1. In 2003, FASB and IASB met and established four criteria for establishing revenue recognition. To recognize revenue, which of the following conditions must be present? A change in assets has occurred and can be appropriately measured. Payment for the sale must be received prior to recognizing the revenue. The product or deliverable, in the case of a service business, has been received by the customer. A promise to deliver has been established. 2. Failure to provide any care in fulfilling a duty owed to another is called gross negligence constructive fraud breach of contract negligence 3. Which of the following is a fundamental characteristic of the market system? Unselfish behavior Central planning by government Government-set wages and prices Property rights 4. The income effect indicates that consumers should substitute among various products until the marginal utility from the last unit of each product purchased is the same a rise in money income will cause consumers to buy smaller quantities of normal goods when the price of a product falls, a consumer will be able to buy more of it with a specific income when the price of a product falls, the lower price will induce the consumer to buy more of that product now that it is relatively cheaper 5. The price elasticity of demand coefficient measures the slope of the demand curve how far business executives can stretch their fixed costs buyer responsiveness to price changes the extent to which a demand curve shifts as incomes change 6. A normative statement is one that applies only to microeconomics is based on the law of averages is based on value judgments applies to macroeconomics 7. Many conflicts of interest in business contracts can be remedied ethically by which of the following? Deception and disclosure Camouflage and consent Disclosure and consent Conflicts of interest can never be remedied ethically 8. Four professional general standards and responsibilities for Certified Public Accountants are quality control and assurance, professional judgment, competence, and: integrity diligence independence knowledge 9. In 2002, Adelphia Cable filed bankruptcy when it was discovered that excess fictitious expenses of $1 million were added to the income statement bank debt in excess of $2.3 billion was not shown on the financial statements assets on the financial statements were considerably undervalued sales in excess of $72 billion were omitted from the financial statements 10. When budgets are used to measure performance, there is a danger that budgetary slack may occur. This happens when sales budgets are set too high and cost budgets are set too low sales budgets are set too low and cost budgets are set too high sales budgets are set too low and cost budgets are set too low sales budgets are set too high and cost budgets are set too high 11. ABC Company owes XYZ Enterprises $1 million for goods purchased from XYZ over a year ago. XYZ Enterprises continues to list the $1 million in their accounts receivable balance and does not record any allowance for doubtful accounts. XYZ Enterprises is failing to follow SFAS 169 Financial Accounting Standards Board FAS 157 Financial Accounting Standards Board Statement No. 5 SFAS 101 12) The EU Privacy Directive presents problems for the United States in that data may not be transferred to a non-EU entity unless guarantees are provided that equal security measures are in place transferred data may not be translated into another language high transfer charges are required to be paid by the recipient in the currency of the country transferring the data several layers of approval are necessary before any data may be transferred to a non-EU entity 13) When revenue is recognized and shipment has not been made and the criteria for recognizing revenue on bill-and-hold transactions set out in SEC Staff Accounting Bulletin No. 101 have not been met, this is known as timely revenue rec



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