1) deductible amounts cause taxable income to be greater than pretax financial income
in the future as a result of existing temporary differences.
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) debt securities include corporate bonds and convertible debt, but not u.s. government
securities.
4) ifrs permits the same depreciation methods as u.s gaap, with the exception of the
units-of-production method, which is not allowed under ifrs.
5) ifrs requires that changes in estimate be accounted for using the retrospective
method.
6) intraperiod tax allocation relates the income tax expense of the period to the specific
items that give rise to the amount of the tax provision.
7) companies should classify the balances in the deferred tax accounts on the balance
sheet as noncurrent assets and noncurrent liabilities.
8) the account form and the report form of the balance sheet are both acceptable under
gaap.
9) when capitalizing interest during construction of an asset, an imputed interest cost on
stock financing must be included.
10) a zero-interest-bearing note payable that is issued at a discount will not result in any
interest expense being recognized.
11) ifrs permits an entity to reverse inventory write-downs in certain situations, whereas
u.s. gaap does not.
12) in all cases when fifo is used, the cost of goods sold would be the same whether a
perpetual or periodic system is used.
13) reclassification in and out of trading securities is permitted under ifrs, although this
type of reclassification should be rare.
14) depreciation, depletion, and amortization all involve the allocation of the cost of a
long-lived asset to expense.
15) companies should record stock issued for services or noncash property at either the
fair value of the stock issued or the fair value of the consideration received.
16) which of the following is true regarding the statement of cash flows and ifrs?
a.cash and cash equivalents are defined differently under ifrs than under u.s. gaap
b.companies preparing a complete set of financial statements under ifrs may exclude the
statement of cash flows if the cash flow activity is reported in the notes to the financial
statements
c.under ifrs most companies choose to use the direct method of reporting cash flows
from operating activities
d. under ifrs noncash investing and financing activities are excluded from the statement
of cash flows and instead are presented in the notes to the financial statements
17) on february 1, 2012, henson company factored receivables with a carrying amount
of $500,000 to agee company. agee company assesses a finance charge of 3% of the
receivables and retains 5% of the receivables. relative to this transaction, you are to
determine the amount of loss on sale to be reported in the income statement of henson
company for february.
assume that henson factors the receivables on a without recourse basis. the loss to be
reported is
a.$0
b.$15,000
c.$25,000
d.$40,000
18) palmer frosted flakes company offers its customers a pottery cereal bowl if they
send in 3 boxtops from palmer frosted flakes boxes and $1. the company estimates that
60% of the boxtops will be redeemed. in 2012, the company sold 675,000 boxes of
frosted flakes and customers redeemed 330,000 boxtops receiving 110,000 bowls. if the
bowls cost palmer company $3 each, how much liability for outstanding premiums
should be recorded at the end of 2012?
a.$270,000
b.$50,000
c.$75,000
d.$138,000
19) the following information is available for barkley companys patents:
barkley would record a loss on impairment of
a.$ 90,000
b.$ 315,000
c.$1,290,000
d.$1,380,000
20) miller company, a company who uses ifrs reporting standards, sells a non-current
asset classified as held-for-sale. which of the following statements is true regarding the
treatment of a gain on a subsequent increase in the fair value less cost?
a.the gain should not be recognized
b.the gain should be recognized in full in the income statement
c.the gain should be recognized but only in retained earnings
d.the gain should be recognized to the extent that it is not in excess of the cumulative
impairment loss that has been recognized
21) when a company has a policy of making sales for which credit is extended, it is
reasonable to expect a portion of those sales to be uncollectible. as a result of this, a
company must recognize bad debt expense. there are basically two methods of
recognizing bad debt expense: (1) direct write-off method, and (2) allowance method.
instructions
(a)describe fully both the direct write-off method and the allowance method of
recognizing bad debt expense.
(b)discuss the reasons why one of the above methods is preferable to the other and the
reasons why the other method is not usually in accordance with generally accepted
accounting principles.
22) trade-offs between the characteristics that make information useful may be
necessary or beneficial. issuance of interim financial statements is an example of a
trade-off between
a.relevance and faithful representation
b.faithful representation and periodicity
c.timeliness and materiality
d.understandability and timeliness
23) a troubled debt restructuring will generally result in a
a.loss by the debtor and a gain by the creditor
b.loss by both the debtor and the creditor
c.gain by both the debtor and the creditor
d.gain by the debtor and a loss by the creditor
24) lawrence company has cash in bank of $22,000, restricted cash in a separate
account of $4,000, and a bank overdraft in an account at another bank of $2,000.
lawrence should report cash of
a.$20,000
b.$22,000
c.$25,000
d.$26,000
25) armstrong inc. is a calendar-year corporation. its financial statements for the years
ended 12/31/12 and 12/31/13 contained the following errors:
assume that no correcting entries were made at 12/31/12, or 12/31/13. ignoring income
taxes, by how much will retained earnings at 12/31/13 be overstated or understated?
a.$32,000 overstatement
b.$28,000 overstatement
c.$40,000 understatement
d.$12,000 understatement
26) direct costs incurred to sell stock such as underwriting costs should be accounted
for as
1>a reduction of additional paid-in capital.
2>an expense of the period in which the stock is issued.
3>an intangible asset.
a.1
b.2
c.3
d.1 or 3
27)
what amount should be recorded as the cost of a machine purchased december 31,
2012, which is to be financed by making 8 annual payments of $8,000 each beginning
december 31, 2013? the applicable interest rate is 8%.
a.$56,000
b.$49,975
c.$85,093
d.$45,973
28) on july 1, 2012, sparks company purchased for $2,880,000 snow-making equipment
having an estimated useful life of 5 years with an estimated salvage value of $120,000.
depreciation is taken for the portion of the year the asset is used.
instructions
(a)complete the form below by determining the depreciation expense and year-end book
values for 2012 and 2013 using the
1>sum-of-the-years’-digits method.
2>double-declining balance method.
(b)assume the company had used straight-line depreciation during 2012 and 2013.
during 2014, the company determined that the equipment would be useful to the
company for only one more year beyond 2014. salvage value is estimated at $160,000.
compute the amount of depreciation expense for the 2014 income statement.
29) debt securities acquired by a corporation which are accounted for by recognizing
unrealized holding gains or losses and are included as other comprehensive income and
as a separate component of stockholders’ equity are
a.held-to-maturity debt securities
b.trading debt securities
c.available-for-sale debt securities
d.never-sell debt securities
30) tanner, inc. incurred a financial and taxable loss for 2013. 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 2013 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 2013