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AndrewCPA
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Posted: 14 Dec 2010 at 20:09 \| IP Logged

Today’s question: FAR

According to the FASB Conceptual Framework, earnings:

A) Are the same as comprehensive income

B) Exclude certain gains and losses that are included in comprehensive income

C) Include certain gains and losses that are excluded from comprehensive income

D) Include certain losses that are excluded from comprehensive income

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AndrewCPA
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Posted: 15 Dec 2010 at 12:46 \| IP Logged

Correct Answer: B

Explanation: Comprehensive income is broader than earnings and includes certain gains and losses not included in earnings. Examples are holding losses or gains on available-for-sale marketable equity securities, foreign currency translation adjustments and minimum pension liability adjustments.

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AndrewCPA
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Posted: 15 Dec 2010 at 20:25 \| IP Logged

Today’s question: BEC

Which of these statements is true in the long run about equilibrium price in competitive product markets?

A) It will be a fair price all consumers can afford.

B) It will be set equal to the total costs of production.

C) It will be set equal to the total fixed costs of production.

D) It will be set equal to the marginal costs of production.

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AndrewCPA
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Posted: 16 Dec 2010 at 17:02 \| IP Logged

Correct Answer: D

Explanation: In a competitive market, the forces of
demand and supply will, in the long run, cause price to
equal marginal cost. If price is higher than marginal
cost, additional production will be forthcoming. If price
is lower than marginal cost, producers will quit
producing. A competitive market cannot assure a fair
price that all consumers can afford.

The disposable income of the consumers dictates whether
or not they can afford the product at the equilibrium
price. Some will be able to afford it and some will not.
A price set equal to the total cost of production fails
to recognize that the total cost should be divided by the
number of units produced. A price set equal to the total
fixed cost of production fails to recognize that the
total fixed cost should be divided by the total number of
units produced. Even then, the variable costs per unit
would be ignored.

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AndrewCPA
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Joined: 31 Dec 2009
Location: United States
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Posts: 763

Posted: 16 Dec 2010 at 19:09 \| IP Logged

Today’s question: AUD

A written client representation letter most likely would be an auditor's best source of corroborative information of a client's plans to:

A) Terminate an employee pension plan.

B) Make a public offering of its common stock.

C) Settle an outstanding lawsuit for an amount less than the accrued loss contingency.

D) Discontinue a line of business.

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