Question 66

Which of the following statements about the accounting treatments (under IFRS and U.S. GAAP) are most accurate regarding inventory accounting and operating expenses, respectively?

       Inventory accounting        Operating expenses

A)    IFRS does not permit LIFO     U.S. GAAP does not distinguish between expenses and losses

B)   IFRS does not permit FIFO     IFRS does not distinguish between expenses and losses

C)   IFRS does not permit LIFO     IFRS does not distinguish between expenses and losses

D)   IFRS does not permit FIFO     U.S. GAAP does not distinguish between expenses and losses

Question 67

The following represents selected financial statement data from De Freitas Inc.:

Based on the information above, comprehensive income for the year is:

A)    $795.

B)   $905.

C)   $945.

D)   $1,105.

Question 68

Which of the following presentation formats of the balance sheet specifically involves standardizing the first-year values to 1.0 and presenting subsequent years’ amounts relative to 1.0?

A)    Vertical common-size balance sheet.

B)   Horizontal common-size balance sheet.

C)   Stacked column graph of balance sheet items.

D)   Line graph of balance sheet items.

Question 69

Company X produces less expensive and average quality flat-screen televisions with basic features and technology. Company Y produces more expensive high-end flat-screen televisions with the latest features. Which of the following statements is most likely correct about the proportion of cost of goods sold (COGS) to sales and level of advertising costs of the two companies, respectively?

       Proportion of COGS to sales     Advertising costs
A)    Lower for Company Y              Higher for Company X
B)   Higher for Company Y       Lower for Company X
C)   Higher for Company Y             Higher for Company X
D)   Lower for Company Y              Lower for Company X

Question 70

The nominations committee is least likely to be responsible for:

A)    recruiting board members.

B)   reviewing the performance of existing board members.

C)   linking compensation to long-term performance/profitability.

D)   preparing an executive management succession plan.

[此贴子已经被作者于2008-11-8 17:58:01编辑过]

Question 66

Which of the following statements about the accounting treatments (under IFRS and U.S. GAAP) are most accurate regarding inventory accounting and operating expenses, respectively?

       Inventory accounting        Operating expenses

A)    IFRS does not permit LIFO     U.S. GAAP does not distinguish between expenses and losses

B)   IFRS does not permit FIFO     IFRS does not distinguish between expenses and losses

C)   IFRS does not permit LIFO     IFRS does not distinguish between expenses and losses

D)   IFRS does not permit FIFO     U.S. GAAP does not distinguish between expenses and losses

The correct answer was C)

IFRS does not permit LIFO inventory accounting. LIFO firms that follow U.S. GAAP must disclose the LIFO reserve in the footnotes to their financial statements. U.S. GAAP differentiates between expenses and losses, but IFRS does not. Under IFRS, losses not related to a firm’s primary business operations are included in operating expenses.

This question tested from Session 10, Reading 43, LOS b

Question 67

The following represents selected financial statement data from De Freitas Inc.:

Based on the information above, comprehensive income for the year is:

A)    $795.

B)   $905.

C)   $945.

D)   $1,105.

The correct answer was A) $795.

The dividends received from the available-for-sale securities and the unrealized loss from trading securities are already included in net income. Issuance of new common stock is a transaction with shareholders, so it is not included in comprehensive income.

This question tested from Session 8, Reading 32, LOS l

Question 68

Which of the following presentation formats of the balance sheet specifically involves standardizing the first-year values to 1.0 and presenting subsequent years’ amounts relative to 1.0?

A)    Vertical common-size balance sheet.

B)   Horizontal common-size balance sheet.

C)   Stacked column graph of balance sheet items.

D)   Line graph of balance sheet items.

The correct answer was B) Horizontal common-size balance sheet.

Under a horizontal common-size balance sheet, the divisor is the first-year values so they are all standardized to 1.0 by construction. Trends in the values of these items as well as the relative growth in these items are readily apparent. A vertical common-size balance sheet expresses all balance sheet accounts as a percentage of total assets. Here there is no “standardization” of the initial year as for a horizontal common-size balance sheet. Stacked column graphs and line graphs show the change in balance sheet items from year to year in graphical form. Again, there is no “standardization” of the initial year as for a horizontal common-size balance sheet.

This question tested from Session 10, Reading 41, LOS a

Question 69

Company X produces less expensive and average quality flat-screen televisions with basic features and technology. Company Y produces more expensive high-end flat-screen televisions with the latest features. Which of the following statements is most likely correct about the proportion of cost of goods sold (COGS) to sales and level of advertising costs of the two companies, respectively?

       Proportion of COGS to sales     Advertising costs
A)    Lower for Company Y              Higher for Company X
B)   Higher for Company Y       Lower for Company X
C)   Higher for Company Y             Higher for Company X
D)   Lower for Company Y              Lower for Company X

The correct answer was D) Lower for Company Y       Lower for Company X

Premium products are usually sold at higher gross margins than average products, so one would expect COGS to be a lower proportion of sales for Company Y (premium product) and a higher proportion of sales for Company X (average product). Higher gross margins for Company Y are necessary to cover higher research and advertising expenses. One would expect Company Y to spend a higher proportion of sales dollars on advertising costs in order to inform consumers about the latest innovations. Company X is more likely to spend a lower proportion of sales dollars on advertising costs because it is competing primarily on the basis of price and therefore does not need to spend as much on advertising relative to Company Y.

This question tested from Session 10, Reading 42, LOS a

Question 70

The nominations committee is least likely to be responsible for:

A)    recruiting board members.

B)   reviewing the performance of existing board members.

C)   linking compensation to long-term performance/profitability.

D)   preparing an executive management succession plan.

The correct answer was C) linking compensation to long-term performance/profitability.

Linking compensation to long-term performance profitability would most likely be a responsibility of the remuneration/compensation committee. In addition to the three responsibilities listed above, the nominations committee would also create nomination procedures and policies.

This question tested from Session 11, Reading 48, LOS f

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