1) comprehensive income includes all changes in equity during a period except those
resulting from distributions to owners.
2) accumulated rights exist when an employer has an obligation to make payment to an
employee even after terminating his employment.
3) under the completion-of-production basis, companies recognize revenue when
agricul-tural crops are harvested since the sales price is reasonably assured and no
significant costs are involved in product distribution.
4) improvements are often referred to as betterments and involve the substitution of a
better asset for the one currently used.
5) participating preferred stock requires that if a company fails to pay a dividend in any
year, it must make it up in a later year before paying any common dividends.
6) similar to u.s. gaap, certain agricultural products and mineral products can be
reported at net realizable value using ifrs.
7) changing the cost or equity method of accounting for investments is an example of a
change in reporting entity.
8) the first step in determining whether an impairment has occurred is to estimate the
future net cash flows expected from the use of that asset and its eventual disposition.
9) the gross profit method can be used to approximate the dollar amount of inventory on
hand.
10) when buying receivables with recourse, the purchaser assumes the risk of
collectibility and absorbs any credit loss.
11) assuming a 40% statutory tax rate applies to all years involved, which of the
following situations will give rise to reporting a deferred tax liability on the balance
sheet?
i.a revenue is deferred for financial reporting purposes but not for tax purposes.
ii.a revenue is deferred for tax purposes but not for financial reporting purposes.
iii.an expense is deferred for financial reporting purposes but not for tax purposes.
iv.an expense is deferred for tax purposes but not for financial reporting purposes.
a.item ii only
b.items i and ii only
c.items ii and iii only
d.items i and iv only
12) for which of the following products is it appropriate to recognize revenue at the
completion of production even though no sale has been made?
a.automobiles
b.large appliances
c.single family residential units
d.precious metals
13) during 2010, hauke co. purchased 3,000, $1,000, 9% bonds. the carrying value of
the bonds at december 31, 2012 was $2,940,000. the bonds mature on march 1, 2017,
and pay interest on march 1 and september 1. hauke sells 1,500 bonds on september 1,
2014, for $1,482,000, after the interest has been received. hauke uses straight-line
amortization. the gain on the sale is
a.$0
b.$7,200
c.$12,000
d.$16,800
14) qualitative characteristics.
accounting information provides useful information about business transactions and
events. those who provide and use financial reports must often select and evaluate
accounting alternatives. the fasb statement on qualitative characteristics of accounting
information examines the characteristics of accounting information that make it useful
for decision-making. it also points out that various limitations inherent in the
measurement and reporting process may necessitate trade-offs or sacrifices among the
characteristics of useful information.
instructions.
(a)describe briefly the following characteristics of useful accounting information.
(b)for each of the following pairs of information characteristics, give an example of a
situation in which one of the characteristics may be sacrificed in return for a gain in the
other.
(c)what criterion should be used to evaluate trade-offs between information
characteristics?
15) equity securities acquired by a corporation which are accounted for by recognizing
unrealized holding gains or losses as other comprehensive income and as a separate
component of stockholders’ equity are
a.available-for-sale securities where a company has holdings of less than 20%
b.trading securities where a company has holdings of less than 20%
csecurities where a company has holdings of between 20% and 50%
d.securities where a company has holdings of more than 50%
16) a company is constructing an asset for its own use. construction began in 2012. the
asset is being financed entirely with a specific new borrowing. construction
expenditures were made in 2012 and 2013 at the end of each quarter. the total amount
of interest cost capitalized in 2013 should be determined by applying the interest rate on
the specific new borrowing to the
a.total accumulated expenditures for the asset in 2012 and 2013
b.average accumulated expenditures for the asset in 2012 and 2013
c.average expenditures for the asset in 2013
d.total expenditures for the asset in 2013
17) the following information is available for naab company for 2012:
the cost of goods sold is equal to 400% of selling expenses. what is the cost of goods
available for sale?
a.$800,000
b.$1,090,000
c.$1,015,000
d.$1,060,000
18) an adjusting entry should never include
a.a debit to an expense account and a credit to a liability account
b.a debit to an expense account and a credit to a revenue account
c.a debit to a liability account and a credit to revenue account
d.a debit to a revenue account and a credit to a liability account
19) intangible assets are reported on the balance sheet
a.with an accumulated depreciation account
b.in the property, plant, and equipment section
c.separately from other assets
d.none of the above
20) the following data are provided:
additional information:
on may 1, 2013, 7,000 shares of common stock were issued. the preferred dividends
were not declared during 2013. the market price of the common stock was $50 at
december 31, 2013.
the book value per share of common stock at 12/31/13 is
a.470 16
b.240 16
c.370 16
d.480 15
21) briefly describe some of the similarities and differences between u.s. gaap and ifrs
with respect to reporting accounting changes.
22) is the following exception applicable to ifrs or u.s. gaap?
a.yesyes
if determining the effect of a correction of an error is considered impracticable, then a
company should report the effect of the error correction in the period in which it
believes it practicable to do so.
23) on august 1, 2012, dambro co. acquired 400, $1,000, 9% bonds at 97 plus accrued
interest. the bonds were dated may 1, 2012, and mature on april 30, 2018, with interest
paid each october 31 and april 30. the bonds will be added to dambros available-for-sale
portfolio. the preferred entry to record the purchase of the bonds on
august 1, 2012 is
24) walton company, which uses igaap, has a note receivable with a carrying value of
$30,000 at december 31, 2010. on january 2, 2011, the borrower declares bankruptcy,
and walton estimates that only $25,000 of the note will be collected. briefly describe the
accounting for the loan subsequent to the bankruptcy, assuming walton estimates that
more than $25,000 can be repaid.
25) generally accepted accounting principles require the use of accruals and deferrals in
the determination of income. how is income determined under the accrual basis of
accounting?