1) Because the securitization entity’s credit rating is based on the quality of the
transferred receivables, it will be the same as the rating of the transferor’s general debt.
2) When conflicts of interest exist, lenders impose higher interest rates to reflect greater
default risk.
3) Differences between reported EPS and analysts’ expectations only matter to investors
when the differences are relatively large.
4) Under certain circumstances, it is permissible to issue financial statements that
contain a material departure from GAAP.
5) As a general rule, IFRS allows more opportunities for managers to change balance
sheet valuations of certain assets even when management has no intention to sell these
assets.
6) When adjusting accrual earnings to obtain cash flows from operations, an increase in
Prepaid Rent Expense is subtracted to arrive at cash flow from operations.
7) Which of the following does not accurately describe the “ownership” perspective of
the firm?
A.Its focus is on the firm’s net capital deployed.
B.It is the prevailing view of GAAP.
C.Its focus is on owners’ capital.
D.It requires that financing transactions generate income or loss.
8) Kim Company uses the installment method of revenue recognition. The following
data pertain to Kim’s installment sales for the years ended December 31, 2013 and
2014:
Required:
a. What amount should Kim report as deferred gross profit in its December 31, 2013
and 2014 balance sheets?
b. What amounts should Kim report as realized gross profit in its 2013 and 2014 income
statements?
9) Assume that Ford Appliance Center reports installment sales in accordance with
IFRS rules. How much realized gross profit on installment sales will Ford recognize in
Year 1?
A.$0
B.$30,000
C.$60,000
D.$100,000
10) How much realized gross profit on installment sales will Ford recognize in Year 2?
A.$24,000
B.$45,500
C.$69,500
D.$130,000
11) Stock options
A.have value only if the market price of the stock declines.
B.have value only if the market price of the stock rises.
C.are taxed at ordinary rates.
D.do not qualify for favorable tax treatment.
12) The Canon Corporation sells ten copiers to the Title Company on October 15 for
$40,000. Canon delivers the copiers to Title on October 20; Title pays $16,000, and
agrees to pay the balance on November 10
Under the accrual basis, how much revenue should Canon recognize in November?
A.$0
B.$16,000
C.$24,000
D.$40,000
13) A cumulative effect of a change in an accounting principle is measured as
A.the difference between prior periods’ net income under the old method and what
would have been reported if the new method had been used in the prior years.
B.the after-tax difference between prior periods’ net income under the old method and
what would have been reported if the new method had been used in the prior years.
C.the difference between prior periods’ net income and current net income under the old
method and what would have been reported if the new method had been used in the
prior years and the current year.
D.the after-tax difference between prior periods’ net income and current net income
under the old method and what would have been reported if the new method had been
used in the prior years and the current year.
14) Which one of the following entries properly records the deferral of gross profit on
Year 2 installment sales not yet collected?
A.
B.
C.
D.
15) Condensed financial data are presented below for the Phoenix Corporation:
If the intangible assets in 2014 are $50,000, the long-term debt to tangible assets for
2013 is:
A.10.0%
B.10.2%
C.30.7%
D.42.5%
16) Which of the following is used to measure the amount of the write-down that must
be recognized on an impaired asset?
A.Undiscounted total future cash inflows minus future outflows.
B.Undiscounted future cash inflows minus the current carrying amount of the asset.
C.Fair value of the asset minus the current carrying amount of the asset.
D.Discounted total future cash inflows minus future outflows.
17) Manero Company included the following information in its annual report:
In a common size income statement for 2012, the cost of goods sold is expressed as
A.40.0%
B.64.3%
C.100.0%
D.230.0%
18) An analyst gathered the following information about a company whose fiscal year
end is December 31.
Required:
Calculate the company’s basic earnings per share for 2014
19) Schlegel Department Store sells gift certificates€redeemable for store
merchandise€that expire one year after their issuance. Schlegel has the following
information pertaining to its gift certificates sales and redemptions:
Schlegel’s experience indicates that 10% of gift certificates will not be redeemed. The
company’s policy is to record revenue on gift certificates when they are redeemed or
expire.
Required:
In its 2014 income statement, what amount should Schlegel report as gift certificate
revenue?
20) Berg, Inc. provides exotic wedding planning services. Berg’s facilities are located in
an elevated area with a dry climate. Assume all amounts are pre-tax and a 30% tax rate
for 2014.
Required:
Based on the available information, provide a condensed income statement for Berg,
Inc. Include all subtotals needed (appropriately labeled) to present your income
statement in good form.
21) Below are the condensed balance sheet and income statement for the Beltway
Company, Inc. Assuming there were no disposals of fixed assets during the year 2014,
provide a statement of cash flows using the indirect method for the year ended
December 31, 2014.
Condensed balance sheet December 31, 2014
Condensed income statement for year ended December 31, 2014