1) Various laws and contracts govern the rights and obligations of a
shareholder. Which of the following istrue?
A.Each type of capital stock has its own provisions on voting
matters, only
B.Each type of capital stock has its own provisions on sharing in
earnings matters, only
C.Each type of capital stock has its own provisions on distributing
assets generated by earnings matters, only
D.Each type of capital stock has its own provisions on sharing in
assets in case of dissolution of the firm.matters, only
E.Each type of capital stock has its own provisions on such matters
as voting, sharing in earnings, distributing assets generated by
earnings, and sharing in assets in case of dissolution of the firm
Answer:
2) The accrual basis of accounting is often contrasted with the cash
basis of accounting. Which of the following is true of the cash
basis of accounting?
A.The cash basis is not subject to manipulation
B.Most larger companies use the cash basis of accounting
C.The cash basis of accounting provides a strong basis to determine
the total assets of the company
D.The cash basis provides an inferior picture of operating
performance
E.The cash basis provides an superior picture of operating
performance
Answer:
3) Which of the following is/are true?
A.When one firm, P, owns more than 50% of the voting stock of
another company, S, P can control the activities of S in terms of
broad policy making
B.When one firm, P, owns more than 50% of the voting stock of
another company, S, P can control the activities of S in terms of
day-to-day operations
C.When one firm, P, owns more than 50% of the voting stock of
another company, S, common usage refers to the majority investor as
the parent and to the majority-owned company as the subsidiary
D.U.S. GAAP and IFRS require the parent to combine the financial
statements of majority-owned companies with those of the parent in
consolidated financial statements
E.all of the above
Answer:
4) Firms have considerable flexibility as to how they report other
comprehensive income each period. Under U.S. GAAP, they can
include
A.it with net income in a single statement of comprehensive
income
B.it in a separate statement of other comprehensive income that is
one of the notes to the financial statements
C.it in a statement of changes in shareholders equity
D.all of the above
E.none of the above
Answer:
5) Which of the following is/are true regarding the Work-in-Process
Inventory account?
A.The Work-in-Process Inventory account accumulates the cost of raw
materials transferred to the factory floor
B.The Work-in-Process Inventory account accumulates the cost of
direct labor used in production
C.The Work-in-Process Inventory account accumulates the
manufacturing overhead costs
D.The Work-in-Process Inventory account is credited for the
manufacturing costs assigned to the finished units transferred to
the finished goods storeroom
E.all of the above
Answer:
6) When an investor uses the equity method to account for investments
in common stock, cash dividends received by the investor from the
investee should be recorded as
A.an increase in the investment account
B.a deduction from the investment account
C.dividend revenue
D.a deduction from the investor’s share of the investee’s
profits
E.None of these answer choices is correct
Answer:
7) The operating lease method is appropriate when the
A.lessee enjoys most of the rewards and bears most of the risks of
ownership
B.lessor enjoys most of the rewards and bears most of the risks of
ownership
C.lessor enjoys most of the rewards, only
D.lessor bears most of the risks of ownership, only
E.lessee enjoys most of the rewards, only
Answer:
8) Marianne Company reports the following:
| Total Assets | $1,200 |
| Total Revenues | $800 |
| Total Liabilities | $500 |
| Beginning Retained Earnings | $200 |
| Total Expenses | $400 |
| Dividends | $0 |
What is Contributed Capital?
A.$300
B.$200
C.$100
D.$0
E.$400
Answer:
9) The approach which dominates current financial reporting of
financial instruments [uses the historical market interest rate to
compute the carrying value of notes and bonds while these
obligations are outstanding] is the _____ approach.
A.amortized cost
B.un-amortized cost
C.imputed cost
D.future value
E.liquidation value
Answer:
10) Which of the following statements is/are not true?
A.The statement of cash flows reports flows, or changes in cash
over time
B.The balance sheet reports changes in the amounts of cash over
time
C.The last few lines of each statement of cash flows report the
amount of cash on each firms balance sheet at the beginning and the
end of each period
D.Both U.S. GAAP and IFRS require that the statement of cash flows
explain changes in cash and cash equivalents
E.All of the above are not true
Answer:
11) U.S. GAAP classifies all of the following as financing activities
on the statement of cash flows except
A.cash inflows from issuance of bonds
B.cash inflows from selling capital stock of the entity
C.cash outflows to lender for interest
D.cash outflows to repurchase capital stock of the entity
E.cash outflows to repurchase bonds of the entity
Answer:
12) Ulrich Co. sells an asset to a buyer for a total sales price of
$6,000 with a payment schedule of $2,000 in year 1, $2,000 in year
2, and $2,000 in year 3. The cost of the asset is $5,000. Under the
cost-recovery-first method, what amount of net profit is recognized
in year 3?
A.$2,000
B.$1,000
C.$666.67
D.$333.33
E.$0
Answer:
13) U.S. GAAP and IFRS provide criteria for distinguishing operating
leases from capital leases. Which of the following is not true?
A.Under the capital, or finance, lease method, the lessor records
the signing of a capital lease the same as if the lessor sold the
leased asset for an installment note receivable
B.Under the capital, or finance, lease method, the lessor
recognizes interest expense on the lease liability, similar to
recognizing interest expense on long-term notes or bonds
C.Under the capital, or finance, lease method, the lessee amortizes
the leased asset, similar to recognizing depreciation on buildings
and equipment
D.Under method, the lessee records the leased asset and the lease
liability on the balance sheet at the present value of the
contractual cash flows at the time of signing the lease
E.The capital, or finance, lease method, treats leases equivalent
to installment purchases or sales, where the lessee borrows funds
from the lessor to purchase the asset and the lessor recognizes
profit at the time of sale
Answer:
14) The current ratio indicates a firms ability to meet its short-term
obligations. Analysts prefer a current ratio that at least
exceeds
A..5
B.1.0
C.2.0
D.3.0
E.4.0
Answer:
15) Montana Company reports its net assets at a book value of $150,000.
Recent investigation revealed that the net assets had a market
value of $175,000. In addition, Montana had been offered $220,000
for the net assets by a company named Supply.Com. What is the
amount of goodwill that should be recorded by Montana Co.?
A.$0
B.$45,000
C.$25,000
D.$70,000
E.$220,000
Answer:
16) ABC Group (ABC), headquartered in Switzerland, is one of the worlds
largest engineering companies. ABC applies U.S. GAAP, and reports
its results in millions of U.S. dollars. Based on ABCs financial
reports for fiscal 2013, at January 1, 2013, ABC reported a balance
in its Prepaid Rent account of $247 million; assume that this
amount reflects its prepayments of rent on factory and office space
for the next month. Assume also that on January 31, 2013, ABC paid
$3,200 million as the annual rent for the period from February 1,
2013, to January 31, 2014. ABC has a calendar year reporting
period. Select the correct journal entries that ABC Group would
make during January 2013 that affect the Prepaid Rent account.
A.Rent Expense $3,200 million
Cash $3,200 million
Prepaid Rent $247 million
Rent Expense $247 million
B.Rent Expense $3,200 million
Prepaid Rent $3,200 million
Prepaid Rent $247 million
Cash $247 million
C.Rent Expense $3,200 million
Prepaid Rent $3,200 million
Prepaid Rent $247 million
Cash $247 million
D.Rent Expense $247 million
Prepaid Rent $247 million
Prepaid Rent $3,200 million
Cash $3,200 million
E.none of the above
Answer:
17) Current assets are expected to be converted to cash within
A.a week
B.a month
C.a quarter
D.a year
E.two years
Answer:
18) Accumulated Other Comprehensive Income
A.is a shareholders equity account that acts for other
comprehensive income the way retained earnings acts for net
income
B.equals net income plus other comprehensive income
C.includes gains and losses from sales or exchanges of assets or
settlements of liabilities related incidentally or peripherally to
the firms core business
D.Firms close amounts in net income for a period to Accumulated
Other Comprehensive Income at the end of the period
E.All of the above answer choices are correct
Answer: