1) Long-lived assets are operating assets that are expected to yield their economic
benefits over a period longer than one year.
2) Companies are required to disclose the dollar amount of pension retirement benefits
they expect to pay in each of the next ten years.
3) Critics of stock options as a form of compensation argue that stock options
encourage managers to cater to Wall Street’s short-term earnings expectations.
4) The most popular method used by the majority of firms for reporting operating
activities is the indirect method.
5) Managers can avoid the negative tax ramifications of LIFO liquidation by purchasing
enough inventory by year-end to bring inventory up to beginning-of-year levels.
6) Preparing comprehensive financial statement forecasts involves six steps, the first
one being to forecast depreciation expense and tax expense each period.
7) Although the SEC has the legal authority to set accounting principles in the U.S., it
has looked to private-sector organizations (e.g., the FASB) to establish and enforce
these principles.
8) The investment account is decreased by the dividends received by the investor when
the investor uses the equity method to account for the stock investment.
9) Interperiod tax allocation refers to the allocation of income tax expense across
periods when book and taxable income differ.
10) The best source of information about a company’s current health and prospects for
the future is the company’s financial statements.