1) While analysts may forecast only a single financial statement item, such forecasts
may prove highly unreliable.
2) A significant difference between income from operations and net cash flows from
operating activities is a signal that reported income might have been distorted.
3) GAAP prohibits adjustment for upward revisions in the replacement cost of the asset,
but mandates write-downs when asset values are impaired.
4) Statutory depletion in excess of cost depletion is an example of a permanent
difference.
5) In a defined contribution plan the employer bears the risk that the ultimate pension
payments will be large enough to sustain a comfortable retirement.
6) The lessor recognizes both gross profit and interest income during the first year of
the lease term when the lease is classified as a sales-type lease.
7) Although covenant compliance can be jeopardized by mandated changes in
accounting principles, few loan agreements have financial covenants that rely on the
accounting rules in place when the loan is first granted.
8) Generally, the recorded cost of a nonmonetary asset acquired in exchange for some
other nonmonetary asset is the book value of the asset that was given up.
9) The lessee must depreciate a leased asset over the lease term assuming that any one
of the four lease criteria applicable to the lessee are met.
10) Events that occur after the financial statements are issued are referred to as
subsequent events.
11) A company reported income taxes payable of $79,500, an increase in deferred tax
assets of $7,900, and an increase in deferred tax liabilities of $19,750; therefore book
income tax expense equals $91,350.