Which of the following statements is false regarding U.S. GAAP versus IFRS financial
statement presentation?
a. U.S. GAAP does not require the presentation of a classified balance sheet.
b. IFRS requires the classification of assets and liabilities as current and noncurrent.
c. If a range of values is available for reporting an outcome in a loss contingency, U.S.
GAAP requires a company to report the high end of the range as a probable outcome.
d. If a range of values is available for reporting an outcome in a loss contingency, IFRS
requires a company to record the mid-point of the range as a probable outcome.
Please complete the following sentences:
a. Accumulated amortization is used with
______________________________________.
b. Accumulated depreciation is used with
______________________________________.
Use the information below for Fargo Corp. for 2015 and 2016 to answer the following
question.
At the end of 2016, Fargo issued bonds at par value for $800,000 cash. The proceeds
from these bonds were used to retire the $500,000 bond issue outstanding at the end of
2015 (before their maturity date). All interest expense was paid in cash during 2016.
How much did Fargo pay to retire the $500,000 bond issue during 2016?
a. $485,000
b. $500,000
c. $515,000
d. $560,000
Sunshine Farm Supply Following are selected data from the financial statements of
Sunshine Farm Supply:
Refer to the data for Sunshine Farm Supply. Which of the following would result from a
horizontal analysis of its income statement?
a. Cost of goods sold is 45.5% of net sales for 2016.
b. Gross profit is 42.1% of net sales for 2016.
c. Cost of goods sold decreased $50,000 or 23.8% during 2016.
d. Accounts receivable total 13.3% of total assets for 2016.
Presented below is the operating activities section of the statement of cash flows for
Golden Consulting for 2016:
Which method of preparing the operating activities section has Golden Consulting
used?
a. The direct method.
b. The indirect method.
c. Either method.
d. Cannot be determined without further information.
Select the correct revenue recognition principle for each of the following.
a. Recognize revenue over the passage of time.
b. Recognize revenue when the customer takes possession of the product.
c. Recognize revenue when cash is collected.
d. Recognize revenue when service is performed.
Rent
The purchase of office equipment on credit has what effect on the accounting equation?
a. Assets decrease and stockholders’ equity decreases.
b. Liabilities increase and stockholders’ equity decreases.
c. Assets increase and liabilities increase.
d. Assets decrease and liabilities decrease.
Which one of the following items is not included in cash?
a. A bank certificate of deposit for one year
b. A savings account at the bank
c. A checking account at the bank
d. All of the above are included in cash
Shuttle Master Airlines has leased an aircraft from Streamline Aircraft Company. The
annual payments are $1,000,000 and the life of the lease is 18 years. It is estimated that
the useful life of the aircraft is 20 years. How would Shuttle Master Airlines record the
acquisition of the aircraft? The effective rate of interest is 9%.
a. The company would not record the aircraft as an asset but would record rent expense
of $1,000,000 per year for 18 years.
b. The company would not record the aircraft as an asset but would record rent expense
of $900,000 per year for 20 years.
c. The aircraft would be recorded as an asset with a cost of $8,756,000.
d. The aircraft would be recorded as an asset with a cost of $9,129,000.
Zebra Company overstated its December 31, 2014 inventory by $5,200. Which
statement is true concerning
Zebra’s financial statement amounts for 2014?
a. Working capital is understated.
b. The current ratio is overstated.
c. Cost of goods sold is overstated.
d. Net income is understated.
On November 2, 2014, Quaint General Store concluded that a customer’s $400 account
receivable was uncollectible and that the account should be written off. What effect will
this writeÂoff have on Quaint’s 2014 net income and balance sheet totals assuming the
allowance method is used to account for bad debts?
a. Decrease in net income; decrease in total assets
b. Increase in net income; no effect on total assets
c. No effect on net income; decrease in total assets
d. No effect on net income; no effect on total assets
As a general rule, revenue is recognized at the point of sale. Which one of the following
situations illustrates this rule?
a. Products are sold to customers on credit with payment due in 30 days.
b. Employees are paid wages the week after the wages are earned.
c. Products are purchased for resale purposes.
d. Interest is collected from amounts loaned to employees.
The following items were reported on the balance sheets and income statement for
Centerton Inc., a service company:
What amount would be reported in the operating activities section of the statement of
cash flows for payments for operating expenses under the direct method?
a. $186,000
b. $154,000
c. $180,000
d. $170,000
Cash flows from borrowing and paying off a 90-day bank loan are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. purchasing activities.
Current liabilities are defined as those liabilities which will be satisfied
a. by the end of the operating cycle.
b. within one year.
c. within one year or within the operating cycle, whichever is longer.
d. within one year or within the operating cycle, whichever is shorter.
Select the term below most properly satisfies each statement.
a. total assets
b. horizontal analysis
c. vertical analysis
d. net sales
When using vertical analysis, accounts on the income statement should be stated as a
percentage of this amount
Which of the following accounts is not classified as a current liability?
a. Taxes payable
b. Note payable, due in three (3) years
c. Salaries payable
d. Accounts payable
Doran Systems Corp. has grown significantly over the past year. One area that has
plagued the Controller of Doran is the reconciliation of supplies expense. The
end-of-year supplies on hand totaled $20, and purchases totaled $500, and supplies on
hand at the beginning of the year amounted to $200. How much will Doran Systems
report as supplies expense for the current year?
a. $ 200
b. $ 680
c. $ 220
d. $ 700
Some cash equivalents appear in the long term investment section of a balance sheet.
a. True
b. False
Allowance for Doubtful Accounts represents:
a. Cash set aside to make up for bad debt losses
b. The amount of uncollectible accounts written off to date
c. The difference between total sales made on credit and the amount collected from
those credit sales
d. The difference between the gross amount of accounts receivable and the net
realizable value of accounts receivable
___________________________ is a noncash expense related to plant assets.
is an account that can only exist if one company purchases another business and the
cost exceeds the fair market values of the identifiable net assets at the time acquired.
What is meant by the balance in the retained earnings account?
The Lobster Shanty had the following account balances at December 31, 2015:
Prepare the stockholders’ equity section of the balance sheet for The Lobster Shanty at
December 31, 2015.
Given below are several accounts and balances from Carrier Corporation’s 2015
financial statements. Prepare the Property, Plant, and Equipment section of the balance
sheet and a partial income statement in the space provided below using the accounts
provided.
The balance sheet columns of the work sheet for Barrows Corporation show total debits
and total credits of $245,000 each. Dividends for the period are $5,000. Accumulated
depreciation is $15,000 at the end of the period. Compute the amount that should
appear on the formal balance sheet for total assets. How do you explain the difference
between this amount and the amount that appears as the total debits and total credits on
the work sheet?
Marrow Company has a large portion of its plant assets concentrated in an area where
technology is changing rapidly. Marrow wants to minimize taxable income and
maximize net income reported to stockholders. Recommend a course of action for
Marrow. Support your recommendation.