Question

1)The main accounting issues in the Nortel Networks case were:

a)Capitalization of operating expenses and off-balance-sheet entities

b)Capitalization of operating expenses and hidden cash reserves

c)Premature revenue recognition and off-balance-sheet entities

d)Premature revenue recognition and hidden cash reserves

2)The accounting shenanigan used in the Dell Computer case can best be described as:

a)Recording revenue from exclusivity payments too soon or of questionable quality

b)Shifting future expenses to the current period as a special charge

c)Shifting current revenue from exclusivity payments to a later period

d)Shifting current expenses to a later period

3)Which of the following was not an accounting issue in the Sunbeam case?

a)Swap transactions

b)Bill and hold sales

c)Cookie jar reserves

d)Channel stuffing

Answer 1

1. Answer is option C. Premature revenue recognition and hidden cash reserves.

2. Answer is option C. Shifting current revenue from exclusive payments to later period.

3. Answer is option A. Swap transaction was not an issue in that case.