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1) Under IFRS, impairment charges related to held-for-collection debt securities may be
reversed.
2) If a company fails to post one of its journal entries to its general ledger, the trial
balance will not show an equal amount of debit and credit balance accounts.
3) All intangibles are subject to periodic consideration of impairment with
corresponding potential write-downs.
4) Recently changes to IFRS require companies to capitalize borrowing costs related to
qualifying assets.
5) A company reduces a deferred tax asset by a valuation allowance if it is probable that
it will not realize some portion of the deferred tax asset.
6) Prior period adjustments can either be added or subtracted in the Retained Earnings
Statement.
7) The Financial Accounting Foundation
a.oversees the operations of the FASB
b.oversees the operations of the AICPA
c.provides information to interested parties on financial reporting issues
d.works with the Financial Accounting Standards Advisory Council to provide
informa-tion to interested parties on financial reporting issues
8) If plant assets of a manufacturing company are sold at a gain of $1,500,000 less
related taxes of $450,000, and the gain is not considered unusual or infrequent, the
income statement for the period would disclose these effects as
a.a gain of $1,500,000 and an increase in income tax expense of $450,000
b.operating income net of applicable taxes, $1,050,000
c.a prior period adjustment net of applicable taxes, $1,050,000
d.an extraordinary item net of applicable taxes, $1,050,000
9) Which of the following is not a publication of the FASB?
a.Statements of Financial Accounting Concepts
b.Accounting Research Bulletins
c.Interpretations
d.Technical Bulletins
10) During self-construction of an asset by Richardson Company, the following were
among the costs incurred:
Fixed overhead for the year$1,000,000
Portion of $1,000,000 fixed overhead that would
be allocated to asset if it were normal production80,000
Variable overhead attributable to self-construction100,000
What amount of overhead should be included in the cost of the self-constructed asset?
a.$ -0-
b.$ 80,000
c.$100,000
d.$180,000
11) Didde Company issues $20,000,000 face value of bonds at 96 on January 1, 2013 .
The bonds are dated January 1, 2013, pay interest semiannually at 8% on June 30 and
December 31, and mature in 10 years. Straight-line amortization is used for discounts
and premiums. On September 1, 2016, $12,000,000 of the bonds are called at 102 plus
accrued interest. What gain or loss would be recognized on the called bonds on
September 1, 2016?
a.$1,200,000 loss
b.$544,000 loss
c.$720,000 loss
d.$907,000 loss
12) On January 1, 2014, the merchandise inventory of Glaus, Inc. was $1,200,000.
During 2014 Glaus purchased $2,400,000 of merchandise and recorded sales of
$3,000,000. The gross profit rate on these sales was 25%. What is the merchandise
inventory of Glaus at December 31, 2014?
a.$600,000
b.$750,000
c.$1,350,000
d.$2,250,000
13) If the residual value of a leased asset is guaranteed by a third party
a.it is treated by the lessee as no residual value
b.the third party is also liable for any lease payments not paid by the lessee
c.the net investment to be recovered by the lessor is reduced
d.it is treated by the lessee as an additional payment and by the lessor as realized at the
end of the lease term
14) Allowing firms to estimate rather than physically count inventory at interim
(quarterly) periods is an example of a trade-off between
a.verifiability and faithful representation
b.faithful representation and comparability
c.timeliness and verifiability
d.neutrality and consistency
15) Under which of the following conditions would material flood damage be
considered an extraordinary item for financial reporting purposes?
a.Only if floods in the geographical area are unusual in nature and occur infrequently
b.Only if the flood damage is material in amount and could have been reduced by
prudent management
c.Under any circumstances as an extraordinary item
d.Flood damage should never be classified as an extraordinary item
16) Financial statements for Kiner Company are given below:
Kiner Company
Balance Sheet
January 1, 2015
AssetsEquities
Cash$ 640,000Accounts payable$ 304,000
Accounts receivable576,000
Buildings and equipment2,400,000
Accumulated depreciation
buildings and equipment(800,000)Common stock1,840,000
Patents 288,000Retained earnings 960,000
$3,104,000$3,104,000
Kiner Company
Statement of Cash Flows
For the Year Ended December 31, 2015
Increase (Decrease) in Cash
Cash flows from operating activities
Net income$800,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accounts receivable$(256,000)
Increase in accounts payable128,000
Depreciationbuildings and equipment240,000
Gain on sale of equipment(96,000)
Amortization of patents 32,000 48,000
Net cash provided by operating activities848,000
Cash flows from investing activities
Sale of equipment192,000
Purchase of land(400,000)
Purchase of buildings and equipment (768,000)
Net cash used by investing activities(976,000)
Cash flows from financing activities
Payment of cash dividend(240,000)
Sale of common stock 640,000
Net cash provided by financing activities 400,000
Net increase in cash272,000
Cash, January 1, 2015 640,000
Cash, December 31, 2015$912,000
Total assets on the balance sheet at December 31, 2015 are $4,432,000. Accumulated
deprecia-tion on the equipment sold was $224,000.
When the equipment was sold, the Buildings and Equipment account received a credit
of
a.$192,000
b.$416,000
c.$320,000
d.$224,000
17) Which accounting assumption or principle is being violated if a company provides
financial reports only when it introduces a new product?
a.Economic entity
b.Periodicity
c.Revenue recognition
d.Full disclosure
18) The Lease Liability account should be disclosed as
a.all current liabilities
b.all noncurrent liabilities
c.current portions in current liabilities and the remainder in noncurrent liabilities
d.deferred credits
19) Presented below is information related to Decker Manufacturing Company as of
December 31, 2015:
Projected benefit obligation$850,000
Accumulated OCI -net gain300,000
Accumulated OCI (PSC) 405,000
The amount for the prior service cost is related to an increase in benefits. The fair value
of the pension plan assets is $600,000.
The pension asset / liability reported on the balance sheet at December 31, 2015 is
a.Pension liability of $250,000
b.Pension liability of $600,000
c.Pension liability of $850,000
d.Pension liability of $1,255,000
20) Tanner, Inc. incurred a financial and taxable loss for 2015 . Tanner therefore
decided to use the carryback provisions as it had been profitable up to this year. How
should the amounts related to the carryback be reported in the 2015 financial
statements?
a.The reduction of the loss should be reported as a prior period adjustment
b.The refund claimed should be reported as a deferred charge and amortized over five
years
c.The refund claimed should be reported as revenue in the current year
d.The refund claimed should be shown as a reduction of the loss in 2015
21) Which accounting assumption or principle is being violated if a company reports its
corporate headquarter building at its fair value on the balance sheet?
a.Going concern
b.Monetary unit
c.Historical cost
d.Full disclosure
22) It has been argued on the grounds of conservatism that all intangible assets should
be written off immediately after acquisition. Discuss the accounting arguments against
this treatment.
23) Discuss how inventory and cost of goods sold may be afforded special accounting
treatment at interim dates.
24) An inventory taken the morning after a large theft discloses $60,000 of goods on
hand as of March 12 . The following additional data is available from the books:
Inventory on hand, March 1$ 84,000
Purchases received, March 1 - 1163,000
Sales (goods delivered to customers)120,000
Past records indicate that sales are made at 50% above cost.
Instructions
Estimate the inventory of goods on hand at the close of business on March 11 by the
gross profit method and determine the amount of the theft loss. Show appropriate titles
for all amounts in your presentation.
25) Aber Company manufactures one product. On December 31, 2013, Aber adopted
the dollar-value LIFO inventory method. The inventory on that date using the
dollar-value LIFO inventory method was $450,000. Inventory data are as follows:
Inventory atPrice index
Yearyear-end prices(base year 2009)
2014$630,0001.05
2015920,0001.15
2016950,0001.25
Instructions
Compute the inventory at December 31, 2014, 2015, and 2016, using the dollar-value
LIFO method for each year.
26) Why does the accounting profession make a distinction between internally created
intangible assets and purchased intangible assets?
27) Weaver Corporation purchased Merando Company 3 years ago and at that time
recorded goodwill of $600,000. The Division's net assets, including the goodwill, have
a carrying amount of $1,200,000. The fair value of the division is estimated to be
$1,100,000 and implied goodwill is $525,000. Prepare Weaver's journal entry, if
necessary, to record impairment of the goodwill.
28) The Financial Accounting Standards Board was established because many groups
interested in financial reporting believed that the Accounting Principles Board was not
effective. Discuss the apparent advantages that the FASB should have over its earlier
counterpart, the APB.
29) Briefly describe some of the similarities and differences between U.S. GAAP and
IFRS with respect to cash flow reporting.
30) The Securities and Exchange Commission appointed the Committee on Accounting
Procedure.
