Question

Can someone check to see if I answered them correctly? The answers are highlighted in Bold font. I also need help with Question 6

1) What criteria must sales transactions meet in order for the seller to recognize revenues before collecting cash?

a.	The revenues must be earned (the firm must have achieved substantial performance).
b.	The amount to be received must qualify as an asset (there must be a future economic benefit and the amount must be measured with sufficient reliability).
c.	The firm must have a reasonable expectation that it will collect the amount owed from the customer.
d.	all of the above
e.	none of the above

2).   _____ arise from relatively infrequent transactions, and there can be no assurance that they will recur in any future period.

a.	Gains/Losses
b.	Revenues
c.	Expenses
d.	Assets
e.	Liabilities

3) Which of the following is/are true?

a.	After cost of sales, the income statement typically shows deductions for other expenses associated with operations (other operating expenses).
b.	Many firms present a subtotal called operating income or operating profit, the difference between revenues and expenses associated with core operating activities.
c.	two common types of operating expenses are selling, general, and administrative expenses (SG&A) and research and development expenses (R&D).
d.	all of the above
e.	none of the above

4) As a general principle, under the accrual basis of accounting, the firm recognizes revenue when the transaction meets which of the following conditions?

a.	completion of the earnings process, only
b.	receipt of assets from the customer, only
c.	completion of the earnings process and receipt of assets from the customer
d.	expiration of the warranty period, only
e.	receipt of the final payment, only

5) A manufacturing firm has manufacturing costs which become product costs. These manufacturing costs do not include:

a.	direct material costs (or raw material costs)
b.	direct labor costs
c.	manufacturing overhead costs (sometimes called indirect manufacturing costs)
d.	expenditures for administrative staff
e.	expenditures for supervisors’ salaries, factory utilities, property taxes, insurance, and depreciation on manufacturing plant and equipment

6) Which of the following is/are 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.

7).   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

8) Which of the following is/are correct?

a.	Discontinued operations are shown as the last category after income from continuing operations.
b.	The discontinued operations section of the income statement consists only of the gain or loss on disposal of the discontinued component net of the tax effect.
c.	The discontinued operations section of the income statement consists only of the income or loss from operating the discontinued component net of the tax effect.
d.	The discontinued operations section of the income statement consists of the income or loss from operating the discontinued component net of the tax effect as well as the gain or loss on disposal of the discontinued component net of the tax effect.
e.	None of these answer choices is correct.

9) The sum of net income and other comprehensive income is/are:

a.	Comprehensive Net Income
b.	Comprehensive Income
c.	Comprehensive Retained Earnings
d.	Net Income after comprehensive income items
e.	none of the above

Answer 1

1 to 3 is Correct.

4. The Correct answer is Option A. the completion of the earnings process, only

As the recognition of revenue does not depend on the receipt of Assets/Payments from the customer. We accrue revenue for the services rendered/Goods delivered when the performance is complete and no uncertainty exists for collectability of revenue.

5 is correct

6. The correct Answer is (e)The firm recognizes and reports expenses that have a causal link with revenues, such as cost of sales, in the next accounting period.

Because all the related expenses used for earning the revenue should be recorded in the same period in which revenue is recorded. This is called Matching Concept of Accounting.

7,8,9 is correct.

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