Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

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Multiple Choice

Which of the following statements correctly contrasts residual income (RI) with return on investment (ROI)?

Residual income considers a required minimum return on investment, while ROI does not.

Both residual income and ROI always lead to the same investment decisions.

Residual income ignores the cost of capital, but ROI incorporates it.

ROI measures absolute dollar value, whereas residual income is expressed as a percentage.

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Verified step by step guidance

Understand the concepts of Residual Income (RI) and Return on Investment (ROI): RI measures the absolute dollar amount of profit above a required minimum return, while ROI measures the percentage return on an investment relative to its cost.

Analyze the statement 'Residual income considers a required minimum return on investment, while ROI does not': This is correct because RI explicitly accounts for a minimum required return, whereas ROI focuses on the percentage return without considering a threshold.

Evaluate the statement 'Both residual income and ROI always lead to the same investment decisions': This is incorrect because RI and ROI can lead to different decisions depending on the required minimum return and the scale of the investment.

Assess the statement 'Residual income ignores the cost of capital, but ROI incorporates it': This is incorrect because RI explicitly incorporates the cost of capital (minimum required return), while ROI does not directly account for it.

Review the statement 'ROI measures absolute dollar value, whereas residual income is expressed as a percentage': This is incorrect because ROI is expressed as a percentage, while RI measures absolute dollar value.