1) If the fair value option is not elected, the company must still disclose the fair value of
its all of its notes receivable.
2) The first stage of impairment testing of a long-lived asset is to take the present value
of the future cash flows generated by the asset.
3) In many contracts, the rights and obligations conferred by the contract will depend
on data in financial statements that are issued after the contract is executed.
4) The long-term asset turnover ratio helps the analyst identify efficiency gains from
improved accounts receivable and inventory management.
5) According to the full disclosure principle, companies create a competitive advantage
when they report:
€¢ Details about the company’s strategies, plans and tactics.
€¢ Information about the company’s technological and managerial innovations.
€¢ Detailed information about the company’s operations.
6) When a company sells its accounts receivable to a factor with recourse, it records a
recourse obligation on its books.
7) Securitization entities generally stay on the balance sheet under both IFRS and
current U.S. GAAP.
8) The Shill Company uses the dollar-value LIFO method for valuing inventory. The
following inventory information is available at the end of the year:
The inventory under dollar-value LIFO at the end of Year 4 is
A.$260,000.
B.$263,657.
C.$274,074.
D.$286,000.
9) Central Investments bought 4,000 shares of Benet Company common stock on
January 1, 2015, for $20,000, and 4,000 shares of Roy Company common on July 1,
2015, for $24,000. Benet declared dividends on December 31, 2015 of $3,000. At the
end of 2015, the market value of Roy was $30,000 and the market value of Benet was
$28,000. At the end of 2016, the market value of Roy was $32,000 and the market value
of Benet was $24,000. The stocks were considered to be held for their long-term
investment potential. Central owns 8% of Benet Company and 12% of Roy Company.
The 2016 year-end adjustment resulted in
A.a $12,000 reduction of stockholders’ equity.
B.a $2,000 reduction of stockholders’ equity.
C.a $2,000 increase in stockholders’ equity.
D.a realized gain of $2,000.
10) The Pepper lease is a/an
A.operating lease because the lease value is less than 90% of the fair value of the asset.
B.capital lease because the lease value is 90% of the fair value of the asset.
C.operating lease because the asset reverts to Blue at the end of the lease.
D.capital lease because the lease term is more than 75% of the life of the asset.
11) Hickory Furniture Company had the following costs paid during the month of May:
Hickory sold $32,000 of the inventory and has agreed to pay warranty
expenses for its customers. These are expected to be $1,600 and occur evenly over the
next four months (i.e., starting in June).
What is the amount of Hickory’s May expenses when applying the matching principle?
A.$33,600
B.$42,400
C.$43,600
D.$50,000
12) Which one of the following entries properly records the installment sales for Year
2?
A.
B.
C.
D.
13) The organization responsible for establishing auditing standards and inspecting and
investigating auditing practices of public accounting firms is
A.Congress under the authority of the Sarbanes-Oxley Act (SOX).
B.the American Institute of Certified Public Accountants (
C.the Securities and Exchange Commission (SEC).
D.the Public Company Accounting Oversight Board (PCAOB).
14) When a lessee has a capital lease, the amount shown for the asset and the amount
shown for the related liability are equal
A.only at the lease inception.
B.throughout the life of the lease.
C.only at the termination of the lease.
D.throughout the life of the lease, but only when there is an unguaranteed residual
value.
15) Konan, Inc. uses the lower of cost or market method to determine inventory value.
The following information pertains to the ending inventory:
The minimum limit for market value of product M-23 is
A.$42.
B.$46.
C.$56.
D.$60.
16) In a study of discretionary accounting accruals, it was found that abnormal accruals
in the year prior to reporting covenant violations
A.significantly decreased the company’s current ratio but significantly increased the
company’s reported earnings.
B.significantly decreased the company’s net worth.
C.significantly increased reported earnings and increased working capital.
D.significantly increased reported earnings but decreased working capital.
17) Konan, Inc. uses the lower of cost or market method to determine inventory value.
The following information pertains to the ending inventory:
The maximum limit for market value of product L-19 is
A.$37.
B.$38.
C.$48.
D.$50.
18) Net income recognition always increases
A.assets.
B.net assets.
C.liabilities.
D.net liabilities.
Net income recognition can occur by reducing Unearned Revenue and increasing
Service Revenue. In this case, there is no change in assets, but net assets have
increased.
19) International accounting rules are currently established by the
A.IASC.
B.IASB.
C.FASB.
D.PCAOB.
20) Convertible bonds are usually
A.mortgage bonds.
B.senior bonds.
C.callable.
D.participating.