Economic income and accounting income are always the same. Economic income and accounting income are always the same.

True False

The matching principle in accounting prescribes that costs must be recognized in the same period

when the related revenues are recognized.

True False

For item to be considered extraordinary, it should be either unusual in nature or infrequent in

occurrence.

True False

A long$-$term asset is said to be impaired when its fair value is below its book value.

True False

Income from continuing operations is a measure that excludes certain nonrecurring items, such as

extraordinary items, and the effects of discontinued operations, from net income.

True False

Multiple Choice $($Questions $6-10)$

As a general rule, revenue is normally recognized when it is:

A$.$ measurable and earned.

B$.$ measurable and received.

C$.$ realizable and earned.

D$.$ realizable and measurable. $7$ Which of the following measures of accounting income is typically reported in an income statement?

A$.$ Net income

B$.$ Comprehensive income

C$.$ Continuing income

D$.$ All of the above

Brierton Company enters a contract at the beginning of year $1$ to build a new federal courthouse

for a price of $$16$ million. Brierton estimates that total cost of the project will be $$12$ million and will

take four years to complete.

Costs incurred Payments from federal

Year $1$

Year $2$

Year $3$

Year $4$

$$4$ million

$$4$ million

S$2$ million

$$2$ million

government

$$2$ million

$$2$ million

$$6$ million

$$6$ million

If Brierton used percentage$-$of$-$completion method to account for this project, what would they have

reported as profit in year $2?$

A$.50$

B$.$ $$1\mathrm{.}33$ million

C$.$ $$1\mathrm{.}50$ million

D$.$ $$0\mathrm{.}67$ million

Compared with companies that expense costs, firms that capitalize costs can be expected to report:

A$.$ higher asset levels and lower equity levels.

B$.$ higher asset levels and higher equity levels.

C$.$ lower asset levels and higher equity levels.

D$.$ lower asset levels and lower equity levels. Chapter $6-$Exercises

$1$ Wr

iil Loss a$$ invertory resulting from a fire

$1$W$.$ Lioss resuifting form a sitrike

A$.1$ arg iV

C$.$ ill $$Iy

E$.$ IH s$$ntiti

True

False

$2.$

The matching principle in accounting prescribes that costs must be recognized in the same period

when the related revenues are recognized.

True

False

$3.$

For item to be considered extraordinary, it should be either unusual in nature or infrequent in

occurrence.

True

False

$4.$

A long$-$term asset is said to be impaired when its fair value is below its book value.

True

False

$5.$

Income from continuing operations is a measure that excludes certain nonrecurring items, such as

extraordinary items, and the effects of discontinued operations, from net income.

True

False

Multiple Choice $($Questions $6-10)$

$6.$

As a general rule, revenue is normally recognized when it is:

A$.$ measurable and earned.

B$.$ measurable and received.

C$.$ realizable and earned.

D$.$ realizable and measurable.

Which of the following measures of accounting income is typically reported in an income statement?

A$.$ Net income

B$.$ Comprehensive income

C$.$ Continuing income

D$.$ All of the above

Brierton Company enters a contract at the beginning of year $1$ to build a new federal courthouse

for a price of $$16$ million. Brierton estimates that total cost of the project will be $$12$ million and will

take four years to complete.

$8.$

If Brierton used percentage$-$of$-$completion method to account for this project, what would they have

reported as profit in year $2?$

A$.$ $$0$

B$.$ $$1\mathrm{.}33$ million

C$.$ $$1\mathrm{.}50$ million

D$.$ $$0\mathrm{.}67$ million

$9.$

Compared with companies that expense costs, firms that capitalize costs can be expected to report:

A$.$ higher asset levels and lower equity levels.

B$.$ higher asset levels and higher equity levels.

C$.$ lower asset levels and higher equity levels.

D$.$ lower asset levels and lower equity levels.

Which of the following would be considered an extraordinary item?

I. Write$-$down of receivables

II$.$ Gains on disposal of a business segment

III. Loss of inventory resulting from a fire

IV$.$ Loss resulting from a strike

A$.$ I and IV

B$.$ I, III, and IV

C$.$ III only

D$.$ I, II$,$ and III