Question : 1.One concept of income suggests that income be measured by : 1242768

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 following, ignoring income taxes would not affect the amount of income for a period?

a.Providing services to outsiders and investments of the funds received

b.Production of goods or services not yet sold not yet delivered to customers or clients.

c.Windfall gains and losses due to external causes.

d.The method used to depreciate property, plant and equipment.

2.The term revenue recognition conventionally refers to

a.The process of identifying transactions to be recorded as revenue in an accounting period.

b.The process of measuring and relating revenue and expenses of an enterprise for an accounting period.

c.The earning process that gives rise to revenue realization.

d.The process of identifying those transactions that result in an inflow of assets from customers.

3.In the transactions approach to income determination, income is measured by subtracting the expenses resulting from specific transactions during the period from revenues of the period also resulting from transactions. Under a strict transactions approach to income measurement, which of the following would not be considered a transaction?

a.Sale of goods on account at 20 percent markup

b.Exchange of inventory at a regular selling price for equipment

c.Adjustment of inventory in lower of cost or market inventory valuations when market is below cost.

d.Payment of salaries

4.Conventionally accountants measure income

a.By applying a value added concept

b.By using a transactions approach

c.As a change in the value of owners’ equity

d.As a change in the purchasing power of owners’ equity

5.Arid Lands, Inc. is engaged in extensive exploration for water in the Caprock Desert.  If upon discovery of water the corporation does not recognize any revenue from water sales until the sales exceed the costs of exploration, the basis of revenue recognition being employed is the

a.Production basis

b.Cash (or collection) basis

c.Sales (or accrual) basis

d.Sunk cost (or cost recovery) basis

6.The installment method of recognizing revenue is not acceptable for financial reporting if

a.The collectability of the sales price is reasonably assured

b.The installment period is less than 12 months

c.The method is applied to only a portion of the total

d.Collection expenses can be reasonably predicted

7.The principal disadvantage of using the percentage of completion method of recognizing revenue from long-term contracts is that it

a.Is unacceptable for income tax purposes

b.May require that intraperiod tax allocation procedures be used

c.Gives results bases upon estimates that may be subject to considerable uncertainty

d.Is likely to assign a small amount of revenue to a period during which much revenue was actually earned

8.One of the basic features of financing accounting is the

a.Direct measurement of economic resources and obligations and changes in them in terms of money and sociological and psychological impact

b.Direct measurement of economic resources and obligations and changes in them in terms of money

c.Direct measurement of economic resources and obligations and changes in them in terms of money and sociological impact

d.Direct measurement of economic resources and obligations and changes in them in terms of money and psychological impact

9.   Which of the following is an argument against using historical cost in accounting?

a.    Fair values are more relevant.

b.Historical costs are based on an exchange transaction.

c.Historical costs are reliable.

d.Fair values are subjective

10. The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as

a.the nocturne  of  conservatism.

b.the materiality constraint.

c.the substance over form principle.

d.the industry practices constraint.