1) Under IFRS, assets that qualify for interest capitalization are assets that are in use or
ready for their intended use.
2) The SEC makes it mandatory for companies to disclose their dividend policy in their
annual report.
3) The Fair Value Adjustment account has a normal credit balance.
4) IFRS requires lesses to.use their incremental rate, unless the implicit rate is known
by the lessee and the implicit rate is lower than the incremental rate.
5) The Accumulated Other Comprehensive Income (G/L) account is amortized only if it
exceeds 10 percent of the larger of the beginning balances of the projected benefit
obligation or the market-related plan assets value.
6) The unexpected gains and losses from changes in the projected benefit obligation are
called asset gains and losses.
7) A disadvantage of the gross profit method is that it uses past percentages in
determining the markup.
8) The percentage-of-sales method results in a more accurate valuation of receivables
on the balance sheet.
9) The standard-setting structure used by the International Accounting Standards Board
is very similar to that used by the Financial Accounting Standards Board.
10) An inventory method which is designed to approximate inventory valuation at the
lower of cost or market is
a.last-in, first-out
b.first-in, first-out
c.conventional retail method
d.specific identification
11) Spicer Corporation has a normal gross profit on installment sales of 30%. A 2013
sale resulted in a default early in 2015 . At the date of default, the balance of the
installment receivable was $32,000, and the repossessed merchandise had a fair value
of $18,000. Assuming the repossessed merchandise is to be recorded at fair value, the
gain or loss on repossession should be
a.$0
b.a $4,400 loss
c.a $4,400 gain
d.a $10,000 loss
12) The category “trade receivables” includes
a.advances to officers and employees
b.income tax refunds receivable
c.claims against insurance companies for casualties sustained
d.none of these answer choices are correct
13) A pension fund gain or loss that is caused by a plant closing should be
a.recognized immediately as a gain or loss on the plant closing
b.spread over the current year and future years
c.charged or credited to the current pension expense
d.recognized as a prior period adjustment
14) Gregg Corp. reported revenue of $1,450,000 in its accrual basis income statement
for the year ended June 30, 2015 . Additional information was as follows:
Accounts receivable June 30, 2014$400,000
Accounts receivable June 30, 2015530,000
Uncollectible accounts written off during the fiscal year15,000
Under the cash basis, Gregg should report revenue of
a.$1,035,000
b.$1,050,000
c.$1,305,000
d.$1,335,000
15) Maxim Company leased an office under a five-year contract, which has been
accounted for as an operating lease. Faced with the downturn in the economy, the viable
company decided to sub-lease the office. However, they have had no luck with this
effort and the landlord will not allow the lease to be cancelled. The payments are $8,000
per year and there are four years left on the lease. The company’s most recent interest
rate for financing from a bank is 6%. The risk-free rate on government bonds is 4%.
What is the provision for the lease under IFRS?
a.$29,040
b.$30,096
c.$32,000
d.$27,721
16) Which of the following will not result in a temporary difference?
a.Product warranty liabilities
b.Advance rental receipts
c.Installment sales
d.All of these will result in a temporary difference
17) On May 1, 2014, a company purchased a new machine which it does not have to
pay for until May 1, 2016 . The total payment on May 1, 2016 will include both
principal and interest. Assuming interest at a 10% rate, the cost of the machine would
be the total payment multiplied by what time value of money factor?
a.Future value of annuity of 1
b.Future value of 1
c.Present value of annuity of 1
d.Present value of 1
18) Which of the following temporary differences results in a deferred tax asset in the
year the temporary difference originates?
I.Accrual for product warranty liability.
II.Subscriptions received in advance.
III.Prepaid insurance expense.
a.I and II only
b.II only
c.III only
d.I and III only
19) What would you pay for an investment that pays you $2,500,000 after forty years?
Assume that the relevant interest rate for this type of investment is 6%.
a.$77,950
b.$779,500
c.$243,050
d.$259,175
20) Jerry recently was offered a position with a major accounting firm. The firm offered
Jerry either a signing bonus of $23,000 payable on the first day of work or a signing
bonus of $26,000 payable after one year of employment. Assuming that the relevant
interest rate is 10%, which option should Jerry choose?
a.The options are equivalent
b.Insufficient information to determine
c.The signing bonus of $23,000 payable on the first day of work
d.The signing bonus of $26,000 payable after one year of employment
21) When is revenue generally recognized?
a.When cash is received
b.When the warranty expires
c.When production is completed
d.When the company satisfies the performance obligation
22) Revenue of a segment includes
a.only sales to unaffiliated customers
b.sales to unaffiliated customers and intersegment sales
c.sales to unaffiliated customers and interest revenue
d.sales to unaffiliated customers and other revenue and gains
23) Monroe Construction Company uses the percentage-of-completion method of
accounting. In 2015, Monroe began work on a contract it had received which provided
for a contract price of $25,000,000. Other details follow:
2015
Costs incurred during the year$12,000,000
Estimated costs to complete as of December 318,000,000
Billings during the year11,000,000
Collections during the year6,500,000
What should be the gross profit recognized in 2015?
a.$1,000,000
b.$13,000,000
c.$3,000,000
d.$5,000,000
24) When a company purchases land as a site for a plant, interest costs capitalized
during the period of construction are part of the:
a.period cost
b.cost of acquisition
c.cost of the plant
d.cost of the land