When Alternative Acceptable Accounting Methods Exist, a Better Quality of Earnings

question 55

Multiple Choice

When alternative acceptable accounting methods exist, a better quality of earnings generally is produced from selecting an accounting method that has the effect of reporting the

• A) lowest amount of future earnings.
• B) greatest amount of retained earnings currently.
• C) lowest amount of current earnings.
• D) greatest amount of assets currently.

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Definitions:

Stockholders' Equity

The value of a company's assets minus its liabilities, representing the ownership interest of the shareholders.

Property, Plant, and Equipment

Property, Plant, and Equipment (PP&E) are tangible, long-term assets used in the operation of a business, not intended for resale.

Net Income

The amount of money that remains from revenues after all expenses, taxes, and costs have been subtracted; a measure of profitability.