61. A wealthy individual, wanting to make a large donation, is comparing two charities to determine which one spends a smaller portion of the funds they raise on administration. Which of the following would be one of their objectives of the charities' financial reporting?
A. Performance evaluation
B. Minimum compliance
C. Income smoothing
D. Management evaluation
62. The Gibsons have recently hired a professional manager to manage their family's business enterprise. Which of the following would be one of their objectives of financial reporting?
A. Performance evaluation
B. Minimum compliance
C. Income smoothing
D. Management evaluation
63. Which of the main objectives of financial reporting requires more information than is available in financial statements prepared according to IFRS?
A. Management evaluation
B. Cash flow prediction
C. Tax minimization
D. Income smoothing
64. Nappanee Inc. has a provision in its loan from the local bank that it must maintain a current ratio above 1.75. Which of the following would be one of their objectives of financial reporting?
A. Performance evaluation
B. Monitoring contract compliance
C. Income smoothing
D. Stewardship
65. Which of the following best describes earnings management?
A. Selecting accounting polices not acceptable under GAAP or IFRS.
B. Reporting activities that did not occur.
C. Choosing accounting policies that satisfy the objectives of the managers.
D. Maintaining the policies that the major stakeholder prefers.
66. If a manager selects an accounting policy to ensure that the company does not violate the debt-to-equity ratio requirement of its bank loan, which of the following would be their objective of financial reporting?
A. Minimum compliance
B. Management evaluation
C. Cash flow prediction
D. Earnings management
67. The Laugh-Out-Loud festival is a popular two-week summer festival in Laneville. The festival has been operating successfully for four years, and this year they are applying for a provincial grant in order to offer more activities at the festival. Which one of the following earnings management techniques might Laugh-Out-Loud be using?
A. Managing earnings to increase income.
B. Managing earnings to decrease income.
C. Managing earnings to smooth income.
D. Taking a Big Bath.
68. The professional soccer team in Rinaldo is trying to get the local government to exempt the stadium from property taxes. They claim that other teams in the league do not pay property taxes and it is causing them to lose money. Which one of the following earnings management techniques might the soccer team be using?
A. Managing earnings to increase income.
B. Managing earnings to decrease income.
C. Managing earnings to smooth income.
D. Taking a Big Bath.
69. The Robert's Resort chain of hotels needs to renegotiate the union contract with the powerful Hotel Workers of Canada Union every other year. Although the hotels in the chain are all successful, labour costs are a major expense for the business, and management wants to ensure that the company remains profitable. Which one of the following earnings management techniques might the Robert's Resort management be using?
A. Managing earnings to increase income.
B. Managing earnings to decrease income.
C. Managing earnings to smooth income.
D. Taking a Big Bath.
70. Which of the following might be considered as a Big Bath technique?
A. Increasing the estimate of the useful life of some capital assets.
B. Waiting until next year to recognize expenses related to closing a plant at the end of this year.
C. Writing down the value of an intangible asset which they are amortizing over 20 years.
D. Recording the deposits received on future sales as revenue when received.