1) in order to justify reguiring a particular measurement or disclosure, the benefits to be
derived from it must equal the costs associated with it.
2) in a contingent issue agreement, the contingent shares are considered outstanding for
computing diluted eps when the earnings or market price level is met by the end of the
year.
3) the asset turnover ratio is computed by dividing net sales by ending total assets.
4) the public company accounting oversight board has oversight and enforcement
authority and establishes auditing and independence standards and rules.
5) ethical issues in financial accounting are governed by the
6) relevance and faithful representation are the two primary qualities that make
accounting information useful for decision making.
7) the criteria for recognizing contingent assets are more stringent under u.s. gaap.
8) investors are interested in financial reporting because it provides information that is
useful for making decisions (decision-usefulness approach).
9) companies always treat gains or losses from an involuntary conversion as
extraordinary items.
10) which of the following is not considered a part of the definition of a liability?
a.unavoidable obligation
b.transaction or other event creating the liability has already occurred
c.present obligation that entails settlement by probable future transfer or use of cash,
goods, or services
d.liquidation is reasonably expected to require use of existing resources classified as
current assets or create other current liabilities
11) limitations of the income statement include all of the following except
a.items that cannot be measured reliably are not reported
b.only actual amounts are reported in determining net income
c.income measurement involves judgment
d.income numbers are affected by the accounting methods employed
12) winsor co. records purchases at net amounts. on may 5 winsor purchased
merchandise on account, $20,000, terms 2/10, n/30. winsor returned $1,500 of the may
5 purchase and received credit on account. at may 31 the balance had not been paid.
by how much should the account payable be adjusted on may 31?
a.$0
b.$430
c.$400
d.$370
13) what is a lifo reserve?
a.the difference between the lifo inventory and the amount used for internal reporting
purposes
b.the tax savings attributed to using the lifo method
c.the current effect of using lifo on net income
d.change in the lifo inventory during the year
14) kasravi co. had net income for 2013 of $400,000. the average number of shares
outstanding for the period was 200,000 shares. the average number of shares under
outstanding options, at an option price of $30 per share is 12,000 shares. the average
market price of the common stock during the year was $36. what should kasravi co.
report for diluted earnings per share for the year ended 2013?
a.$2.00
b.$1.98
c.$1.90
d.$1.89
15) which of the following is not a reason why revenue is recognized at time of sale?
a.realization has occurred
b.the sale is the critical event
c.title legally passes from seller to buyer
d.all of these are reasons to recognize revenue at time of sale
16) which of the following is not an objective of financial reporting?
a.to provide information about economic resources, the claims to those resources, and
the changes in them
b.to provide information that is helpful to investors and creditors and other users in
assessing the amounts, timing, and uncertainty of future cash flows
c.to provide information that is useful to those making investment and credit decisions
d.all of these are objectives of financial reporting
17) plant assets purchased on long-term credit contracts should be accounted for at
a.the total value of the future payments
b.the future amount of the future payments
c.the present value of the future payments
d.none of these
18) in 2012, edwards corporation incurred research and development costs as follows:
these costs relate to a product that will be marketed in 2011. it is estimated that these
costs will be recouped by december 31, 2015. the equipment has no alternative future
use. what is the amount of research and development costs that should be expensed in
2012?
a.$0
b.$220,000
c.$280,000
d.$370,000
19) what is a primary objective of financial reporting as indicated in the conceptual
framework?
a.provide information that is useful to those making investing and credit decisions
b.provide information that is useful to management
c.provide information about those investing in the entity
d.all of the above
20) dunston company will receive $200,000 in a future year. if the future receipt is
discounted at an interest rate of 10%, its present value is $102,632. in how many years
is the $200,000 received?
a.5 years
b.6 years
c.7 years
d.8 years
21) travel advances should be reported as
a.supplies
b.cash because they represent the equivalent of money
c.investments
d.none of these
22) in 2012, payton corporation began selling a new line of products that carry a
two-year warranty against defects. based upon past experience with other products, the
estimated warranty costs related to dollar sales are as follows:
sales and actual warranty expenditures for 2012 and 2013 are presented below:
what is the estimated warranty liability at the end of 2013?
a.$38,000
b.$58,000
c.$98,000
d.$16,000
23) gorman construction co. began operations in 2013. construction activity for 2013 is
shown below. gorman uses the completed-contract method.
which of the following should be shown on the balance sheet at december 31, 2013
related to contract 2?
a.inventory, $680,000
b.inventory, $820,000
c.current liability, $680,000
d.current liability, $1,500,000
24) the igaap approach for derecognizing a receivable focuses on which of the
following?
a.risks
b.rewards
c.loss of control
d.all of these
25) what is a purpose of having a conceptual framework?
a.to enable the profession to more quickly solve emerging practical problems
b.to provide a foundation from which to build more useful standards
c.neither a nor b
d.both a and b
26) the fasb concluded that if a company sells its product but gives the buyer the right
to return the product, revenue from the sales transaction shall be recognized at the time
of sale only if all of six conditions have been met. which of the following is not one of
these six conditions?
a.the amount of future returns can be reasonably estimated
b.the seller’s price is substantially fixed or determinable at time of sale
c.the buyer’s obligation to the seller would not be changed in the event of theft or
damage of the product
d.the buyer is obligated to pay the seller upon resale of the product
27) edwards co. includes one coupon in each bag of dog food it sells. in return for 4
coupons, customers receive a dog toy that the company purchases for $1.50 each.
edwards’s experience indicates that 60 percent of the coupons will be redeemed. during
2012, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 40,000
coupons were redeemed. during 2013, 120,000 bags of dog food were sold, 16,000 toys
were purchased, and 60,000 coupons were redeemed.
instructions
determine the premium expense to be reported in the income statement and the
premium liability on the balance sheet for 2012 and 2013.
28) which inventory costing method most closely approximates current cost for each of
the following:
29) how might differences in presentation of comparative data under u.s. and ifrs affect
adoption of ifrs by u.s. companies?
30) on february 1, 2012, marsh contractors agreed to construct a building at a contract
price of $5,400,000. marsh estimated total construction costs would be $4,000,000 and
the project would be finished in 2014. information relating to the costs and billings for
this contract is as follows:
instructions
fill in the correct amounts on the following schedule. for percentage-of-completion
accounting and for completed-contract accounting, show the gross profit that should be
recorded for 2012, 2013, and 2014.
31) selected financial statement information and additional data for stanislaus co. is
presented below. prepare a statement of cash flows for the year ending december 31,
2012
december 31
additional data for 2012:
1>net income was $240,200.
2>depreciation was $31,600.
3>land was sold at its original cost.
4>dividends of $101,600 were paid.
5>equipment was purchased for $84,000 cash.
6>a long-term note for $201,600 was used to pay for an equipment purchase.
7>common stock was issued to pay a $67,200 long-term note payable.
32) listed below in scrambled order are 13 income statement categories. use the
numerals 1 through 13 to indicate the order in which these categories should appear on
a multiple-step income statement.
()discontinued operations.
()cost of goods sold.
()other revenues and gains.
()net income.
()income taxes.
()sales revenue.
()gross profit on sales.
()income from operations.
()income from continuing operations before income taxes.
()operating expenses.
()extraordinary item.
()income before extraordinary items.
()income from continuing operations.