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470 final - Chapter 6 1 As a general rule revenue is...

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Chapter 6 1. As a general rule, revenue is normally recognized when it is: a. Realizable and earned 2. Which of the following measures of accounting income is typically reported in an income statement a. Net income b. Comprehensive income c. Continuing income 3. According to FASB, initial franchise fees should be recognized as income when: a. The franchiser has substantially performed or satisfied all material services and conditions 4. Which of the following statements concerning deferred taxes is correct? a. Deferred taxes arise from the depreciation of a specific asset and will ultimately reduce to zero as the item is depreciated 5. Differences in taxable and pretax accounting income that will not be offset by corresponding differences or “turn around” in future periods are called: a. Permanent differences 6. If a company that normally expenses advertising costs was to capitalize and amortize these costs over 3 years instead: a. After the third year net income would be higher (if it is capitalized) only if advertising cost were increasing. 7. Compared with companies that expense costs, firms that capitalize costs can be expected to report: a. Higher asset levels and higher equity levels
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8. The capitalization of interest cost during construction: a. Increases net income during construction phase 9. If a company estimates that its expected return on pension plan assets will increase to 9.5% from 9.0%, this would be considered a. A change in accounting estimate 10. Which of the following items is not included in the calculation of net income but is included in the calculation of comprehensive income? a. Unrealized holding gain on available-for-sale marketable securities 11. Which of the following statements is true? Under GAAP comprehensive income: a. Must be reported in addition to net income 12.Which of the following statements is incorrect? Employee stock options a. Will not affect share price of the company when exercised FALSE 13. Economic income and accounting income are always the same. FALSE 14. Revenue from sales where the buyer has the right of return can only be recognized after the return period has expired. FALSE
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15. Generally revenue should be recorded when it is probable and reasonably
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