Archives: Quiz

1) On September 1, Horton purchased $13,300 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were $280. Payment for the purchase was made on September 18 . Assuming Horton uses the perpetual inventory […]

1) In November and December 2014, Lane Co., a newly organized magazine publisher, received $60,000 for 1,000 three-year subscriptions at $20 per year, starting with the January 2015 issue. Lane included the entire $60,000 in its 2014 income tax return. […]

1) On January 1, 2011, Russell Company purchased a copyright for $1,500,000, having an estimated useful life of 16 years. In January 2015, Russell paid $225,000 for legal fees in a successful defense of the copyright. Copyright amortization expense for […]

1) On December 31, 2015 Dean Company changed its method of accounting for inventory from weighted average cost method to the FIFO method. This change caused the 2015 beginning inventory to increase by $840,000. The cumulative effect of this accounting […]

1) Sawyer Furniture Company concluded its first year of operations in which it made sales of $900,000, all on installment. Collections during the year from down payments and installments totaled $300,000. Purchases for the year totaled $710,000; the cost of […]

1) Wynne Inc. charges an initial franchise fee of $1,840,000, with $400,000 paid when the agreement is signed and the balance in five annual payments. The present value of the future payments, discounted at 10%, is $1,091,744. The franchisee has […]

1) Sun Inc assigns $3,000,000 of its accounts receivables as collateral for a $1 million 8% loan with a bank. Sun Inc. also pays a finance fee of 1% on the transaction upfront. What would be recorded as a gain […]

1) Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies? Depreciation MethodComposition a.NoYes b.YesYes c.YesNo d.NoNo 2) The various classifications listed below have been used in the past by Maris Company […]

1) When revenue or expense has been recognized or incurred but not yet collected or paid, it is normally called a(n) ____________ revenue or expense. a.deferred b.adjusted c.estimated d.None of these answer choices are correct 2) Which of the following […]

1) Milford Company had 400 units of Tank in its inventory at a cost of $6 each. It purchased 600 more units of Tank at a cost of $9 each. Milford then sold 700 units at a selling price of […]

1) Parker Corporation has issued 2,000 shares of common stock and 400 shares of preferred stock for a lump sum of $74,000 cash. Instructions (a)Give the entry for the issuance assuming the par value of the common stock was $5 […]

1) At December 31, 2014, Emley Company had 1,200,000 shares of common stock outstanding. On October 1, 2015, an additional 400,000 shares of common stock were issued. In addition, Emley had $10,000,000 of 6% convertible bonds outstanding at December 31, […]

1) Jane wants to set aside funds to take an around the world cruise in four years. Jane expects that she will need $12,000 for her dream vacation. If she is able to earn 8% per annum on an investment, […]

1) On January 1, 2014, Huff Co. sold $4,000,000 of its 10% bonds for $3,541,184 to yield 12%. Interest is payable semiannually on January 1 and July 1 . What amount should Huff report as interest expense for the six […]

1) If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit f.o.b. shipping point in purchases, but not ending inventory? a.Overstate the current ratio b.Understate the current ratio c.No […]

1) Which of the following post-balance-sheet events would generally require disclosure, but no adjustment of the financial statements? a.Retirement of the company president b.Settlement of litigation when the event that gave rise to the litigation occurred prior to the balance […]

1) A sale should not be recognized as revenue by the seller at the time of sale if a.payment was made by check b.the selling price is less than the normal selling price c.the buyer has a right to return […]

1) When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as a.a prior period adjustment b.an extraordinary item c.an […]

1) On January 1, 2015, Morris Company sells land to Lopez Corporation for $8,000,000, and immediately leases the land back. The following information relates to this transaction: 1>The term of the noncancelable lease is 20 years and the title transfers […]

1) Under IFRS, assets that qualify for interest capitalization are assets that are in use or ready for their intended use. 2) The SEC makes it mandatory for companies to disclose their dividend policy in their annual report. Answer: False […]

1) Under IFRS compliance requirements the revaluation surplus is not considered contributed capital. 2) Companies recognize the accumulated benefit obligation in their accounts and in their financial statements. Answer: False 3) The first level of the conceptual framework identifies the […]

1) Companies account for a change in depreciation methods as a change in accounting principle. 2) One purpose of a trial balance is to prove that debits and credits are equal in the general ledger. Answer: True 3) The three […]

1) Companies should accrue an estimated loss from a loss contingency if information available prior to the issuance of financial statements indicates that it is reasonably possible that a liability has been incurred. 2) Companies must recognize the entire expected […]

1) The principal advantage of the completed-contract method is that reported revenue reflects final results rather than estimates. 2) Unrealized holding gains and losses are recognized in net income for available-for-sale debt securities. Answer: False 3) One requirement related to […]

1) Discount on Notes Payable is a contra account to Notes Payable on the balance sheet. 2) The distinction between a direct-financing lease and a sales-type lease is the presence or absence of a transfer of title. Answer: False 3) […]

1) Total stockholders equity consists of common stock and the earnings retained in the business. 2) As with U.S. GAAP, IFRS requires that both direct and indirect costs in self-constructed assets be capitalized. Answer: False 3) Because of the historical […]

1) A modified perpetual inventory system provides detailed inventory records of increases and decreases in quantities only-not dollar amounts. 2) Under IAS 37 and the establishment of estimate provisions, discounting is required where the time value of money is material. […]

1) IFRS requires that gains and losses on available-for-sale securities be reported directly in equity. 2) Paying a current liability with cash will always reduce the current ratio. Answer: False 3) Companies must make correcting entries for noncounterbalancing errors, even […]

1) Similar to U.S. GAAP, certain agricultural products and mineral products can be reported at net realizable value using IFRS. 2) The monetary unit assumption is a part of GAAP, but not IFRS. Answer: False 3) A strength of the […]

1) Bond issue costs are capitalized as a deferred charge and amortized to expense over the life of the bond issue. 2) Comprehensive income includes all changes in equity during a period except those resulting from distributions to owners. Answer: […]

1) Companies should recognize the expense and related liability for compensated absences in the year earned by employees. 2) It is unlikely that the basic concepts related to the existing conceptual framework will change. Answer: True 3) The Construction in […]

1) An employer does not have to report a liability on its balance sheet in a defined-benefit plan. 2) Companies must consider presently enacted changes in the tax rate that become effective in future years when determining the tax rate […]

1) If market value of an impaired asset recovers after an impairment has been recognized, the impairment may be reversed in a subsequent period. 2) Both IFRS and U.S. GAAP allow for comprehensive income to be reported in either a […]

1) The first step in the preparation of the statement of cash flows is to determine the net cash flow from operating activities. 2) Compound interest, rather than simple interest, must be used to properly evaluate long- term investment proposals. […]

1) The declining-balance method does not deduct the salvage value in computing the depreciation base. 2) Stock splits and large stock dividends have the same effect on a companys retained earnings and total stockholders equity. Answer: False 3) A markup […]

1) The economic entity assumption means that economic activity can be identified with a particular legal entity. 2) Companies can recognize revenue prior to completion and delivery of the product under certain circumstances. Answer: True 3) GAAP requires start-up costs […]

1) The interest rate of variable-rate mortgages is tied to changes in the fluctuating market rate. 2) One significant difference between a balance sheet prepared using IFRS rather than U.S. GAAP is that long-term tangible assets may be reported at […]

1) The accounting profession has concluded that an investment of more than 50 percent of the voting stock of an investee should lead to a presumption of significant influence over an investee. 2) Companies should report accounting transactions as they […]

1) Liquidity refers to the ability of an enterprise to pay its debts as they mature. 2) Service cost is the expense caused by the increase in the accumulated benefit obligation because of employees service during the current year. Answer: […]

1) The lessor will recover a greater net investment if the residual value is guaranteed instead of unguaranteed. 2) The preemptive right allows stockholders the right to vote for directors of the company. Answer: False 3) Unlike U.S. GAAP, interest […]

1) Supplementary information may include details or amounts that present a different perspective from that adopted in the financial statements. 2) A company that reports a discontinued operation or an extraordinary item must report per share amounts for these items. […]

1) LIFO liquidations can occur frequently when using a specific-goods LIFO approach. 2) Under IFRS, there is no specific standard related to pledging receivables. Answer: True 3) In all cases when FIFO is used, the cost of goods sold would […]

1) When numerous adjustments are necessary, companies often use a cash flow worksheet instead of preparing a statement of cash flows. 2) When a company amends its defined benefit plan, and recognizes prior service, the projected benefit obligation is increased […]

1) The book value of any depreciable asset is the difference between its cost and its salvage value. 2) The future value of an ordinary annuity table is used when payments are invested at the beginning of each period. Answer: […]

1) IFRS and U.S. IFRS are very similar in accounting for cash and receivables. 2) The number of financial statement elements in the IFRS conceptual framework is equal to those in GAAP. Answer: False 3) Preferred dividends are subtracted from […]

1) If preferred stock is cumulative and no dividends are declared, the company subtracts the current year preferred dividend in computing earnings per share. 2) The recording of convertible bonds at the date of issue is the same as the […]

1) Even though IFRS does not employ the first-stage recoverability test used under U.S. GAAP – comparing the undiscounted cash flows to the carrying amount, the fact that IFRS uses a fair value test to measure impairment loss makes IFRS […]

1) Special assessments for local improvements such as street lights and sewers should be accounted for as land improvements. 2) When capitalizing interest during construction of an asset, an imputed interest cost on stock financing must be included. Answer: False […]

1) IFRS permits some capitalization of internally generated intangible assets, if it is probable there will be a future benefit and the amount can be readily measured. 2) The payout ratio is determined by dividing cash dividends paid to common […]

1) Savings accounts are usually classified as cash on the balance sheet. 2) IFRS allows for reduced disclosure of contingent liabilities if the disclosure could increase the company`s chance of losing a lawsuit. Answer: False 3) Comprehensive income includes all […]