.Multiple Choices Exercises for FSA.1. As a general rule, revenue is normally recognized whenA. it is measurable. B. it is measurable and received.C. the earnings process is completed and cash receipt is assured. D. The measurement process is complete.2. If a company recognizes revenue earlier than justified under accrual accounting, which of the following best describes the impact on accounts receivable and inventory, respectively? Accounts Receivable InventoryA. overstated oversatedB. overstated understatedC. understated overstatedD. understated understated3. The following are Samples of unusual or infrequent items EXCEPT:A. Gains or losses from disposal of a portion of a business segment.B. Losses resulting from foreign government expropriation of assets.C. Provisions for environmental remediation.D. Impairments, write-offs, write-downs, and restructuring costs.4. When a company discontinues and disposes of an operation, the action is considered:A. an extraordinary item.B. a prior period adjustment.C. a cumulative effect of a change in an accounting principle.D. separately and shown net of taxes on the income statement.5. Which one of the following is a change in an accounting principles?A. A change from FIFO to LIFO.B. Recording a prior period adjustment.C. A change in the estimated service life of machinery.D. Recording depreciation expense for the first time on machinery purchased five years ago.6. All of the following are general categories of nonrecurring items EXCEPT:A. unusual or infrequent items.B. discontinued operations.C. capitalization of leases.D. accounting changes.7. A firm discovered that it had used an incorrect accounting principles in 1996. On the firms 1997 financial statements, this firm should report the impact of this error as:A. an extraordinary item.B. A nonrecurring item.C. Part of cost of goods sold.D. A prior period adjustment.8. The completed contract method should be used whenA. There is a reasonable estimate of the costs to be incurred.B. There is a contract price.C. Collectibility of the contract price is uncertain.D. There is a reasonable estimate of the revenues.9. Using the percentage-of-completion method in accounting for long-term projects, a company can increase reported earnings by:A. accelerating recognition of project expenditures.B. delaying recognition of project expenditures.C. switching to completed contract accountingD. overestimating the total cost of the project.10. Which of the following would be an example of management attempting to manipulate income?A. a change from a straight-line to an accelerated depreciation in order to increase income.B. recognizing losses in bad years and recognizing gains in good years.C. additional losses are taken in bad yearsD. a gain from the condemnation of property by the city is shown in income from continuing operations, while a loss on the sale of equipment is shown after income from continuing operations.11. When accounting for merchandising businesses, gross margin equals the difference between:A. net sales and cost of goods sold.B. net sales and operating expenses.C. gross sales and the sum of returns and allowances.D. net sales and the sum of cost of goods sold and operating expenses.11. Which of the following would not contribute to the difference between gross sales and net sales?A. cash refunds for returned products.B. Discounts from listed prices for delayed shipping.C. Allowance off selling prices for defective productsD. Sales made on credit rather than for immediate payment.12. Among the following items, which is added to net income for calculation of cash flows from operating activities in the indirect method?A. decrease of inventory.B. Increase of prepaid expenses.C. Decrease of accounts payable.D. Increase of accounts receivable.13. In the Statement of Cash Flows, which of the following best describes whether interest received and interest paid, respectively, are classified as operating or investing cash flow? Interest Received Interest paidA. Operating OperatingB. Operating InvestingC. Investing OperatingD. Investing Investing14. FASB is trying to do projects related to international convergence with:A. IASBB. SECC. IOSCOD. Federal Reserve Board15. Which of the following is not considered an asset?A. InventoryB. TrademarksC. Retained earnings.D. Accounts receivable.16. If a companys ending inventory is understated by $3, 000 and beginning inventory is overstated by $5, 000, the companys operating income will most likely