Question :
61. A common-size income statement expresses each expense and net income : 1230558
61. A common-size income statement expresses each expense and net income as a percentage of
A. assets
B. revenues
C. liabilities
D. expenses
E. shareholders’ equity
62. Which of the following is not true?
A. Net income or profit for a period is the difference between revenues from selling goods and services and the expenses incurred to generate those revenues, plus some gains or losses of the period.
B. If the expenses plus losses exceed the revenues plus gains, the result is a net loss.
C. U.S. GAAP and IFRS require the accrual basis of accounting, which detaches the recognition of revenue from the receipt of cash.
D. A seller recognizes revenues when it has performed all, or nearly all, of its obligations to the customer and when it has received cash or an asset that is convertible to cash.
E. The firm recognizes and reports expenses that have a causal link with revenues, such as cost of sales, in the next accounting period.
63. Which of the following is true?
A. Interpreting the income statement involves studying the relations among revenues, expenses, and net income both over time and across firms.
B. Comparisons are likely more valid for the same firm over time than across firms because of the difficulty in identifying truly similar firms.
C. In evaluating over-time performance of a given firm, the user must understand both current economic conditions and how those conditions may have changed over the period of analysis.
D. In evaluating across-firm performance, the user should control for the underlying business model by selecting peer firms that are similar, economically, to the firm being analyzed.
E. all of the above are true
64. Under the accrual method, the timing of revenue recognition is influenced by
A. where the purchaser gets funds to pay the seller
B. whether the buyer pays with cash or a promise
C. when the services or product are provided
D. when the seller has received a form of payment in settlement of a purchaser’s promise
E. the nature of the services or product provided
65. The accrual basis of accounting is often contrasted with the cash basis of accounting. Which of the following is true of the cash basis of accounting?
A. the cash basis is not subject to manipulation
B. most larger companies use the cash basis of accounting
C. the cash basis of accounting provides a strong basis to determine the total assets of the company
D. the cash basis provides an inferior picture of operating performance
E. all of the above are true
66. A common-sized income statement permits
A. analysis of changes or differences in relations between revenues, expenses, and net income
B. identification of relations that the analyst should explore further
C. analysis of changes or differences in relations between assets, liabilities, and shareholders’ equity
D. both choices a and b
E. both choices a and c
67. A common-size income statementpermits an analysis of changes or differences in the relations between revenues, expenses, and net income and identifies relations that the analyst should explore further, such as
A. time series analysis
B. economic analysis
C. cross-section analysis
D. both choices a and c
E. both choices b and c
68. A common-sized income statement permits
A. analysis of changes or differences in relations between revenues, expenses, and net income
B. identification of relations that the analyst should explore further
C. analysis of changes or differences in relations between assets, liabilities, and shareholders’ equity
D. both a and b
E. none of the above
69. Which financial statement reports operating performance for a specific period of time?
A. Balance sheet
B. Income statement
C. Statement of changes in shareholders’ equity
D. Statement of retained earnings
E. Statement of Cash Flows
70. A natural business year
A. is the calendar year
B. records activities for a period less than a year
C. refers to an interim accounting period
D. ends when most activities in an operating cycle have been substantially concluded
E. none of the above
