Which of the Following Actions Would Be Considered as Contributing

question 37

Multiple Choice

Which of the following actions would be considered as contributing to low quality of financial reporting?

• A) A pharmaceutical company maintains research and development expenses even in a depressed economy.
• B) A company reveals that a major customer may file for bankruptcy.
• C) A company uses an accelerated depreciation method for delivery vehicles
• D) A beverage company reduces advertising expense in order to meet earnings forecast for the quarter.

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Definitions:

Accounting Profit

The total revenue of a business minus the explicit costs associated with that business, as calculated for financial accounting and reporting purposes.

Explicit Costs

Direct, out-of-pocket payments made by businesses for resources and services.

ATC

Average Total Cost, which is the total cost of production divided by the number of goods produced, representing the per unit cost of production.

AVC

Average Variable Cost is the total variable costs divided by the quantity of output produced; it represents the variable cost per unit of output.