An analyst must be familiar with the concepts involved in determining income. The amount of in- come reported for a company depends on the recognition of revenues and expenses for a given time period. In certain cases, costs are recognized as expenses at the time of product sale; in other situations, guidelines are applied in capitalizing costs and recognizing them as expenses in future periods. Explain the rationale for recognizing costs as expenses at the time of product sale. What is the rationale underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain. Under what circumstances is it appropriate to treat a cost as an asset instead of as an expense? Explain. Certain expenses are assigned to specific accounting periods on the basis of systematic and rational allocation Identify the conditions necessary to treat a cost as a loss.

Each of the following situations relates to a different company. A. For each of these independent situations, find the missing amounts. B. How would stakeholders view the financial performance of each company? Explain.

Will the financial statements of a company always differ when different choices at the start of the accounting period are made regarding the denominator-level capacity concept?

Select all the items that are not relevant for decision making from the list below:   A. Loss in gross margin   B. Direct advertising   C. General advertising   D. Rent   E. Depreciation: Store fixtures   F. Depreciation: Delivery equipment   G. Store management salaries   H. General office salaries   I. General office - other   J. Insurance   K. Utilities   L. Employment taxes

Which method results in a more realistic amount for income because it matches the most current costs against revenue? a.FIFO b.Weighted average cost c.Specific identification d.LIFO

When choosing between the ‘nature’ and ‘function’ of expenses in the presentation of its statement of comprehensive income, a company should:   A. select the method that results in the lowest income.   B. select the method that is easiest to implement.   C. select the method that best reflects the nature of its business.   D. select the method that results in the highest income.

a. What information does a comparison of the current ratio and acid test ratio provide? b. Is the company using leverage to its advantage? Explain. c. What other observations can be made comparing Global Technologys ratios to the following industry norms:

A company should recognize revenue when a. the revenue is earned b. die contract is signed c. the seller satisfies the performance obligation d. the consideration is received

Accounting Current Cost Measurement Why liabilities, such as Accounts Payable (an obligation) is usually recorded using current cost in the financial statements rather than historical cost measurement?