EX 1 1. The critical event for revenue recognition is: A. defined by generally accepted accounting principles for every situation. B. the same for every industry. C. dependent upon the exact nature of the business and industry. D. easily defined by the FASB. 2. To be reported as an extraordinary item on the income statement, an event must be: A. both unusual in nature and an infrequent occurrence. B. either unusual in nature or an infrequent occurrence. C. unusual in nature. D. an infrequent occurrence. 3. Companies offering higher risk securities have incentives to mask their true condition by: A. supplying overly optimistic financial information. B. not having their financial statements audited. C. listing on foreign exchanges where reporting requirements are less stringent than those in the U.S. D. including testimonials from well-known executives in their financial statements 4.The matching principle requires that expenses be recognized: A. in the same period in which all the assets are used up. B. in the same period in which the revenue generated by these expenses is recognized. C. when the costs are paid by the entity. D. in the same period in which the revenue generated by these expenses is received. 5. The change in equity of an entity during a period from transactions and other events from non-owner sources is known as: A. net income. B. net operating income. C. comprehensive income. D. net change in assets. 6. The discontinued operations section of the income statement is comprised of which one of the following? A. Income from the operation of discontinued business component and gain or loss from the disposal of the discontinued component. B. Income from the operation of discontinued business component, net of tax, and gain or loss from the disposal of the discontinued component, net of tax. C. Income from the operation of discontinued business component, net of tax, and gain or loss from the disposal of the discontinued component. D. Gain or loss from the disposal of the discontinued component, net of tax. 7. The type of analysis that uses financial statements to assess valuation of current market price is __________ analysis. A. valuation B. efficient market C. fundamental D. technical 8.When transitory earnings are present, which of the following correctly depicts the order used on the income statement? A. Income from continuing operations, income tax expense, extraordinary loss, discontinued operations, net income. B. Income from continuing operations, extraordinary loss, discontinued operations, income tax expense, net income. C. Income from continuing operations, income tax expense, discontinued operations, extraordinary loss, net income. D. Income tax expense, income from continuing operations, discontinued operations, extraordinary loss, net income. 9. Net income recognition always increases: A. assets. B. net assets. C. liabilities. D. net liabilities. 10. To recognize revenue after the time of sale, there must be extreme uncertainty regarding the amount of cash to be collected or: A. there must be substantial future services required whose costs cannot be reasonably estimated. B. units are heterogeneous. C. the product is immediately salable at quoted market prices. D. a formal contract must be signed. 11. Employees demand financial statement information because the firms performance is often linked to all of the following EXCEPT: A. negotiated increases in union contracts. B. social security benefits. C. pension plan benefits. D. employee profit sharing. 12. In 2009, the FASB completed a five-year effort to distill the existing GAAP literature into a single database known as: A. the accounting standards database. B. international financial reporting standards. C. the converged accounting standards. D. the accounting standards codification. 13. On the income statement, income from discontinued operations is shown: A. as a separate section of income from continuing operations. B. as an accounting principle change. C. without any income tax effect. D. net of taxes after income from continuing operations. 14.Financial statements follow: A. rigid guidelines that require specific adherence to regulated procedures. B. generally accepted guidelines that allow management to choose among different procedures. C. general guidelines with little choice among different procedures. D. legal requirements for uniform presentation and disclosure. 15.Traceable costs are also called __________ costs. A. period B. expired C. product D. administrative 16.Using the same accounting methods to record and report similar events from period to period demonstrates: A. consistency. B. comparability. C. neutrality. D. faithful representation. 17. The rationale behind the rules for multiple-step income statements is to subdivide the income in a manner that facilitates: A. cash flows. B. forecasting. C. tax return preparation. D. audits. 18. Differences between IFRS and U.S. GAAP include all of the following EXCEPT: A. reversal of inventory write-downs. B. extraordinary items. C. lease capitalization. D. research and development costs. 19.When reporting a change in an accounting principle, the general rule requires that the current years income from continuing operations reflect: A. use of the newly adopted principle for the current year recognition. B. use of the old principle for the current year recognition. C. managements choice of either the old or newly adopted principle for the current year recognition. D. FASBs designation of either the old or newly-adopted principle based on the item being changed. 20. A companys financial statements can be used for all of the following purposes EXCEPT as a/an: A. scorecard on the companys social responsibility. B. management report card. C. early warning signal. D. measure of accountability.