1) When revenue or expense has been recognized or incurred but not yet collected or
paid, it is normally called a(n) ____________ revenue or expense.
a.deferred
b.adjusted
c.estimated
d.None of these answer choices are correct
2) Which of the following is a requirement for an accounting principle to be called
“generally accepted”?
a.An authoritative accounting rule-making body has established it in an official
pronouncement
b.The principle has been accepted as appropriate because of its universal application
c.An authoritative accounting rule-making body has established it and it has been
accepted because of its universal application
d.None of the answer choices are correct
3) Of the following questions, which one would not be answered by the statement of
cash flows?
a.Where did the cash come from during the period?
b.What was the cash used for during the period?
c.Were all the cash expenditures of benefit to the company during the period?
d.What was the change in the cash balance during the period?
4) A feature common to both stock splits and stock dividends is
a.a transfer to earned capital of a corporation
b.that there is no effect on total stockholders’ equity
c.an increase in total liabilities of a corporation
d.a reduction in the contributed capital of a corporation
5) On June 30, 2014, when Ermler Co.’s stock was selling at $65 per share, its capital
accounts were as follows:
Capital stock (par value $50; 50,000 shares issued)$2,500,000
Premium on capital stock600,000
Retained earnings4,200,000
If a 100% stock dividend were declared and distributed, capital stock would be
a.$2,500,000
b.$3,100,000
c.$5,000,000
d.$7,300,000
6) Surf Company follows IFRS for its external financial reporting. The following
amounts were available at December 31, 2015:
Interest paid $25,000
Dividends paid16,000
Taxes paid on operations 37,000
Under IFRS, what is the maximum amount that could be reported for cash used by
financing activities for Surf Company for the year ended December 31, 2015?
a.$62,000
b.$41,000
c.$53,000
d.$78,000
7) Types of franchising arrangements include all of the following except
a.service sponsor-retailer
b.wholesaler-service sponsor
c.manufacturer-wholesaler
d.wholesaler-retailer
8) Litke Corporation issued at a premium of $5,000 a $100,000 bond issue convertible
into 2,000 shares of common stock (par value $20). At the time of the conversion, the
unamortized premium is $2,000, the market value of the bonds is $110,000, and the
stock is quoted on the market at $60 per share. If the bonds are converted into common,
what is the amount of paid-in capital in excess of par to be recorded on the conversion
of the bonds?
a.$65,000
b.$62,000
c.$72,000
d.$60,000
9) If the financial statements examined by an auditor lead the auditor to issue an
opinion that contains an exception that is not of sufficient magnitude to invalidate the
statement as a whole, the opinion is said to be
a.unqualified
b.qualified
c.adverse
d.exceptional
10) The debit for a sales tax properly levied and paid on the purchase of machinery
preferably would be a charge to
a.the machinery account
b.a separate deferred charge account
c.miscellaneous tax expense (which includes all taxes other than those on income)
d.accumulated depreciation–machinery
11) All of the following are key differences between U.S. GAAP and IFRS with respect
to accounting for inventories except the
a.definition of the lower-of-cost-or-market test for inventory valuation differs between
U.S. GAAP and IFRS
b.inventory basis determination for writedowns differs between U.S. GAAP and IFRS
c.guidelines are more principles based under IFRS than they are under U.S. GAAP
d.average costing method is prohibited under IFRS
12) To avoid leased asset capitalization, companies can devise lease agreements that fail
to satisfy any of the four leasing criteria. Which of the following is not one of the ways
to accomplish this goal?
a.Lessee uses a higher interest rate than that used by lessor
b.Set the lease term at something less than 75% of the estimated useful life of the
property
c.Write in a bargain purchase option
d.Use a third party to guarantee the assets residual value
13) Which of the following research and development related costs should be
capitalized and depreciated over current and future periods?
a.Research and development general laboratory building which can be put to alternative
uses in the future
b.Inventory used for a specific research project
c.Administrative salaries allocated to research and development
d.Research findings purchased from another company to aid a particular research
project currently in process
14) Gains and losses that relate to the computation of pension expense should be
a.recorded currently as an adjustment to pension expense in the period incurred
b.recorded currently and in the future by applying the corridor method which provides
the amount to be amortized
c.amortized over a 15-year period
d.recorded only if a loss is determined