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chapter 15
Financial Reporting
and Concepts
goals discussion
goals achievement
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in the blanks
multiple
choice
problems
check list and key terms
Select the appropriate response.
The utilization of a prior period adjustment is appropriate for:
correction of an error or an appropriation
Which of the following would precede the other on a detailed corporate income statement?
discontinued operations or extraordinary items
To report an event as an extraordinary item, how many of the criteria (unusual in nature and infrequent in occurrence) must be satisfied?
at least one or both
Continuing operations, discontinued operations, extraordinary items, and prior period adjustments should all be reported net of their related tax effect.
Changing from one generally accepted accounting method to another one should be accounted for via:
retrospective adjustment or restatement
Earnings per share is a popular measure of corporate book value.
The calculation of earnings per share is based on:
weighted-average common shares outstanding or shares outstanding at the end of an accounting period
Which of the following takes into account potential dilution from convertible securities?
basic earnings per share or diluted earnings per share
Book value per share is the same as fair value per share.
When two classes of stock are outstanding, the book value per share computation involves dividing total stockholders' equity by the sum of the number of common and preferred shares outstanding.
The dividend payout ratio is calculated by dividing dividends per share by:
earnings per share or stock price per share
An objective of accounting information is to provide information that is useful in the decision-making process of both investors and creditors.
One specific objective of financial accounting is to provide information useful in assessing the amounts, timing, and uncertainty of an organization's:
cash flows or sales projections
Financial statements are generally regarded as:
general purpose or special purpose
Which characteristic of financial accounting pertains to the degree to which information bears on the decision-making process?
To be reliable, accounting information must display the characteristic of:
freedom from bias or understandability
To be understandable, accounting information must be comprehensible to those who (1) have a reasonable understanding of business and economic activities and (2) are willing to study the information with reasonable diligence.
The establishment of generally accepted accounting principles means that all organizations record and measure financial activity in the same manner.
The private sector group responsible for the establishment of financial accounting rules is the:
Securities and Exchange Commission or Financial Accounting Standards Board
A presumption that a business will continue to operate for an indefinite period of time unless there is substantial evidence to the contrary is the:
going-concern assumption or periodicity assumption
The revenue realization principle holds that expenses should be recognized in the same period as the revenues that they helped to produce.
The consistency principle is based on the idea that businesses should employ the same accounting practices in each reporting period to improve the:
monetary unit of financial statements or comparability of financial statements
The idea that corporations should expense the cost of small items of equipment relates to the concept of:
The Financial Accounting Standards Board currently requires all companies to report supplemental information on the effects of inflation.
To date, no attempt has been made to establish uniformity for international accounting standards.
If a foreign currency account payable is established in the accounts at $0.50 per unit, and the exchange rate subsequently changes to $0.60 per unit, then which of the following will result?
exchange gain or exchange loss
Exchange gains and losses should be recognized on the date of settlement of the foreign currency payable or receivable, and also:
at the end of each accounting period or on the day the transaction creating the payable or receivable occurs