1) a change in accounting principle is a change that occurs as the result of new
information or additional experience.
2) companies frequently report income tax expense as the last item before net income
on a single-step income statement.
3) callable preferred stock permits the corporation at its option to redeem the
outstanding preferred shares at stipulated prices.
4) earnings management generally makes income statement information more useful for
predicting future earnings and cash flows.
5) financial accounting is the process of identifying, measuring, analyzing, and
communicating financial information needed by management to plan, evaluate, and
control a companys operations.
6) ifrs allows for revaluation of long-term tangible and intangible assets with the
differences impacting equity but not net income.
7) depreciation is a means of cost allocation, not a matter of valuation.
8) cash receipts from customers are computed by adding a decrease in accounts
receivable to revenue from sales.
9) the present value of an annuity due table is used when payments are made at the end
of each period.
10) the fasb conceptual framework specifically identifies accrual basis accounting as
one of its fundamental assumptions.
11) the lifo conformity rule requires that if a company uses lifo for tax purposes, it must
also use lifo for financial accounting purposes.
12) prior period adjustments can either be added or subtracted in the retained earnings
statement.
13) a soundly developed conceptual framework enables the fasb to issue more useful
and consistent pronouncements over time.
14) a company that reports a discontinued operation or an extraordinary item has the
option of reporting per share amounts for these items.
15) on june 1, 2012, penny corp. sold merchandise with a list price of $40,000 to linn
on account. penny allowed trade discounts of 30% and 20%. credit terms were 2/15,
n/40 and the sale was made f.o.b. shipping point. penny prepaid $800 of delivery costs
for ison as an accommodation. on june 12, 2012, penny received from linn a remittance
in full payment amounting to
a.$21,952
b.$22,736
c.$22,752
d.$22,392
16) which of the following serves as the justification for the periodic recording of
depreciation expense?
a.association of efforts (expense) with accomplishments (revenue)
b.systematic and rational allocation of cost over the periods benefited
c.immediate recognition of an expense
d.minimization of income tax liability
17) presented below is information related to hale corporation:
the total paid-in capital (cash collected) related to the common stock is
a.$4,800,000
b.$5,350,000
c.$5,750,000
d.$5,200,000
18) gregg corp. reported revenue of $1,250,000 in its accrual basis income statement for
the year ended june 30, 2013. additional information was as follows:
under the cash basis, gregg should report revenue of
a.$835,000
b.$850,000
c.$1,105,000
d.$1,135,000
19) the accounting for cash discounts and trade discounts are
a.the same
b.always recorded net
c.not the same
d.tied to the timing of cash collections on the account
20) a company issues $15,000,000, 7.8%, 20-year bonds to yield 8% on january 1,
2011. interest is paid on june 30 and december 31. the proceeds from the bonds are
$14,703,109. using straight-line amortization, what is the carrying value of the bonds
on december 31, 2013?
a.$14,752,673
b.$14,955,466
c.$14,725,375
d.$14,747,642
21) larsen corporation reported $100,000 in revenues in its 2012 financial statements, of
which $55,000 will not be included in the tax return until 2013. the enacted tax rate is
40% for 2012 and 35% for 2013. what amount should larsen report for deferred income
tax liability in its balance sheet at december 31, 2012?
a.$19,250
b.$22,000
c.$24,500
d.$28,000
22) when funds are borrowed to pay for construction of assets that qualify for
capitalization of interest, the excess funds not needed to pay for construction may be
temporarily invested in interest-bearing securities. interest earned on these temporary
investments should be
a.offset against interest cost incurred during construction
b.used to reduce the cost of assets being constructed
c.multiplied by an appropriate interest rate to determine the amount of interest to be
capitalized
d.recognized as revenue of the period
23) both ifrs and u.s. gaap permit valuation of long-term debt and other liabilities at
a.present value discounted at the firm’s cost of capital
b.current market values of the obligations, based on changes in the discount rate with
unrealized gains and losses reflected in a separate account in stockholders’ equity
c.fair value with gains and losses on changes in fair value recorded in income in certain
situations
d.historic costs without reflecting changes in valuation as obligations will be retired at
their maturity date
24) a change in estimate should
a.result in restatement of prior period statements
b.be handled in current and future periods
c.be handled in future periods only
d.be handled retroactively
25) logan company incurred $4,000,000 ($1,100,000 in 2011 and $2,900,000 in 2012)
to develop a computer software product. $1,200,000 of this amount was expended
before technological feasibility was established in early 2012. the product will earn
future revenues of $8,000,000 over its 5-year life, as follows: 2012 $2,000,000; 2013
$2,000,000; 2014 $1,600,000; 2015 $1,600,000; and 2016 $800,000. what portion of
the $4,000,000 computer software costs should be expensed in 2012?
a.$700,000
b.$750,000
c.$800,000
d.$2,900,000
26) information available prior to the issuance of the financial statements indicates that
it is probable that, at the date of the financial statements, a liability has been incurred
for obligations related to product warranties. the amount of the loss involved can be
reasonably estimated. based on the above facts, an estimated loss contingency should be
a.accrued
b.disclosed but not accrued
c.neither accrued nor disclosed
d.classified as an appropriation of retained earnings
27) which statement is false?
a.the factor for the future value of an annuity due is found by multiplying the ordinary
annuity table value by one plus the interest rate
b.the factor for the present value of an annuity due is found by multiplying the ordinary
annuity table value by one minus the interest rate
c.the factor for the future value of an annuity due is found by subtracting 1.00000 from
the ordinary annuity table value for one more period
d.the factor for the present value of an annuity due is found by adding 1.00000 to the
ordinary annuity table value for one less period
28) wright co., organized on january 2, 2012, had pretax accounting income of
$640,000 and taxable income of $1,600,000 for the year ended december 31, 2012 the
only temporary difference is accrued product warranty costs which are expected to be
paid as follows:
the enacted income tax rates are 35% for 2012, 30% for 2013 through 2015, and 25%
for 2016. if wright expects taxable income in future years, the deferred tax asset in
wright’s december 31, 2012 balance sheet should be
a.$192,000
b.$224,000
c.$272,000
d.$336,000
29) of the following conditions, which is the only one that is not required if the transfer
of receivables with recourse is to be accounted for as a sale?
a.the transferor is obligated to make a genuine effort to identify those receivables that
are uncollectible
b.the transferor surrenders control of the future economic benefits of the receivables
c.the transferee cannot require the transferor to repurchase the receivables
d.the transferor’s obligation under the recourse provisions can be reasonably estimated
30) under ifrs, the standard for revenue recognition states that the
i. revenue be realized or realizable.
ii. economic benefits associated with the transaction will flow to the company selling
the goods.
iii. costs must be capable of being reliably measured.
a.i, ii, and iii.
b.i and iii only.
c.ii only.
d.ii and iii only.
31) if a savings account pays interest at 4% compounded quarterly, then the amount of
$1 left on deposit for 8 years would be found in a table using
a.8 periods at 4%
b.8 periods at 1%
c.32 periods at 4%
d.32 periods at 1%
32) which of the following items will not appear in the retained earnings statement?
a.net loss
b.prior period adjustment
c.discontinued operations
d.dividends
33) all of the following are requirements for disclosures related to financial instruments
except
a.disclosing the fair value and related carrying value of the instruments
b.distinguishing between financial instruments held or issued for purposes other than
trading
c.combining or netting the fair value of separate financial instruments
d.displaying as a separate classification of other comprehensive income the net
gain/loss on derivative instruments designated in cash flow hedges
34) net income is understated if, in the first year, estimated salvage value is excluded
from the depreciation computation when using the
35) bradshaw company experienced a loss that was deemed to be both unusual in nature
and infrequent in occurrence. how should bradshaw report this item in accordance with
ifrs?
36) due to the importance of earnings per share information, it is required to be reported
by all
37) on january 1, a store had inventory of $48,000. january purchases were $46,000 and
january sales were $80,000. on february 1 a fire destroyed most of the inventory. the
rate of gross profit was 25% of cost. merchandise with a selling price of $7,500
remained undamaged after the fire. compute the amount of the fire loss, assuming the
store had no insurance coverage. label all figures.
38) briefly describe some of the similarities and differences between u.s. gaap and igaap
with respect to the accounting for cash and receivables.
39) nance company estimates its annual warranty expense as 2% of annual net sales. the
following data relate to the calendar year 2012:
which one of the following entries was made to record the 2012 estimated warranty
expense?