In Preparing Financial Statements with Cash Flow Prediction as a Major

question 39

Multiple Choice

In preparing financial statements with cash flow prediction as a major objective,a company should choose an accounting policy that ________.

• A)allows a cost to be capitalized
• B)allows a cost to be expensed
• C)results in income-smoothing
• D)maximizes net income

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Definitions:

Total Cost

The complete cost of production or operation, including both fixed and variable costs.

Total Revenue

The total amount of income generated by the sale of goods or services related to a company's primary operations.

Odd Pricing

Psychological pricing strategy in which goods are priced at, say, $9.99 rather than $10.00 in the belief that the price will seem lower than it really is.

Prestige Pricing

A pricing strategy where goods are priced higher than market averages to evoke a sense of luxury or exclusivity.