All of the following statements are true except:
a. The criteria to determine whether a lease contract should be considered a capital lease
are applied in a more rigid way under U.S. GAAP than IFRS.
b. The criteria to determine whether a lease contract should be considered a capital
lease are applied in a more rigid way under IFRS than U.S. GAAP.
c. The lease criteria under IFRS are to be used as guidelines rather than rules.
d. IFRS requires more accounting judgment than U.S. GAAP in the determination of
whether a lease is classified as an operating lease or a capital lease.
Match the following bond and long-term liability related terms to the appropriate
definition.
a. Long-term liability
b. Face value
c. Debenture bonds
d. Serial bonds
e. Callable bonds
f. Face rate of interest
g. Market rate of interest
h. Bond issue price
i. Premium
j. Discount
k. Effective interest method of amortization
l. Carrying value
m. Gain or loss on redemption
The face value of a bond plus the amount of unamortized premium or minus the amount
of unamortized discount.
The following set of items describes activities completed by a company in purchasing
and paying for merchandise. For each activity, identify whether or not the activity
adheres to or violates sound internal control procedures. Although the department
supervisor can indicate a preferred supplier or vendor on purchase requisitions, the
purchasing department has the responsibility for making the final decision on a vendor.
a. Adheres to sound internal control procedures
b. Violates sound internal control procedures
c. Neither strengthens nor violates internal control
Debbie and Alex formed a new partnership. The partnership agreement specified that
income should be allocated in a 2-to-1 ratio, with Debbie receiving the larger portion. If
revenue for the first year was $90,000 and expenses were $60,000, how much would be
allocated to each partner?
a. Debbie-$45,000; Alex-$45,000
b. Debbie-$20,000; Alex-$10,000
c. Debbie-$60,000; Alex-$30,000
d. Debbie-$40,000; Alex-$20,000
Interest expense is computed annually when a bond is issued for other than its face
value. For a bond issued at a premium, how will this component change as the bond
approaches maturity?
a. decrease
b. increase
c. remain constant
d. not enough information given to decide
Taryn Corporation The accountant for Taryn Corporation prepared the following list of
account balances from the company’s records for the year ended December 31, 2014:
Read the information for Taryn Corporation. Determine the following amounts for
Taryn Corp. A) Total assets at the end of 2014 B) Total liabilities at the end of 2014
_________________________ C) What parties have a claim on
Taryn Corporation’s assets? Explain you answer in the terms of the
accounting equation.
One effect of recognizing depreciation is to decrease net income.
a. True
b. False
Canyon Corporation
The accountant for the Canyon Corporation prepared the following list from the
company’s accounting records for the year ended December 31, 2014:
Read the information for Canyon Corporation. Determine the following amounts for
Canyon Corporation: A) Total revenues for 2014 B) Total expenses for 2014 C) Net
income for 2014
Match the following characteristics with the statements about each qualitative character
istic’s importance.
a. Consistency
b. Materiality
c. Conservatism
d. Comparability
e. Reliability
f. Relevance
g. Understandability
This quality allows users to analyze two or more companies and look for similarities
and differences.
Sunshine Farm Supply Following are selected data from the financial statements of
Sunshine Farm Supply:
Refer to the data for Sunshine Farm Supply. Which of the following would result from a
horizontal analysis of its balance sheet?
a. Accounts receivable increased $22,000 or 57.9% during 2016.
b. Accounts receivable is five times larger than Merchandise inventory in 2016.
c. Accounts receivable is 13.3% of total assets for 2016.
d. Merchandise inventory is 2.7% of total assets for 2016.
In 2010, Blanton Company bought equipment with a cost of $160,000, an estimated
residual value of $40,000, and an estimated life of 15 years. It was depreciated by the
straight-line method for 4 years. Due to obsolescence, it was determined at the
beginning of 2014 that the useful life should be shortened by 3 years and the residual
value changed to zero. The depreciation expense for 2014 is
a. $11,636
b. $16,00
c. $11,00
d. $8,000