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ACG 5026 FSU Exam 2 Questions and
Correct Answers
The period of time over which the asset is expected to provide
economic benefits to the company Ans: Useful life method
Primary transactions and events of a company Ans: Operating
activities
Examples of operating activities Ans: Purchase of goods from
suppliers, employment of personnel, conversion of materials into
finished products, promotion and distribution of goods, sale of
goods and services, and post sale customer support
Reflects the profitability from business operations Ans: operating
income
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What does operating income exclude? Ans: non operating
revenues and expenses
The financial (borrowing) and securities investment activities Ans:
Nonoperating revenues and expenses
Operating income equation Ans: Total revenue - COGS = OI
OR
gross profit - operating expenses - depreciation = OI
4 components of operating income Ans: - Revenue - income from
sales of goods or services
- COGS - direct costs from producing the goods or services
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- Operating expenses - rent, salaries, utilities, etc.
- Depreciation & amortization - allocation of long term asset costs
over time
Two reasons that nonrecurring items are useful to separate
recurring from nonrecurring on the income statement Ans: 1. To
evaluate company performance or management quality, current
performance is compared with prior year's recurring income
2. Estimation of company value involves forecasts of income and
cash flows in which only recurring amounts should be expected to
recur in the future
Two common nonrecurring items Ans: - Restructuring charges -
expenses and losses related to significant reorganization of a
company's operations
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- Discontinued operations - income related to business units that
the company has discontinued and sold or plans to sell
expenses and losses related to significant reorganization of a
company's operations Ans: Restructuring charges
income related to business units that the company has Ans:
Discontinued operations
Two revenue recognition criteria Ans: 1. Revenue must be
realized or realizable
· The company has the cash (or a good promise to get it)
2. Revenue must be earned
· The seller has executed its duties under the terms of the sales
agreement and or title has passed to the buyer
© 2025 All rights reserved
ACG 5026 FSU Exam 2 Questions and
Correct Answers
The period of time over which the asset is expected to provide
economic benefits to the company Ans: Useful life method
Primary transactions and events of a company Ans: Operating
activities
Examples of operating activities Ans: Purchase of goods from
suppliers, employment of personnel, conversion of materials into
finished products, promotion and distribution of goods, sale of
goods and services, and post sale customer support
Reflects the profitability from business operations Ans: operating
income
© 2025 All rights reserved
, 2 | Page
What does operating income exclude? Ans: non operating
revenues and expenses
The financial (borrowing) and securities investment activities Ans:
Nonoperating revenues and expenses
Operating income equation Ans: Total revenue - COGS = OI
OR
gross profit - operating expenses - depreciation = OI
4 components of operating income Ans: - Revenue - income from
sales of goods or services
- COGS - direct costs from producing the goods or services
© 2025 All rights reserved
, 3 | Page
- Operating expenses - rent, salaries, utilities, etc.
- Depreciation & amortization - allocation of long term asset costs
over time
Two reasons that nonrecurring items are useful to separate
recurring from nonrecurring on the income statement Ans: 1. To
evaluate company performance or management quality, current
performance is compared with prior year's recurring income
2. Estimation of company value involves forecasts of income and
cash flows in which only recurring amounts should be expected to
recur in the future
Two common nonrecurring items Ans: - Restructuring charges -
expenses and losses related to significant reorganization of a
company's operations
© 2025 All rights reserved
, 4 | Page
- Discontinued operations - income related to business units that
the company has discontinued and sold or plans to sell
expenses and losses related to significant reorganization of a
company's operations Ans: Restructuring charges
income related to business units that the company has Ans:
Discontinued operations
Two revenue recognition criteria Ans: 1. Revenue must be
realized or realizable
· The company has the cash (or a good promise to get it)
2. Revenue must be earned
· The seller has executed its duties under the terms of the sales
agreement and or title has passed to the buyer
© 2025 All rights reserved
