Question 1

How is the performance for period recorded according to GAAP business?
A)As a "fair" presentation of results for the period.
B)As a capitalized as asset on balance sheet,not as an expense on income statement.
C)As a proper matching of revenues and costs for the period in an income statement.
D)All of the above.
E)None of the above.

Accepted Answer

GAAP requires that a proper matching of revenues and costs for the period is recorded in an income statement. This means that the performance for the period should be reflected accurately in the income statement by recording all revenues earned and expenses incurred during that period. Option A is not specific enough to capture the accounting requirements for recording performance, and option B is not generally applicable as most expenses are recorded as expenses on the income statement rather than capitalized as assets. Option D is not correct as option B is not accurate and option A is too vague.

Question 2

For which of the following operating activities is the rate of inflation not commonly used for projections?
A)Food.
B)Clothing.
C)Alimony.
D)Hobbies.
E)Charitable contributions.

Accepted Answer

The rate of inflation is commonly used for projecting the costs of food, clothing, hobbies, and charitable contributions since these expenses are impacted by changes in the cost of living. However, alimony payments are typically based on a fixed amount or percentage of the payer's income, rather than being adjusted for inflation. Therefore, the rate of inflation is not commonly used for projecting alimony payments.

Question 3

How is depreciation recorded according to GAAP business?
A)As a "fair" presentation of results for the period.
B)As a capitalized as asset on balance sheet,not as an expense on income statement.
C)As an expense on income statement based on original cost,and deducted from asset on balance sheet.
D)All of the above.
E)None of the above.

Accepted Answer

According to GAAP business, depreciation is recorded as an expense on the income statement based on the original cost and is deducted from the asset on the balance sheet. This is known as the straight-line method of depreciation. Choice A is incorrect because "fair" presentation does not specifically refer to depreciation accounting. Choice B is incorrect because depreciation should be recorded as an expense, not capitalized as an asset. Choices D and E are incorrect for the same reasons as A and B.

Question 4

Which of the following statements is not accurate?
A)Household results are provided on a cash flow statement while business results are provided on an income statement.
B)Business accounting under GAAP attempts to report income and expenses,whether or not in cash,for a fair presentation.
C)For household reporting of results,only cash matters.
D)All of the above statements are accurate.
E)None of the above statements are accurate.

Accepted Answer

A) The statement is inaccurate because both households and businesses can use cash flow statements, but businesses primarily report their results on income statements and balance sheets. B) This statement is accurate as GAAP (Generally Accepted Accounting Principles) focuses on a fair presentation of financial statements, including non-cash items. C) This statement is not entirely accurate because households may also consider non-cash aspects, such as depreciation of assets, but it's true that cash flow is more directly relevant to household finance. Therefore, the assertion that all statements are accurate is incorrect, making D the incorrect choice based on the question's phrasing, which asks for the not accurate statement.

Question 5

Why is it useful for a footnote to the balance sheet to give the cost of investment assets individually?
A)To avoid double taxation when taxes are filed.
B)To permit estimation of the effect of taxation on the gain upon ultimate sale.
C)As investment assets often cannot be turned into cash immediately without penalty.
D)All of the above.
E)None of the above.

Accepted Answer

Giving the cost of investment assets individually in a footnote to the balance sheet permits estimation of the effect of taxation on the gain upon ultimate sale. This information can be useful for tax planning and determining the potential gains or losses on selling these assets. It has nothing to do with avoiding double taxation or penalties for turning investment assets into cash immediately.

Question 6

How are each of the following items recorded according to GAAP business?
-Balance Sheet
-Performance for Period
-Revenues
-Expenses Paid
-Profits
-Capital Expenditures
-Depreciation
-Asset Value on Balance Sheet

Accepted Answer

The answer of How are each of the following items...

Question 7

What are pro forma statements?
A)Functional cash statements that were converted from traditional cash flow statements.
B)Statements that do not include projections.
C)Statements that include projections.
D)Traditional cash statements that were converted from functional cash flow statements.
E)None of the above.

Accepted Answer

Pro forma statements are financial statements that include projections or forecasts for future periods. They are useful for planning purposes and for evaluating the potential impact of different scenarios or decisions on a company's financial performance. Pro forma statements can include projections for income statements, balance sheets, and cash flow statements, among others.

Question 8

Which of the following is not a reason why we include projections in a statement?
A)To better anticipate needs.
B)To forecast resources to meet those needs.
C)To adjust our plans according to our forecasts.
D)All of the above are reasons why we include projections in a statement.
E)None of the above is a reason why we include projections in a statement.

Accepted Answer

Projections are included in a statement to better anticipate needs, forecast resources to meet those needs, and adjust our plans according to our forecasts.

Question 9

What is the common rate?
A)The rate of annual increase that many household expenses share.
B)The inverse of the assumed future inflation rate.
C)Investment projections based on an assumed return.
D)All of the above.
E)None of the above.

Accepted Answer

The common rate refers to the rate of annual increase that many household expenses share, such as the cost of groceries or utilities. The other options (B and C) do not accurately describe the common rate.

Question 10

What is depreciation?
A)The projected reduction in asset value due to wear and tear or obsolescence.
B)A non-tax deductible expense that depreciates household assets.
C)The projected increase in asset value due to capital gains.
D)A non-tax deductible expense that depreciates household income.
E)None of the above.

Accepted Answer

Depreciation refers to the projected reduction in asset value over time due to wear and tear or obsolescence. This reduction can be calculated and documented for tax and accounting purposes, and can be used to offset taxable income.

Quiz 5: Financial Statements Analysis

How is the performance for period recorded according to GAAP business?

For which of the following operating activities is the rate of inflation not commonly used for projections?

How is depreciation recorded according to GAAP business?

Which of the following statements is not accurate?

Why is it useful for a footnote to the balance sheet to give the cost of investment assets individually?

How are each of the following items recorded according to GAAP business? -Balance Sheet -Performance for Period -Revenues -Expenses Paid -Profits -Capital Expenditures -Depreciation -Asset Value on Balance Sheet

What are pro forma statements?

Which of the following is not a reason why we include projections in a statement?

What is the common rate?

What is depreciation?