21. Excessive earnings management typically begins as a result of a. a downturn

Question

21. Excessive earnings management typically begins as a result of a. a downturn in business. b. a regulatory investigation. a violation of generally accepted accounting principles. d. c. pressure to meet the expectations of stakeholders. 22- The following information is available from Earthlink Corporation's accounting records for the year ended December 31,2017: Cash paid to suppliers and employees . Cash dividends paid $1,020,000 60,000 1,740,000 20,000 220,000 Rent received Taxes paid Net cash flow provided by operating activities for 2017 was a. $500,000 b. $520,000 c. $440,000 d. $460,000 Which of the following earnings management techniques is frequently associated with start-up companies? 23. Expensing purchased in-process research and development. a. b. Recognizing revenue when a contract is signed and before goods are delivered or services are provided. c. Recording immaterial adjustments that cause earnings to meet analysts' expectations d. Recording extremely high warranty expense when earnings are high. A gain on the sale of a plant asset in the ordinary course of business should be presented in a statement of cash flows prepared using the indirect method as a. a cash inflow from investing activities. b. a cash inflow from financing activities. c. an addition to net income. d. a deduction from net income. 24. Earnings management through strategic matching is best exemplified by a. b. 25. capitalizing as assets expenditures that have no future economic benefit. changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements. changing the useful life of a depreciable asset. timing transactions such that large one-time gains and losses occur in the same quarter. c. d.

Explanation / Answer

21

a

Downturn in business

22

a

-1020000+1740000-220000 = 500,000

23

b

recognizing the revenue when contract is signed and before goods are delivered or services are provided

24

d

a deduction from net income

25

d

timing transactions such that large one-time gains and losses occur in the same quarter

21

a

Downturn in business

22

a

-1020000+1740000-220000 = 500,000

23

b

recognizing the revenue when contract is signed and before goods are delivered or services are provided

24

d

a deduction from net income

25

d

timing transactions such that large one-time gains and losses occur in the same quarter

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