1) Supplementary information may include details or amounts that present a different
perspective from that adopted in the financial statements.
2) A company that reports a discontinued operation or an extraordinary item must report
per share amounts for these items.
3) Companies report changes in accounting estimates retrospectively.
4) Under international accounting standards, historical cost is the preferred treatment
for property, plant, and equipment.
5) It is not necessary to post the closing entries to the ledger accounts because new
revenue and expense accounts will be opened in the subsequent accounting period.
6) IFRS defines market as replacement cost subject to certain constraints.
7) When accounts receivable decrease during a period, cash-basis revenues are higher
than revenues reported on an accrual basis.
8) The increased acceptance of IFRS has caused costs associated with internally
generated intangible assets to be capitalized under U.S. GAAP.
9) IFRS uses the term contingent for assets and liabilities not recognized in the financial
statement.
10) Revenues and gains increase both net income and owners equity.
11) The existing conceptual frameworks underlying GAAP and IFRS are very similar.
12) On December 31, 2014, Isle Co. has $4,000,000 of short-term notes payable due on
February 14, 2015 . On January 10, 2013, Isle arranged a line of credit with Beach
Bank which allows Isle to borrow up to $3,000,000 at one percent above the prime rate
for three years. On February 2, 2015, Isle borrowed $2,400,000 from Beach Bank and
used $1,000,000 additional cash to liquidate $3,400,000 of the short-term notes
payable. The amount of the short-term notes payable that should be reported as current
liabilities on the December 31, 2014 balance sheet which is issued on March 5, 2015 is
a.$0
b.$600,000
c.$1,000,000
d.$1,600,000
13) The use of a Purchase Discounts account implies that the recorded cost of a
purchased inventory item is its
a.invoice price
b.invoice price plus any purchase discount lost
c.invoice price less the purchase discount taken
d.invoice price less the purchase discount allowable whether taken or not
14) The IFRS approach for derecognizing a receivable focuses on which of the
following?
a.Risks
b.Rewards
c.Loss of control
d.All of these answers choices are correct
15) In determining net cash flow from operating activities, a decrease in accounts
payable during a period
a.means that income on an accrual basis is less than income on a cash basis
b.requires an addition adjustment to net income under the indirect method
c.requires an increase adjustment to cost of goods sold under the direct method
d.requires a decrease adjustment to cost of goods sold under the direct method
16) On January 1, 2014, Ogleby Corporation signed a five-year noncancelable lease for
equipment. The terms of the lease called for Ogleby to make annual payments of
$90,000 at the beginning of each year for five years with title passing to Ogleby at the
end of this period. The equipment has an estimated useful life of 7 years and no salvage
value. Ogleby uses the straight-line method of depreciation for all of its fixed assets.
Ogleby accordingly accounts for this lease transaction as a capital lease. The minimum
lease payments were determined to have a present value of $375,289 at an effective
interest rate of 10%.
With respect to this capitalized lease, for 2015 Ogleby should record
a.interest expense of $28,529 and depreciation expense of $53,613
b.interest expense of $37,529 and depreciation expense of $53,613
c.interest expense of $22,382 and depreciation expense of $53,613
d.interest expense of $31,382 and depreciation expense of $53,613
17) During 2014, Martin Corporation sold merchandise costing $3,500,000 on an
installment basis for $5,000,000. The cash receipts related to these sales were collected
as follows: 2014, $2,000,000; 2015, $1,750,000; 2016, $1,250,000.
What is the rate of gross profit on the installment sales made by Martin Corporation
during 2014?
a.30%
b.40%
c.60%
d.70%
18) Reyes Company had a gross profit of $720,000, total purchases of $840,000, and an
ending inventory of $480,000 in its first year of operations as a retailer. Reyess sales in
its first year must have been
a.$1,080,000
b.$1,320,000
c.$360,000
d.$1,200,000
19) Starfish Company (a company using U.S. GAAP and LIFO inventory method) is
considering changing to IFRS and the FIFO inventory method. How would a
comparison of these methods affect Starfish’s financials?
a.During a period of inflation, the current ratio would decrease when IFRS and the
FIFO inventory method are used as compared to U.S. GAAP and LIFO
b.During a period of inflation, the taxes will decrease when IFRS and the FIFO
inventory method are used as compared to U.S. GAAP and LIFO
c.During a period of inflation, net income would be greater if IFRS and the FIFO
inventory method are used as compared to U.S.GAAP and LIFO
d.During a period of inflation, working capital would decrease when IFRS and the
FIFO inventory method are used as compared to U.S. GAAP and LIFO
20) Palomo Corp has a tax rate of 30 percent and income before non-operating items of
$1,071,000. It also has the following items (gross amounts).
Unusual gain$ 69,000
Loss from discontinued operations549,000
Dividend revenue18,000
Income increasing prior
period adjustment222,000
What is the amount of income tax expense Palomo would report on its income
statement?
a.$347,400
b.$182,700
c.$249,300
d.$326,700
21) When should an average amount be used for the numerator or denominator?
a.When the numerator is a balance sheet item or items
b.When the denominator is a balance sheet item or items
c.When a ratio consists of an income statement item and a balance sheet item
d.When the numerator is an income statement item or items
22) Which of the following is true of pension termination?
a.Companies can terminate a pension plan whenever they wish to do so
b.Terminating a pension plan is illegal in U.S
c.A company must start a new defined benefit plan after it eliminates the old one
d.FASB requires recognition in earnings of a gain or loss when a pension obligation is
settled
23) A corporation called an outstanding bond obligation four years before maturity. At
that time there was an unamortized discount of $750,000. To extinguish this debt, the
company had to pay a call premium of $250,000. Ignoring income tax considerations,
how should these amounts be treated for accounting purposes?
a.Amortize $1,000,000 over four years
b.Charge $1,000,000 to a loss in the year of extinguishment
c.Charge $250,000 to a loss in the year of extinguishment and amortize $750,000 over
four years
d.Either amortize $1,000,000 over four years or charge $1,000,000 to a loss
immediately, whichever management selects