Chapter 5
Multiple Choice
1. One concept of income suggests that income be measured by determining the net change over
time in the discounted present value of net cash flow expected to be received by the firm. Under
this concept of income, which of the fo
Jinyoung Lee
ACCT 8071
CASE 5-1
A. Why do business managers prefer stable earnings trends?
The main reason for the business managers to prefer stable earnings is
because it can make the reported income better and lower the companys
cost of capital. (Reduc
Jinyoung Lee
ACCT 8071
CASE 5-4
A. Explain the meanings of (1) cost, (2) expense, and (3) loss as used for financial
reporting in conformity with GAAP. In your explanation, discuss the distinguishing
characteristics of the terms and their similarities and
Jinyoung Lee
ACCT 8071
CASE 5-5
A. Why is the point of sale generally used as the basis for the timing of revenue
recognition?
It is because the point of sale is usually the most common case when the revenue has
been earned and realized. For the revenue t
Jinyoung Lee
ACCT 8071
CASE 2-1
A. Identify and discuss the benefits that can be expected to be derived from the FASBs
conceptual framework study.
FASBs conceptual framework is like a backbone of accounting. It gives consistency
to accounting. If accounti
Jinyoung Lee
ACCT 8071
CASE 2-2
A. Discuss the goals and objectives of
a. The conceptual Framework Project
The FASB Conceptual Framework Project is to give uniform and clear
principals to FASB standards. Since there are many alternative choices in
financi
Jinyoung Lee
ACCT 8071
CASE 1-1
A. What are the major goals of the FASB ASC?
The major goal of the FASB ASC is to make GAAP authoritative more accessible and
available to the users. Before ASC, there were so many accounting standards, and
users had to loo
