Which of the following expenditures should be expended in full in the current period resulting in an immediate reduction in the income statement? 

	a.	An expense that extends the life of the asset
	b.	an expense that increases the capacity of the asset
	c.	An expense that improves the efficiency of the asset
	d.	An expense to maintain the asset's current production

If a the chance of a liability occurring is reasonably possible then the company must ______ that liability in its financial statements. 

	a.	not record or disclose
	b.	only disclose
	c.	record and disclose
	d.	none of the choices is correct

Which of the following is generally the best indicator that a seller can recognize revenue on a transaction? 

	a.	The buyer has paid for the good ro services
	b.	The seller has transferred control of the product to the customer
	c.	The right to return the product has expired
	d.	The buyer and seller have signed a contract that obligates both parties to perform

If a customer is offered the right to return a good or product purchased (i.e., variable consideration), then this will always preclude the seller from recognizing revenue until the right to return expires.  

 True

 False

 

In order for a contract between two parties to be considered valid for revenue recognition purposes it must be in writing. 

 True

 False

 

Depreciation expenses is generally calculated by the following formula:

Cost- Residual Value 

Expected useful life of the asset 

If a company wanted to overstate their fixed assets balance, ho would they manipulate depreciation expense? 

	a.	Increase the residual value of the asset
	b.	Decrease the residual value of the asset
	c.	Decrease the useful life of the asset
	d.	Any one of the above methods will result in an overstatement of the fixed asset balance