978-1337276337 Test Bank Appendix A Part 2

Appendix A

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33. Significant differences exist in terms on financial statements around the world. For example, another name for what

we know as Capital Stock in the United States is

a. Share Capital.

b. Capital Reserves.

c. Provisions for Other Risks.

d. Deferred Income.

34. When analyzing foreign statements, all of the following are accurate positions of noncurrent liabilities listings except

a. after total equity.

b. before current liabilities.

c. after share capital.

d. after current liabilities.

35. Significant differences exist in terms on financial statements around the world. For example, another name for what

we know as Additional Paid-In Capital in the United States is

a. Share Capital.

b. Capital Reserves.

c. Provisions for Other Risks.

d. Deferred Income.

36. Significant differences exist in terms on financial statements around the world. For example, another name for what

we know as Contingent Liabilities in the United States is

a. Share Capital.

b. Capital Reserves.

c. Provisions for Other Risks.

d. Deferred Income.

Appendix A

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37. What is the name for the balance sheet under international accounting standards?

a. Assets and equity attributable to shareholders

b. Statement of financial position

c. Statement of balance

d. The equitable claims statement

38. Which of the following presents the proper ordering of assets, liabilities, and equities on the statement of financial

position used by some countries that is different from the United States?

a. Current assets, long-term assets, current liabilities

b. Inventories, trade receivables, cash

c. Assets, liabilities, equities

d. Current liabilities, long-term liabilities, equities

39. Which of the following is a true statement about the terms used on the balance sheet?

a. U.S. GAAP requires a standard set of terms on the balance sheet.

b. IFRS require a standard set of terms on the balance sheet.

c. Terminology is consistent across all countries.

d. Neither IFRS nor U.S. GAAP requires a standard set of terms on the balance sheet.

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42. Which of the following statements regarding inflation and accounting is false?

a. The SEC requires U.S. companies to present supplemental financial information adjusted for the effects of

inflation.

b. Instability of the measuring unit that is the currency occurs in countries with rampant inflation.

c. In some Latin American and South American countries, companies have been required to

adjust their financial statements to take into account the effects of inflation.

d. The FASB developed rules for companies in the United States to use to adjust for inflation.

43. Which of the following statements is false regarding the reasons for differing accounting systems around the world?

a. Countries that have strong political and economic ties often share similar accounting

practices.

b. Canada and Mexico, two former British colonies, can trace their accounting roots to those found in the United

Kingdom.

c. The state of economic development typically mirrors the development stage of accounting rules in countries.

d. In some less-developed countries of the world, where the forces of capitalism are less prevalent, accounting

standards have developed at a much slower pace than they have in more advanced economies.

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44. When did the SEC drop its longstanding rule that required foreign companies that filed financial statements with it to

adjust those statements to conform with U.S. GAAP and allow them to use IFRS?

a. 2001

b. 2007

c. 2009

d. 2016

45. Which of the following statements is false regarding U.S. GAAP versus IFRS financial statement presentation?

a. U.S. GAAP does not require the presentation of a classified balance sheet.

b. IFRS require the classification of assets and liabilities as current and noncurrent.

c. If a range of values is available for reporting an outcome in a loss contingency, U.S. GAAP requires a company to

report the high end of the range as a probable outcome.

d. If a range of values is available for reporting an outcome in a loss contingency, IFRS require a company to record

the midpoint of the range as a probable outcome.

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46. Which of the following statements is true regarding the treatment of leases on the financial statements?

a. U.S. GAAP prohibits the presentation of leases on the financial statements since they are off-balance-sheet

transactions.

b. U.S. GAAP criteria for lease capitalization are less strict than IFRS.

c. The criteria concerning whether a lease is a capital lease are very different for IFRS and U.S. GAAP.

d. The criteria required for lease capitalization under IFRS are considered more like guidelines rather than

strict rules.

47. McDonald Corp. owns a building with an original cost of $2,000,000 and accumulated depreciation at the balance

sheet date of $300,000. Based on a recent appraisal, the fair value of the building is $1,800,000.

Required

1. At what amount will the building be reported on the year-end balance sheet if McDonald follows U.S. GAAP?

2. Does McDonald have a choice in the amount to report for the building if instead it follows IFRS? What are those

choices?

Appendix A

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48. During the most recent year, Grace paid $109,000 in interest to its lenders and $78,000 in dividends to its

stockholders.

Required

1. In which category of the statement of cash flows (operating, investing, or financing) should each of these amounts be

shown if Grace follows U.S. GAAP? If more than one category is acceptable, indicate what the choices are.

2. In which category of the statement of cash flows (operating, investing, or financing) should each of these amounts be

shown if Grace follows IFRS? If more than one category is acceptable, indicate what the choices are.

49. The cost of Fulton’s inventory at the end of the year was $145,000. Due to obsolescence, the cost to replace the

inventory was only $90,000. Net realizable value—what the inventory could be sold for—is $102,000.

Required

Determine the amount Fulton should report on its year-end balance sheet for inventory assuming the company follows (a)

U.S. GAAP and (b) IFRS.

Appendix A

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Essay

50. Explain the two primary legal systems used around the world and what these differences have to do with accounting

standards.

51. Discuss at least four reasons that accounting standards currently differ between countries.

Appendix A

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52. How would you describe the current role of the IASB in setting accounting standards?

53. Explain the meaning of the terms contingent liabilities and provisions as they relate to U.S. GAAP and IFRS?

54. Summarize some of the common differences between U.S. GAAP and IFRS.

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55. How does the application of the lower-of-cost-or-market rule differ between U.S. GAAP and IFRS?

56. Explain some of the differences in accounting for operating assets that exist between U.S. GAAP and IFRS.