Which of the Following Items Is Consistent with Earnings Not

question 48

Multiple Choice

Which of the following items is consistent with earnings not being informative about current performance but are informative about future earnings?

• A) The firm recognizes an unexpected gain
• B) The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.
• C) The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.
• D) The firm experiences a large jump in sales and earnings as a result of successful research and development of new products.

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Definitions:

Loss

The state of being deprived of or of being without something that one has had.

Setback

An unexpected challenge or obstacle that delays progress or reverses some of the advances already made.

Farther

Used to describe a greater physical distance when comparing two or more points.

Testing

The process of evaluating the functionality, performance, or quality of a product, system, or concept through examination and trial.