1. Which of the following are possible motives for managers to manipulate their earnings lower (I.e., make reported earnings less than unmanaged earnings)?(check all that apply)

1 point

Unmanaged earnings would fall below security analysts forecasts of earnings

Government is investigating potential monopolistic practices by the company because of its high levels of profitability

A potential competitor is deciding whether to introduce new products to compete with the companys product line and will do so only if it thinks the company is making huge profits

The company is close to violating a debt covenant on its public bond issue because of low earnings

Congress is planning a vote on extending tax credits to companys industry due to its poor recent performance

2.

Question 2

Which of the following actions would be examples of real earnings management? (check all that apply)

1 point

Delay a new R&D program to the next period

Capitalize a higher percentage of cash costs during this period (i.e., spend the same in cash costs, but capitalize more of them as an asset this period)

Reduce the expected percentage of this periods sales that will be uncollectible

Cut spending on employee training this period

Reduce advertising spending in the current period

3.

Question 3

Below are two years of quarterly data for Norwegian Elkhound Ltd. What was Norwegian Elkhounds YoY Change in Accounts Receivable for Q4 of This Year?

Fiscal Quarter	Revenue	Accounts Receivable
Last Year Q1	78.087	61.053
Last Year Q2	39.624	34.586
Last Year Q3	52.602	43.492
Last Year Q4	73.897	64.226
This Year Q1	97.450	86.612
This Year Q2	61.916	55.809
This Year Q3	80.601	74.103
This Year Q4	99.650	90.583

1 point

4.6%

34.8%

41.0%

22.2%

48.4%

4.

Question 4

Which of the following companies is the most likely suspect for managing earnings higher in Q4 of This Year?

	Fiscal Quarter	YoY change in Revenue	YoY change in Accounts Receivable	YoY change in Cash Collected	Days A/R	TT Revenue/ Employees
ActiveLab Inc	Last Year Q4	20.4%	21.0%	23.4%	76.65	108.1
ActiveLab Inc	This Year Q4	53.2%	70.4%	42.6%	75.41	108.6
Akita Ltd	Last Year Q4	49.7%	47.1%	54.1%	82.87	115.5
Akita Ltd	This Year Q4	27.5%	31.9%	25.4%	82.25	139.8
HealthyDog Corp	Last Year Q4	10.4%	11.3%	5.0%	88.36	115.9
HealthyDog Corp	This Year Q4	29.8%	57.5%	9.1%	84.29	139.8
Jack Russell Pty	Last Year Q4	50.1%	50.9%	75.4%	81.22	107.2
Jack Russell Pty	This Year Q4	25.8%	24.9%	67.7%	84.41	83.8
Pugporium Co	Last Year Q4	20.9%	27.2%	10.3%	75.58	150.7
Pugporium Co	This Year Q4	34.8%	41.0%	56.4%	79.82	135.8

1 point

Jack Russell Pty

Akita Ltd

Pugporium Co

ActiveLab Inc

HealthyDog Corp

5.

Question 5

Below are two years of quarterly data for Devo Whippet Corp. Calculate Devo Whippets Bookings for Q4 of This Year?

	Revenue	Unearned Revenue
Last Year Q1	560.012	572.201
Last Year Q2	750.667	621.333
Last Year Q3	1047.111	774.222
Last Year Q4	678.074	696.148
This Year Q1	617.049	629.099
This Year Q2	825.700	683.399
This Year Q3	1151.800	851.599
This Year Q4	815.866	795.733

1 point

915.451

815.866

760.000

871.733

716.282

6.

Question 6

Which of the following actions would increase a companys earnings during the period? (check all that apply)

1 point

Capitalize a greater percentage of cash costs

Increase the amortization period for capitalized costs

Decrease the amortization period for capitalized costs

Capitalize a smaller percentage of cash costs

7.

Question 7

Below are five years of data on Deferred Subscriber Acquisition Costs and Amortization of Deferred Subscriber Acquisition Costs for Finnish Lapphund Oyj. During which year did Finnish Lapphund make a big change to its amortization assumptions?

	Year 1	Year 2	Year 3	Year 4	Year 5
Deferred subscriber acquisition costs	54	150	303	444	578
Amortization of Deferred subscriber acquisition costs	18	61	126	159	221

1 point

Year 4

Year 2

Year 5

Year 3

None of the years

8.

Question 8

Dalmatian Inc. had $50 of Net Income this year. It capitalized $530 in software development costs and recognized Amortization Expense for those costs of $180 during the year. Dalmatians tax rate is 40%. What would Dalmatians Net Income have been this year if it had expensed all software development costs immediately?

1 point

$278

$140

($300)

$400

($160)

9.

Question 9

Below is the Accounts Receivable line from the Balance Sheet of Corgi Feldman Inc. Estimate how much Corgi Feldman reduced its expenses in Year 2 by reducing its estimated percentage of uncollectible accounts. (Hint: See the Dogamer case for an example of this calculation)

	Year 1	Year 2
Accounts receivable, net of allowance of 21 and 12, respectively	679	788

1 point

3.0

3.4

12.4

12.0

9.0

10.

Question 10

Which of the following assets are subject to write-downs under the lower-of-cost-or-market accounting principle? (check all that apply)

1 point

Equipment

Inventory

Accounts Receivable

Brand names

Cash