Archives: Quiz

1) on october 31, a fire destroyed ph inc.’s entire retail inventory. the inventory on hand as of january 1 totaled $1,360,000. from january 1 through the time of the fire, the company made purchases of $330,000 and had sales […]

1) weiser corp. on january 1, 2009, granted stock options for 40,000 shares of its $10 par value common stock to its key employees. the market price of the common stock on that date was $23 per share and the […]

1) the deposit method of revenue recognition is used when a.the product can be marketed at quoted prices and units are interchangeable b.cash is received before the sales transaction is complete c.the contract is short-term or the percentage-of-completion method cant […]

1) nolte co. has 4,800,000 shares of common stock outstanding on december 31, 2012. an additional 200,000 shares are issued on april 1, 2013, and 480,000 more on september 1. on october 1, nolte issued $6,000,000 of 9% convertible bonds. […]

1) easton company and lofton company were combined in a purchase transaction. easton was able to acquire lofton at a bargain price. the sum of the fair values of identifiable assets acquired less the fair value of liabilities assumed exceeded […]

1) depreciation is normally computed on the basis of the nearest a.full month and to the nearest cent b.full month and to the nearest dollar c.day and to the nearest cent d.day and to the nearest dollar 2) one of […]

1) the passage of a new fasb standards statement requires the support of a.all board members b.three board members c.four board members d.five board members 2) which of the following is an acceptable method of presenting the income statement? a.a […]

1) the advantage of relating a company’s bad debt expense to its outstanding accounts receivable is that this approach a.gives a reasonably correct statement of receivables in the balance sheet b.best relates bad debt expense to the period of sale […]

1) which of the following statements is correct? a.a company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis b.a company may exclude a short-term obligation from current liabilities […]

1) a contingency can be accrued when a.it is certain that funds are available to settle the disputed amount b.an asset may have been impaired c.the amount of the loss can be reasonably estimated and it is probable that an […]

1) on january 1, 2013 reese company granted jack buchanan, an employee, an option to buy 200 shares of reese co. stock for $40 per share, the option exercisable for 5 years from date of grant. using a fair value […]

1) members of the financial accounting standards board are a.employed by the american institute of certified public accountants ( b.part-time employees c.required to hold a cpa certificate d.independent of any other organization 2) belgium co. is constructing a tunnel for […]

1) deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on a.their expected reversal dates b.their debit or credit balance c.the length of time the deferred tax amounts will generate […]

1) peavys net cash provided by investing activities for 2013 was a.$316,000 b.$416,000 c.$476,000 d.$636,000 2) ermler corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 shares of common stock. if the […]

1) with regard to recognizing stock-based compensation a.ifrs and u.s. gaap follow the same model b.ifrs and u.s. gaap standards are undergoing major reform on valuation issues c.it has been agreed that these standards will not be merged due to […]

1) the stockholders’ equity section of benton corporation’s balance sheet as of december 31, 2012 is as follows: stockholders’ equity the following events occurred during 2013: 1>jan. 520,000 shares of authorized and unissued common stock were sold for $8 per […]

1) lewis company traded machinery with a book value of $570,000 and a fair value of $540,000. it received in exchange from timmons company a machine with a fair value of $600,000. lewis also paid cash of $60,000 in the […]

1) companies should recognize the expense and related liability for compensated absences in the year earned by employees. 2) on the balance sheet, an adjunct account reduces either an asset, a liability, or an owners equity account. Answer: f 3) […]

1) the accounting profession has recommended that companies use the word reserve only to describe amounts deducted from assets. 2) normally, companies compute depletion on a straight-line basis. Answer: f 3) most purchase commitments must be recorded as a liability. […]

1) companies frequently use the composite approach when the assets are similar in nature and have approximately the same useful lives. 2) when it is impossible to determine whether a change in principle or change in estimate has occurred, the […]

1) discontinued operations, extraordinary items, and unusual gains and losses are all reported net of tax in the income statement. 2) companies can recognize revenue prior to completion and delivery of the product under certain circumstances. Answer: t 3) simple […]

1) many u.s. companies that have international operations use lifo for u.s. purposes but use fifo for their foreign subsidiaries. 2) the cost of an asset less its salvage value is its depreciation base. Answer: t 3) internally created intangibles […]

1) a company should abandon the historical cost principle when the future utility of the inventory item falls below its original cost. 2) a strength of the income statement as compared to the balance sheet is that items that cannot […]

1) amortization of a premium increases bond interest expense, while amortization of a discount decreases bond interest expense. 2) present value is the value now of a future sum or sums discounted assuming compound interest. Answer: t 3) the transaction […]

1) if a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier. 2) preferred dividends are subtracted from net income but not income before extraordinary items in computing earnings […]

1) under the fair value method, the investor reports as revenue its share of the net income reported by the investee. 2) companies usually make bond interest payments semiannually, although the interest rate is generally expressed as an annual rate. […]

1) deductible amounts cause taxable income to be greater than pretax financial income in the future as a result of existing temporary differences. 2) if a company fails to post one of its journal entries to its general ledger, the […]

1) the units-of-production approach to depreciation is appropriate when depreciation is a function of time instead of activity. 2) under ifrs, the discount rate should reflect risks for which future cash flow estimates have been adjusted. Answer: f 3) the […]

1) in general, debits refer to increases in account balances, and credits refer to decreases. 2) the intrinsic value of a stock option is the difference between the market price of the stock and the exercise price of the options […]

1) companies should assign no portion of fixed overhead to self-constructed assets. 2) the most popular input measure used to determine the progress toward completion is the cost-to-cost basis. Answer: t 3) companies should accrue an estimated loss from a […]

1) significant financing and investing activities that do not affect cash are not reported in the statement of cash flows or any other place. 2) under ifrs compliance requirements the revaluation surplus is not considered contributed capital. Answer: t 3) […]

1) balance sheet errors affect only the presentation of an asset or liability account. 2) if a decline in a securitys value is judged to be temporary, a company needs to write down the cost basis of the individual security […]

1) if a company plans to retire long-term debt from a bond retirement fund, it should report the debt as current. 2) the ifrs statement of recognized income and expenses is identical to the u.s. gaap statement of retained earnings […]

1) both u.s. gaap and ifrs permit the use of the lifo method to account for inventories. 2) when numerous adjustments are necessary, companies often use a cash flow worksheet instead of preparing a statement of cash flows. Answer: f […]

1) under ifrs, companies are not required to prepare a statement of cash flows if the transactions are reported elsewhere in the financial statements. 2) users of financial reports provided by a company use that information to make their capital […]

1) counterbalancing errors are those that will be offset and that take longer than two periods to correct themselves. 2) under ifrs, if an estimate is being developed for a large number of items with varied outcomes, then the expected […]

1) as with u.s. gaap, ifrs requires that both direct and indirect costs in self-constructed assets be capitalized. 2) when accounts receivable decrease during a period, cash-basis revenues are higher than revenues reported on an accrual basis. Answer: t 3) […]

1) revenues are realizable when assets received or held are readily convertible into cash or claims to cash. 2) the primary advantage of the multiple-step format lies in the simplicity of presentation and the absence of any implication that one […]

1) the inventory turnover ratio is computed by dividing the cost of goods sold by the ending inventory on hand. 2) deferred gross profit is generally treated as an unearned revenue and classified as a current liability. Answer: f 3) […]

1) if two annuities have the same number of rents with the same dollar amount, but one is an annuity due and one is an ordinary annuity, the present value of the annuity due will be greater than the present […]

1) the income statement is useful for helping to assess the risk or uncertainty of achieving future cash flows. 2) financial reports in the early 21st century did not provide any information about a companys soft assets (intangibles). Answer: f […]

1) in computing diluted earnings per share, stock options are considered dilutive when their option price is greater than the market price. 2) u.s. companies that list overseas are required to use international financial reporting standards, issued by the international […]

1) if an fasb standard creates a new principle, expresses preference for, or rejects a specific accounting principle, the change is considered clearly acceptable. 2) one of two assumptions made by the iasb conceptual framework is that the reporting entity […]

1) prepaid insurance should be included in the numerator when computing the acid-test (quick) ratio. 2) the recognition criteria for an asset retirement obligation (aro) are more stringent under ifrs. Answer: f 3) although the fasb has developed a conceptual […]

1) a company should add back bond premium amortization to net income to arrive at net cash flow from operating activities. 2) companies include postdated checks and petty cash funds as cash. Answer: f 3) the future value of a […]

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. Answer: […]

1) when a stock dividend is less than 20-25 percent of the common stock outstanding, a company is required to transfer the fair value of the stock issued from retained earnings. 2) the net amount reported for short-term receivables is […]

1) the accrual basis recognizes revenue when earned and expenses in the period when cash is paid. 2) dollar-value lifo techniques help protect lifo layers from erosion. Answer: t 3) timeliness and neutrality are two ingredients of relevance. Answer: f […]

1) depreciation is based on the decline in the fair market value of the asset. 2) ifrs differs from u.s. gaap in the development phase in that costs are capitalized once technological feasibility is achieved. Answer: t 3) users of […]

1) u.s. gaap, per sfas no. 153, now requires that gains on exchanges of nonmonetary assets be recognized if the exchange lacks commercial substance. 2) companies classify some cash flows relating to investing or financing activities as operating activities. Answer: […]