Learning Objective 2-1
1) Net income equals ________.
A) the gross profit on a sale
B) operating income minus cost of goods sold
C) the increase in cash for the period
D) revenue minus expenses
2) Gross profit equals ________.
A) sales minus cost of goods sold
B) operating income minus cost of goods sold
C) the increase in cash for the period
D) revenue minus expenses
3) Busy Beaver had revenues of $2,000, cost of goods sold of $780, advertising expense of $100, and interest expense of $25. Net income was ________.
A) $1,095
B) $1,120
C) $1,195
D) $1,220
4) Busy Beaver had revenues of $2,000, cost of goods sold of $780, advertising expense of $100, and interest expense of $25. Gross profit was ________.
A) $1,095
B) $1,120
C) $1,195
D) $1,220
5) Generally accepted accounting principles (GAAP) ________.
A) are a set of rules that a U.S. company must follow when preparing its financial statements
B) are accounting rules determined by the IRS
C) are accounting rules required by the U.S. government for all businesses to follow
D) are issued by the International Accounting Standards Board
6) The set of rules that a U.S. company must follow when preparing its financial statements is called ________.
A) AICPA
B) FASB
C) GAAP
D) SOX
7) The set of rules that a U.S. company must follow when preparing its financial statements is called ________.
A) generally accepted accounting principles
B) internal revenue code
C) internal control procedures
D) internally accepted accounting principles
8) Which of the following statements is TRUE?
A) The IASB is the current standards setting body for the U.S. accounting profession.
B) The FASB determines U.S. generally accepted accounting principles.
C) Applying IFRS will require much less judgment and interpretation than following U.S. GAAP.
D) The IRS determines generally accepted accounting principles.
9) U.S. generally accepted accounting principles (GAAP) are determined by the ________.
A) IFRS
B) IASB
C) FASB
D) U.S. Congress
10) It requires more judgment to use ________ than to use ________.
A) IFRS; U.S. GAAP
B) U.S. GAAP; IFRS
C) This is a trick question, since U.S. GAAP and IFRS are the same.
D) IGAAP; U.S. GAAP