Which of the Following Statements Is CORRECT

question 42

Multiple Choice

Which of the following statements is CORRECT?

• A) The focal point of the income statement is the cash account, because that account cannot be manipulated by "accounting tricks."
• B) The reported income of two otherwise identical firms cannot be manipulated by different accounting procedures provided the firms
• Follow Generally Accepted Accounting Principles (GAAP).
• C) The reported income of two otherwise identical firms must be identical if the firms are publicly owned, provided they follow procedures that are permitted by the Securities and Exchange
• Commission (SEC).
• D) If a firm follows Generally Accepted Accounting Principles (GAAP), then its reported net income will be identical to its reported net
• Cash flow.
• E) The income statement for a given year, say 2007, is designed to
• Give us an idea of how much the firm earned during that year.

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