25 May Question 1 In 2003, FASB and IASB met and established four criteria f
Question
1
In 2003, FASB and IASB met and established four criteria for establishing revenue recognition. To recognize revenue, which of the following conditions must be present?
·
A change in assets has occurred and can be appropriately measured.
·
Payment for the sale must be received prior to recognizing the revenue.
·
The product or deliverable, in the case of a service business, has been received by the customer.
·
A promise to deliver has been established.
2
Failure to provide any care in fulfilling a duty owed to another is called
·
gross negligence
·
constructive fraud
·
breach of contract
·
negligence
3
Which of the following is a fundamental characteristic of the market system?
·
Unselfish behavior
·
Central planning by government
·
Government-set wages and prices
·
Property rights
4
The income effect indicates that
·
consumers should substitute among various products until the marginal utility from the last unit of each product purchased is the same
·
a rise in money income will cause consumers to buy smaller quantities of normal goods
·
when the price of a product falls, a consumer will be able to buy more of it with a specific income
·
when the price of a product falls, the lower price will induce the consumer to buy more of that product now that it is relatively cheaper
5
The price elasticity of demand coefficient measures
·
the slope of the demand curve
·
how far business executives can stretch their fixed costs
·
buyer responsiveness to price changes
·
the extent to which a demand curve shifts as incomes change
6
A normative statement is one that
·
applies only to microeconomics
·
is based on the law of averages
·
is based on value judgments
·
applies to macroeconomics
7
Many conflicts of interest in business contracts can be remedied ethically by which of the following?
·
Deception and disclosure
·
Camouflage and consent
·
Disclosure and consent
·
Conflicts of interest can never be remedied ethically
8
Four professional general standards and responsibilities for Certified Public Accountants are quality control and assurance, professional judgment, competence, and:
·
integrity
·
diligence
·
independence
·
knowledge
9
In 2002, Adelphia Cable filed bankruptcy when it was discovered that
·
excess fictitious expenses of $1 million were added to the income statement
·
bank debt in excess of $2.3 billion was not shown on the financial statements
·
assets on the financial statements were considerably undervalued
·
sales in excess of $72 billion were omitted from the financial statements
When budgets are used to measure performance, there is a danger that budgetary slack may occur. This happens when
·
sales budgets are set too high and cost budgets are set too low
·
sales budgets are set too low and cost budgets are set too high
·
sales budgets are set too low and cost budgets are set too low
·
sales budgets are set too high and cost budgets are set too high
11
ABC Company owes XYZ Enterprises $1 million for goods purchased from XYZ over a year ago. XYZ Enterprises continues to list the $1 million in their accounts receivable balance and does not record any allowance for doubtful accounts. XYZ Enterprises is failing to follow
·
SFAS 169
·
Financial Accounting Standards Board FAS 157
·
Financial Accounting Standards Board Statement No. 5
·
SFAS 101
12) The EU Privacy Directive presents problems for the United States in that
·
data may not be transferred to a non-EU entity unless guarantees are provided that equal security measures are in place
·
transferred data may not be translated into another language
·
high transfer charges are required to be paid by the recipient in the currency of the country transferring the data
·
several layers of approval are necessary before any data may be transferred to a non-EU entity
13) When revenue is recognized and shipment has not been made and the criteria for recognizing revenue on bill-and-hold transactions set out in SEC Staff Accounting Bulletin No. 101 have not been met, this is known as
·
timely revenue recognition
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