1. Suppose spot exchange rate E¥/$ = 85. If the price of a music compact disc (CD) is $18 in the U.S. and the same CD costs 1,900 yen in Japan, then the dollar price of CDs sold in Japan is _____, which implies the law of one price _____.
$105.55; does not hold
$18; holds
$10.5; does not hold
$21; does not hold
$22.35; does not hold
2. Which of the following is NOT true about Income Statements?
Revenue recognition and the Matching Principle require the recognition of revenue in the time period for which the product or service has been substantially performed.
Operating expenses flow the income statement in the period they are incurred, while capital spending is recorded on the balance sheet then depreciated.
Nonrecurring items can distort reported earnings in a given period.
Analysts only need to track reported income and earnings to evaluate a company.