Archives: Quiz

1) The number of compounding periods will always be one less than the number of rents when computing the future value of an ordinary annuity. 2) Under both IFRS and U.S. GAAP, interest costs incurred during construction must be capitalized. […]

1) The Unrealized Holding Gain/LossEquity account is reported as a part of other compre-hensive income. 2) When a change in the tax rate is enacted, the effect is reported as an adjustment to income tax payable in the period of […]

1) Under IFRS recording for the issuance of Bonds Payable, the Discount on Bonds Payable and the Paid-in Capital-Convertible Bonds could be utilized. 2) When a company has a complex capital structure, it must report both basic and diluted earnings […]

1) As in U.S. GAAP, under IFRS the costs associated with research and development are segregated into two components. 2) Companies report the cash flows from purchases and sales of trading securities as cash flows from operating activities. Answer: True […]

1) The LIFO retail method assumes that markups and markdowns apply only to the goods purchased during the period. 2) Income from an investment in common stock using the equity method is added to net income in computing net cash […]

1) In computing the annual lease payments, the lessor deducts only a guaranteed residual value from the fair value of a leased asset. 2) Prior service cost is amortized into income over the expected service lives of employees under both […]

1) The Pension Asset / Liability account balance equals the difference between the projected benefit obligation and the fair value of pension plan assets. 2) If the Accumulated Other Comprehensive Income (G/L) account is less than the corridor, the net […]

1) Under IFRS, impairment charges related to held-for-collection debt securities may be reversed. 2) If a company fails to post one of its journal entries to its general ledger, the trial balance will not show an equal amount of debit […]

1) Asset revaluations are permitted under IFRS and U.S. GAAP. 2) Dollar-value LIFO techniques help protect LIFO layers from erosion. Answer: True[/cpmembership] 3) Financial statement readers often assess liquidity by using the current cash debt coverage. Answer: True[/cpmembership] 4) According […]

1) When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face value. 2) In most situations, an auditor issues a qualified opinion or disclaims an opinion. Answer: […]

1) Companies value and report short-term receivables at net realizable valuethe net amount they expect to receive in cash. 2) The average days to sell inventory represents the average number of days sales for which a company has inventory on […]

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) IFRS prohibits use of the percentage-of-completion method of accounting for long-term construction contracts. 2) The interest rate written in the terms of the bond indenture is called the effective yield or market rate. Answer: False 3) Companies frequently describe […]

1) The IFRS statement of recognized income and expenses is identical to the U.S. GAAP statement of retained earnings – beginning balance retained earnings, plus net income, less dividends, equals ending balance retained earnings. 2) The ending retained earnings balance […]

1) Companies classify some cash flows relating to investing or financing activities as operating activities. 2) Prepaid insurance should be included in the numerator when computing the acid-test (quick) ratio. Answer: False 3) Employers are at risk with defined-benefit plans […]

1) The future value of a single sum is determined by multiplying the future value factor by its present value. 2) In order to justify requiring a particular measurement or disclosure, the benefits to be derived from it must equal […]

1) Costs in the research phase are expensed under U.S. GAAP, but capitalized under IFRS. 2) Both a guaranteed and an unguaranteed residual value affect the lessees computation of amounts capitalized as a leased asset. Answer: False 3) Under the […]

1) In the gross method, sales discounts are reported as a deduction from sales. 2) In order to make adequate disclosure of related party transactions, companies should report the legal form, rather than the economic substance, of these transactions. Answer: […]

1) Changes in estimates are handled prospectively by dividing the assets book value less any salvage value by the remaining estimated life. 2) A company excludes from the current assets section, the amount of cash restricted for purposes other than […]

1) Pretax financial income is the amount used to compute income taxes payable. 2) All long-term debt maturing within the next year must be classified as a current liability on the balance sheet. Answer: True 3) If the loss on […]

1) IFRS requires that Company A consolidate Company B when it controls and owns at least 50% of Company B. 2) The provision for a loss on an unprofitable contract may be combined with the Construction in Process account balance […]

1) IFRS requires immediate recognition of a loss if the overall contract is going to be unprofitable. 2) If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier. […]

1) A statement of cash flows prepared according to IFRS requirements must be prepared using the direct method for operating activities. 2) Revenues are realized when a company exchanges goods and services for cash or claims to cash. Answer: True […]

1) Under IFRS, a deferred tax liability is classified as current or noncurrent based on the classification of the asset or liability to which it relates. 2) A benefit of leasing to the lessor is the return of the leased […]

1) Under IFRS, employee share-purchase plans must be recorded as an expense in the year it was issued by a company. 2) For counterbalancing errors, restatement of comparative financial statements is necessary even if a correcting entry is not required. […]

1) Companies should recognize the entire increase in projected benefit obligation due to a plan initiation or amendment as pension expense in the year of amendment. 2) The most popular input measure used to determine the progress toward completion in […]

1) Qualified pension plans permit deductibility of the employers contributions to the pension fund. 2) Companies record corrections of errors from prior periods as an adjustment to the beginning balance of retained earnings in the current period. Answer: True 3) […]

1) Companies should consider both positive and negative evidence to determine whether it needs to record a valuation allowance to reduce a deferred tax asset. 2) Use of LIFO provides a tax benefit in an industry where unit costs tend […]

1) Terry Company is unable to reliably estimate revenues and costs associated with its only long-term construction contract. Under IFRS, Terry Company must use the completed-contract method to account for this contract. 2) Noncash investing and financing activities are disclosed […]

1) Because IFRS is very general in its provisions for lease accounting, the required disclosures for leases under IFRS are more detailed and extensive than those required under U.S. GAAP. 2) Under IFRS, both the investor and the investee should […]

1) Deductible amounts cause taxable income to be greater than pretax financial income in the future as a result of existing temporary differences. 2) Cash receipts from customers are computed by adding a decrease in accounts receivable to revenue from […]

1) Pachelor Corporation owns 70% of the outstanding stock of Stabb Company. On January 1, 2010, Stabb issued $1,000,000 in 7% bonds that matured on January 1, 2015 . At the time of issuance, the bonds were sold at a […]

1) Porter Corporation acquired 70% of the outstanding voting common stock of Sherman Inc. in 2004 . On January 1, 2005, Sherman Inc. purchased a depreciable machine for $120,000 cash with an estimated useful life of 10 years that was […]

1) Kline Corporation incurred major losses in 2011 and entered into voluntary Chapter 7 bankruptcy in the early part of 2012 . By July 1, all assets were converted into cash, the secured creditors were paid, and $122,700 in cash […]

1) Buddy, a dog, is cared for by a trust set up by his owner’s will. The following transactions occurred for the trust. 1>The trust was established with $100,000 from his owner’s estate, by deposit to a savings account. 2>A […]

1) Preen Corporation acquired a 60% interest in Shino Corporation at a cost equal to 60% of the book value of Shino’s net assets in 2010 . At the time of acquisition, the book value and fair value of Shino’s […]

1) What method of accounting will generally be used when one company purchases less than 20% of the outstanding stock of another company? A) Only the fair value method may be used B) Only the equity method may be used […]

1) During a “flight to quality” A) the spread between Treasury bonds and Baa bonds increases B) the spread between Treasury bonds and Baa bonds decreases C) the spread between Treasury bonds and Baa bonds is not affected D) the […]

1) Jeff Corporation owns 90% of the common stock of Subsidiary Jordan. The following data is available: JeffJordan Net income for 2011$250,000$150,000 Preferred dividends for 2011$20,000 Common dividends for 2011$25,000 Number of common shares outstanding 200,00020,000 10% Preferred Stock, $100 […]

1) The accounting equation for an agency fund is A) Current assets – Current liabilities = Fund Balance B) Assets – Liabilities = Equity C) Assets = Equity + Liabilities D) Assets = Liabilities 2) Paris Corporation purchased 80% of […]

1) On January 1, 2012, Packaging International purchased 90% of Shipaway Corporation’s outstanding shares for $135,000 when the fair value of Shipaway’s net assets were equal to the book values. The balance sheets of Packaging and Shipaway Corporations at year-end […]

1) An investor uses the cost method of accounting for its investment in common stock. During the current year, the investor received $25,000 in dividends, an amount that exceeded the investor’s share of the investee company’s undistributed income since the […]

1) Paggle Corporation owns 80% of Spillway Inc.’s common stock that was purchased at its underlying book value. At the time of purchase, the book value and fair value of Spillway’s net assets were equal. The two companies report the […]

1) The steeply upward sloping yield curve in the figure above indicates that ________ interest rates are expected to ________ in the future A) short-term; rise B) short-term; fall moderately C) short-term; remain unchanged D) long-term; fall moderately 2) If […]

1) According to the liquidity premium theory of the term structure, a downward sloping yield curve indicates that short-term interest rates are expected to A) rise in the future B) remain unchanged in the future C) decline moderately in the […]

1) The trust fund for a school library is required to prepare financial statements that include A) Balance Sheet and Income Statement B) Statement of Revenues, Expenses and Changes in Fiduciary Net Assets C) Statement of Fund Balance and Statement […]

1) On January 1, 2011, Pardy Corporation acquired a 70% interest in the common stock of Salter Corporation for $7,000,000 when Salter’s stockholders’ equity was as follows: 10% cumulative, nonparticipating preferred stock, $100 par, with a $105 liquidation preference, callable […]

1) GAAP requires that segment information be reported A) by geographics, without regard to size of the segment B) by geographics, without regard to industry or product-line C) however management organizes the enterprise into units for internal decision-making and performance-evaluation […]

1) At December 31, 2011, an Enterprise Fund has the following adjusted accounts outstanding: Insurance Expense$2,000 Depreciation Expense3,000 Supplies Expense10,000 Salaries Expense100,000 Service Revenues123,000 When preparing the closing entry for the temporary accounts at December 31, 2011, the Enterprise Fund’s […]

1) Under parent company theory, noncontrolling interest is classified on the consolidated balance sheet as ________. Under entity theory, noncontrolling interest is classified on the consolidated balance sheet as ________. A) stockholders’ equity; stockholders’ equity B) stockholders’ equity; liability C) […]