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BUSA 312-CH 4 (MC): Questions & Solutions (Rated A+)
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BUSA 312-CH 4 (MC): Questions & Solutions (Rated A+)
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BUSA 312-CH 4 (MC): Questions & Solutions (Rated A+)The major elements of the income statement are
a. revenue, cost of goods sold, selling expenses, and general expense.
b. operating section, nonoperating section, discontinued operations,
extraordinary items, and cumulative effect.
c. revenues, expenses, gains, and losses.
d. all of these. Right Ans - C
Information in the income statement helps users to
a. evaluate the past performance of the enterprise.
b. provide a basis for predicting future performance.
c. help assess the risk or uncertainty of achieving future cash flows.
d. all of these. Right Ans - D
Limitations of the income statement include all of the following except
a. items that cannot be measured reliably are not reported.
b. only actual amounts are reported in determining net income.
c. income measurement involves judgment.
d. income numbers are affected by the accounting methods employed.
Right Ans - D
Which of the following would represent the least likely use of an income
statement prepared for a business enterprise?
a. Use by customers to determine a company's ability to provide needed goods
and services.
b. Use by labor unions to examine earnings closely as a basis for salary
discussions.
c. Use by government agencies to formulate tax and economic policy.
d. Use by investors interested in the financial position of the entity. Right
Ans - D
The income statement reveals
a. resources and equities of a firm at a point in time.
, b. resources and equities of a firm for a period of time.
c. net earnings (net income) of a firm at a point in time.
d. net earnings (net income) of a firm for a period of time. Right Ans - D
The income statement information would help in which of the following tasks?
a. Evaluate the liquidity of a company.
b. Evaluate the solvency of a company
c. Estimate future cash flows
d. Estimate future financial flexibility Right Ans - C
Which of the following is an example of managing earnings down?
a. Changing estimated bad debts from 3 percent to 2.5 percent of sales.
b. Revising the estimated life of equipment from 10 years to 8 years.
c. Not writing off obsolete inventory.
d. Reducing research and development expenditures. Right Ans - B
Which of the following is an example of managing earnings up?
a. Decreasing estimated salvage value of equipment.
b. Writing off obsolete inventory.
c. Underestimating warranty claims.
d. Accruing a contingent liability for an ongoing lawsuit. Right Ans - C
What might a manager do during the last quarter of a fiscal year if she wanted
to improve current annual net income?
a. Increase research and development activities.
b. Relax credit policies for customers.
c. Delay shipments to customers until after the end of the fiscal year.
d. Delay purchases from suppliers until after the end of the fiscal year Right
Ans - B
What might a manager do during the last quarter of a fiscal year if she wanted
to decrease current annual net income?
a. Delay shipments to customers until after the end of the fiscal year.
b. Relax credit policies for customers.
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