If a firm has a profit-related bonus scheme and the expected profit performance is just below the target profit which would trigger the bonus plan, which of the following accounting choices is most likely to be made by managers who behave as Positive Accounting Theory predicts? If a firm has a profit-related bonus scheme and the expected profit performance is just below the target profit which would trigger the bonus plan, which of the following accounting choices is most likely to be made by managers who behave as Positive Accounting Theory predicts? Expense interest rather than capitalise interest. Postpone sales revenue to a future period. Bring forward discretionary expenses to the current period. Capitalise interest rather than expense interest.

According to the bonus plan hypothesis of Positive Accounting Theory, within the available set of accounting policies, management will tend to choose: (1) Accounting methods that increase current period reported income (where the bonus plan is based on reported profit). (2) Asset increasing accounting policies (where there is a positive link between asset values and the bonus plan). (3) Accounting methods that decrease current period reported income (where the bonus plan is based on reported profit). Which of the above statements is/are correct? According to the bonus plan hypothesis of Positive Accounting Theory, within the available set of accounting policies, management will tend to choose: (1) Accounting methods that increase current period reported income (where the bonus plan is based on reported profit). (2) Asset increasing accounting policies (where there is a positive link between asset values and the bonus plan). (3) Accounting methods that decrease current period reported income (where the bonus plan is based on reported profit). Which of the above statements is/are correct? Statements (1) and (2) Statement (1) only Statement (2) only Statement (3) only

According to the bonus plan hypothesis: According to the bonus plan hypothesis: Managers of firms with bonus plans are more likely to use accounting methods that increase current period’s reported income. None of the given options is correct Managers of firms with bonus plans are more likely to use accounting methods that reduce current period’s reported income. Managers of firms with bonus plans are more likely to use accounting methods which would help in the fair reporting of the current period’s reported income.

A firm’s debt contract contains a covenant placing a maximum value on balance sheet gearing and the firm’s gearing is approaching the maximum. Which of the following accounting choices is most likely to be made by managers as Positive Accounting Theory predicts: A) To expense interest rather than capitalise interest B) To renegotiate tax payments C) To postpone sales revenue to a future period D) To take advantage of an off-balance sheet finance scheme to reduce long- term borrowings

According to the political cost hypothesis of Positive Accounting Theory within the available set of accounting policies: According to the political cost hypothesis of Positive Accounting Theory within the available set of accounting policies: Large firms are more likely than small firms to use accounting choices that reduce reported profits. Large firms are politically sensitive and are more likely to use accounting methods to increase reported profits. Small firms are more likely than large firms to use accounting choices that reduce the reported profits. Large firms are more likely than small firms to use accounting choices that increase reported profits.

Accounting profits may not be the best measure of a company's performance. Which of the following statements support this theory? (1) Profits are affected by accounting policies. (2) Profits take no account of risk. (3) Profits take no account of the level of investment made during the year. (4) Profits are measures of short-term historic performance. O2 and 4 only O 1, 2, 3 and 4 O2 and 3 only O 1 only