1. Which Statement is FALSE?
a) When using the current rate method to record foreign subsidiary results, all assets and liabilities are translated at a rate, in effect as of the statement date.
b) One of the problems with purchase accounting is that there is often very little basis for comparability of financial statements before acquisition and after acquisition.
c) One of the problems with consolidated financial statements is that all intercompany transactions are not reported.
d) Translation is the process under which local currency results are translated into the functional currency.
2. Which statement is FALSE?
a) If two firms are identical except that one firm uses percentage-of-completion accounting and the other uses completed contract accounting for revenue recognition, the cash flows of the firms will be identical.
b) Revenues are earned inflows that arise from a company's ongoing business activities.
c) Gains are earned inflows that arise from a company's ongoing business activities.
d) Comprehensive income is computed by adjusting net income, on an after-tax basis, for certain unrealized gains and losses.
3. Which statement is TRUE?
a) Accounting errors are considered accounting changes and treated accordingly.
b) When a company disposes of a segment of its business, it must restate all prior year financial statements as if it had never owned that segment of the business.
c) Comprehensive income reflects nearly all changes to equity, other than those from owner activities (such as dividends and share issuances)
d) A deferred tax liability imposes an obligation on the business to pay taxes.