Question : 21. U.S. GAAP and IFRS require firms in some instances to : 1245926

21. U.S. GAAP and IFRS require firms in some instances to change the carrying value of certain
assets and liabilities. Both sets of accounting standards preclude the recognition of these
changes in net income, and therefore in retained earnings. 
 

22. There are three formats available for both U.S. GAAP and IFRS reporting of the items that are included in Other Comprehensive Income. 
 

23. U.S. GAAP and IFRS distinguish between revenues and expenses on the one hand and gains and losses on the other. Which of the following is/are not true? 
A. Revenues and expenses result from the recurring, primary operating activities of a business.
B. Income items include the ordinary, recurring operating activities of the firm.
C. Gains and losses result from either peripheral activities or nonrecurring activities.
D. The reporting of revenues and expenses are at gross amounts, and firms report gains and losses at net amounts.
E. Gains and losses result from the recurring, primary operating activities of a business.

24. The firm recognizes an expense when the following condition(s) hold(s). 
A. The consumption of the asset results from a transaction that leads to the recognition of revenue.
B. The consumption of the asset results from the passage of time.
C. The expenditures on advertising must be recognized as expense in the period of expenditure.
D. The expenditures on research must be recognized as expense in the period of expenditure.
E. all of the above

25. A seller of goods can easily associate (or match) the consumption of the benefits of the asset sold with revenues from its sale. At the time of sale and revenue recognition, the seller  
A. removes the asset (inventory) from the seller’s balance sheet.
B. recognizes revenue.
C. recognizes a reduction in an asset (inventory).
D. records the cost of goods sold expense in the same amount by which inventory decreases.
E. all of the above

26. The matching convention assigns _____ to the related _____. 
A. expenses; revenues
B. revenues; revenues
C. assets; liabilities
D. liabilities; assets
E. assets; shareholders’ equity

27. Which of the following concepts best characterizes the accrual basis of accounting? 
A. Conservatism
B. Matching
C. Understandability
D. Going concern
E. Unit of measurement

28. Which of the following is/are true? 
A. Revenues measure the inflow of net assets from operating activities.
B. Expenses measure the outflow of net assets consumed in the process of generating revenues.
C. Recognizing revenues and expenses always involves a simultaneous entry in an asset and/or liability account.
D. Adjusting entries almost always involve an entry in at least one income statement and one balance sheet account.
E. All of the above are true.

29. The _____ convention, links the timing of some expenses with revenue recognition.  
A. going concern
B. conservatism
C. matching
D. materiality
E. objectivity

30. _____ reflect the decrease in shareholders’ equity resulting from the decrease in the net assets consumed during the generation of income. 
A. Revenues
B. Expenses
C. Dividends
D. Liabilities
E. Common stock