1) A benchmark comparison is an analytic tool similar in approach to time-series
analysis.
2) A variable interest entity must be consolidated into the financial statements of the
sponsoring entity if the sponsoring entity has either a controlling or a noncontrolling
financial interest.
3) When a company factors its receivables to a bank with recourse, the company cannot
be required to pay the bank if a customer’s account proves uncollectible.
4) The goal of the growing movement toward international convergence of accounting
standards is a single set of accounting standards accepted worldwide and superior to the
choices presently available.
5) Under IFRS a company may report either a statement of financial position or a
statement of changes in shareholders’ equity but it need not provide both statements.
6) Generally accepted accounting principles are set by the Securities and Exchange
Commission.
7) The Z-score model combines five financial ratios in a precise way to estimate a
company’s default risk.
8) U. S. tax rules specify that if LIFO is used for tax purposes, the external financial
statements must also use LIFO.
9) Investors use financial statements as an analytical tool.
10) Financial reports provide information that can reduce investors’ uncertainty about
the company’s opportunities and risks thereby raising the company’s cost of capital.
11) Variable costing is an acceptable costing method for GAAP.
12) Creation of the deferred tax asset valuation allowance account is subjective and
therefore provides management the opportunity to manipulate income.
13) Avoidable interest is the product of cumulative weighted average expenditures
times the interest rate.
14) Under a periodic inventory system, cost of goods sold automatically includes the
cost of inventory ‘shrinkage.”
15) Construction contracts usually require purchasers to make progress payments to the
contractor as construction progresses.
16) The accumulated benefit obligation approximates the employer’s pension liability if
the pension plan were terminated and must be shown as a liability on the year-end
balance sheet.