provides
investors and creditors with information that helps them predict the _______, ________,
and ___________ of future cash flows. It helps investors and creditors predict future
cash flows in a number of different ways.
Income statement ✅important changes in value are not reported in the _______
__________:
(a)Unrealized gains or losses on available-for-sale investments,
(b)Changes in the market values of long-term liabilities, such as bonds payable,
(c)Changes (increases) in value of property, plant and equipment, such as land, natural
resources, or equipment,
(d)Changes (increases) in the values of intangible assets such as customer goodwill,
brand value, or intellectual capital.
Methods ✅application of different accounting _______ or accounting estimates results
in difficulties in comparing companies:
(a) Inventory methods—LIFO vs. FIFO,
(b) Depreciation Methods—straight-line vs. Accelerated,
(c) Accounting for long-term contracts—percentage-of-completion vs. Completed-
contract,
(d) Estimates of useful lives or salvage values for depreciable assets,
(e) Estimates of bad debts,
(f) Estimates of warranty costs.
Transaction ✅Why is the __________ approach to income measurement preferable to
other ways of measuring income:
It focuses on the activities that have occurred during a given period and instead of
presenting only a net change, a description of the components that comprise the
change is included
Advantages ✅The ________ of the single-step income statement are:
(1) simplicity and conciseness, (2) probably better understood by the layperson,
(3) emphasis on total costs and expenses, and net income, and (4) does not imply
priority of one revenue or expense over another
Disadvantages ✅The ________ of the single-step income statement are:
It does not show the relationship between sales and cost of goods sold and it does not
show other important relationships and information, such as income from operations,
income before taxes, etc.
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