Danny S. Litt
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For each of the following, choose the best choice that answers the question or statement. Mark your
answers on your SCANTRON. Write your name and section number on this test paper as well as on your
SCANTRON. (You may use this test paper as scratch paper and write on it as much as your wish.) Turn
in this exam and turn in the SCANTRON when finished.
A firm's comprehensive income always:
A. Is the same as its net income.
B. Is greater than its net income.
C. Is less than its net income.
D. Could be greater than or less than net income.
In a recent annual report, Apple Computer reported the following in one of its disclosure notes:
"Warranty Expense: The Company provides currently for the estimated cost for product warranties at
the time the related revenue is recognized." This note exemplifies Apple's use of:
B. The matching principle
C. Realization principle
D. Economic entity
GAAP is an abbreviation for:
A. Generally authorized accounting procedures.
B. Generally applied accounting procedures.
C. Generally accepted auditing practices.
D. Generally accepted accounting principles.
The SEC issues accounting standards in the form of:
A. Accounting Research Bulletins.
B. Financial Reporting Releases.
C. Financial Accounting Standards.
D. Financial Technical Bulletins.
The full disclosure principle requires a balance between:
A. Comparability and consistency.
B. Relevance and cost effectiveness.
C. Reliability and neutrality.
D. Timeliness and predictive value.
Which of the following groups is not among the external users for whom financial statements are
D. All of the above are external users of financial statements.
In its first year of operations Best Corp. had income before tax of $500,000. Best made income tax
payments totaling $210,000 during the year and has an income tax rate of 40%. What was Best's net
income for the year?
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Dave's Duds reported cost of goods sold of $2,000,000 this year. The inventory account increased by
$200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that
Dave purchased during the year?
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