QUESTION 7 When revenue expenses are capitalized net income

QUESTION 7

When \"revenue expenses\" are capitalized, net income will be overstated.  This is a common way to manipulate earnings fraudulently.

True

False

QUESTION 8

A sale is made to a customer on terms 2/10 net 30 and the customer has very poor credit. There is no evidence that the customer can make good on the payment however, delivery is made and there is a contract. This is a very large sale and should be booked.

True

False

QUESTION 9

The receivable turnover ratio tells you the number of days it takes to collect an accounts receivable.

True

False

QUESTION 10

The expression of the relationship or percentage of component part to a specific base - such as cash as a percentage of total assets or accounts payable as a percentage of total liabilities is horizontal analysis.

True

False

Solution

1.TRUE
BY CAPITALISING THE EXPENSE ,IT IS DEDUCT FROM INC STATEMENT IN INSTALLMENT WHICH WILL OVERSTATE THE NET INCOME ON FIRST YEAR

2. FALSE
REVENUE IS RECOGNISED WHEN
-REALIZABLE OR REALIZED
-EARNED - I.E DELIVERY OF GOOD OR SERVICES
IN OUR CASE AS THE CREDIT WORTHINESS IS NOT GOOD SO WE CANNOT RECOGNISE IT

3.FALSE- AVERAGE COLLECTION PERIOD TELLS YOU THAT
RECEIVABLE TURNOVER RATIO = SALES/ AVERAGE ACCOUNT RECEIVABLE

4. FALSE - EXPRESSION OF RELATIONSHIP TO A SPECIFIC BASE IS CALLED VERTICAL ANALYSIS