Question 6

Which of the following is not reported as an accounting error (prior period adjustment)?

		Change in the method of inventory pricing form FIFO to average-cost.
		Mathematical mistakes.
		Mistakes in the application of accounting principles.
		Oversight or misuse of facts that existed at the time financial statements were prepared.

Question 7

The disposal of a significant component of a business is called

		A change in accounting principle
		A special item of income from continuing operations item
		An other expense
		Discontinued operation

Question 8

Gains and losses that bypass net income but affect stockholders' equity are referred to as:

		Comprehensive income
		Other comprehensive income
		Prior period income
		Unusual gains and losses

Question 9

Which of the following is true in accounting for changes in estimates?

		Changes in estimates are considered as errors.
		A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.
		A company accounts for changes in estimates only in the period of change, even though it affects the future periods.
		Changes in estimates are not carried back to adjust prior years.

Question 10

Which of the following is not an economic consequence of financial reporting?

		Financial information can affect the distribution of wealth among investors. More informed investors, or investors employing security analysts, may be able to increase their wealth at the expense of less informed investors.
		Financial information can affect the level of risk accepted by a firm. Focusing on short-term, less risky projects may have long-term detrimental effects.
		Financial information can affect the rate of capital formation in the economy and result in a reallocation of wealth between consumption and investment within the economy.
		Financial information can affect the allocation of psychic income among investors.

Question 11

Which of the following occur from peripheral or incidental transactions?

		Sales revenue
		Cost of goods sold
		Gain on the sale of equipment
		Operating expenses

Question 12

Which of the following is the definition of an expense?

		Outflows or other using-up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations.
		Inflows or other enhancements of assets of an entity or settlements of its liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.
		Decreases in equity (net assets) from peripheral or incidental transactions of an entity except those that result from expenses or distributions to owners.
		Increases in equity (net assets) from peripheral or incidental transactions of an entity except those that result from revenues or investments by owners.

Question 13

Which of the following is characteristic of a change in an accounting estimate?

		It usually need not be disclosed
		It does not affect the financial statements of prior periods
		It should be reported through the restatement of the financial statements
		It makes necessary the reporting of pro forma amounts for prior periods

Question 14

The statement, net income should reflect all items that affected the net increase or decrease in stockholders' equity during the period is consistent with which of the following concepts of income?

		Economic
		All inclusive
		Current operating performance
		Money

Question 15

A measure of a company's profitability is the

		Current ratio
		Current cash debt coverage ratio
		Return on assets ratio
		Debt to total assets ratio

Question 16

The calculation net income/sales is the formula for which of the following ratios

		Return on assets
		Profit margin
		Asset turnover
		Asset usage

Question 17

The valuation basis used in conventional financial statements is

		Replacement cost
		Market value
		Original cost
		A mixture of costs and values

Question 18

The calculation sales/average total assets is the formula for which of the following ratios

		Return on assets
		Profit margin
		Asset turnover
		Asset usage