Textbook GAAP Self-Test Questions

Which of the following is true regarding whether U.S. GAAP specifically addresses the accounting and reporting for effects of changes in accounting policies? Direct effects Indirect effects a. Yes Yes b. No No c. No Yes d. Yes No

Direct effects Indirect effects a. Yes Yes

Which of the following statements is false? a. FASB is a government office within the SEC. b. The FASB and IASB have similar governance structures. c. U.S. GAAP is generally viewed as more detailed or rules-based; IFRS is viewed as more principles-based. d. The SEC oversees FASB standard-setting.

a. FASB is a government office within the SEC.

All of the following are key similarities between U.S. GAAP and IFRS with respect to accounting for investments except: a. IFRS and U.S. GAAP require the same accounting for all equity securities. b. IFRS and U.S. GAAP apply the equity method to significantinfluence equity investments. c. IFRS and U.S. GAAP have a fair value option for financial instruments. d. the accounting for impairment of investments is similar, although IFRS allows recovery of impairment losses.

a. IFRS and U.S. GAAP require the same accounting for all equity securities.

Which of the following statements is correct? a. IFRS separates the proceeds of a convertible bond between debt and equity by determining the fair value of the debt component before the equity component. b. When there is a choice of settlement of an option for cash or shares, share settlement is assumed by both IFRS and U.S. GAAP. c. IFRS separates the proceeds of a convertible bond between debt and equity, based on relative fair values. d. Both U.S. GAAP and IFRS separate the proceeds of convertible bonds between debt and equity.

a. IFRS separates the proceeds of a convertible bond between debt and equity by determining the fair value of the debt component before the equity component.

For 2022, Carson Majors Inc. had pension expense of $77 million and contributed $55 million to the pension fund. Which of the following is the journal entry that Carson Majors would make to record pension expense and funding under U.S. GAAP? a. Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 55,000,000 b. Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 99,000,000 c. Pension Expense 55,000,000 Pension Asset/Liability 22,000,000 Cash 77,000,000 d. Pension Expense 22,000,000 Pension Asset/Liability 55,000,000 Cash 77,000,000

a. Pension Expense 77,000,000 Pension Asset/Liability 22,000,000 Cash 55,000,000

Which of the following statements is false? a. Receivables include equity securities purchased by the company. b. Receivables include credit card receivables. c. Receivables include amounts owed by employees as result of company loans to employees. d. Receivables include amounts resulting from transactions with customers.

a. Receivables include equity securities purchased by the company.

Which of the following does not represent a pair of U.S. GAAP/IFRS-comparable terms? a. Treasury stock/Repurchase reserve. b. Additional paid-in capital/Share premium. c. Common stock/Share capital—ordinary. d. Preferred stock/Preference share.

a. Treasury stock/Repurchase reserve.

Which of the following is false? a. U.S. GAAP and IFRS have the same absolute standard regarding the reporting of error corrections in previously issued financial statements. b. The accounting for changes in estimates is similar between U.S. GAAP and IFRS. c. Under IFRS, the impracticability exception applies both to changes in accounting principles and to the correction of errors. d. U.S. GAAP has detailed guidance on the accounting and reporting of indirect effects; IFRS does not.

a. U.S. GAAP and IFRS have the same absolute standard regarding the reporting of error corrections in previously issued financial statements.

Which of the following is false? a. Under U.S. GAAP, deferred taxes are reported based on the classification of the related asset or liability. b. Under IFRS, all potential liabilities must be recognized. c. Under U.S. GAAP, the enacted tax rate is used to measure deferred tax assets and liabilities. d. Under IFRS, all deferred tax assets and liabilities are classified as noncurrent.

a. Under U.S. GAAP, deferred taxes are reported based on the classification of the related asset or liability.

For purposes of the statement of cash flows, under U.S. GAAP interest paid is treated as: a. an operating activity in all cases. b. an investing or operating activity, depending on use of the borrowed funds. c. either a financing or investing activity. d. either an operating or financing activity, but treated consistently from period to period.

a. an operating activity in all cases.

Research and development costs are: a. expensed under U.S. GAAP. b. expensed under IFRS. c. expensed under both U.S. GAAP and IFRS. d. None of the answer choices is correct.

a. expensed under U.S. GAAP.

A trial balance: a. is the same under U.S. GAAP and IFRS. b. proves that transactions are recorded correctly. c. proves that all transactions have been recorded. d. will not balance if a correct journal entry is posted twice.

a. is the same under U.S. GAAP and IFRS.

Under U.S. GAAP: a. lessees may not use alternative measurement bases (e.g., revaluation accounting) for the right-of-use asset. b. different measurement bases may be used for the right-of-use asset but only for leases with terms less than one year. c. the same guidance on collectibility of the lease payments is used by lessors as in IFRS. d. lessors are required to defer gross profit on sales-type leases.

a. lessees may not use alternative measurement bases (e.g., revaluation accounting) for the right-of-use asset.

Anazazi Co. offers all its 10,000 employees the opportunity to participate in an employee share-purchase plan. Under the terms of the plan, the employees are entitled to purchase 100 ordinary shares (par value $1 per share) at a 3% discount. The purchase price must be paid immediately upon acceptance of the offer. There is no option feature in the plan. In total, 8,500 employees accept the offer, and each employee purchases on average 80 shares at $26.68 per share (market price $27.50). Under U.S. GAAP, Anazazi Co. will record: a. no compensation since the plan is used to raise capital, not compensate employees. b. compensation expense of $850,000. c. compensation expense of $22,678,000. d. compensation expense of $697,000.

a. no compensation since the plan is used to raise capital, not compensate employees.

Under U.S. GAAP, the retrospective approach should not be used if: a. retrospective application requires assumptions about management's intent in a prior period. b. the company does not have trained staff to perform the analysis. c. the effects of the change have counterbalanced. d. the effects of the change have not counterbalanced.

a. retrospective application requires assumptions about management's intent in a prior period.

U.S. GAAP does not require companies to measure their financial assets at fair value except when: a. the equity method of accounting is used. b. the financial asset is a trading debt investment. c. the financial asset is an equity investment of less than 20% of shares outstanding. d. an investment is classified as trading.

a. the equity method of accounting is used.

On January 1, Martinez Inc. issued $3,000,000, 11% bonds for $3,195,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Martinez uses the effective-interest method of amortizing bond premium. At the end of the first year, Martinez should report bonds payable of: a. $3,185,130. b. $3,184,500. c. $3,173,550. d. $3,165,000.

b. $3,184,500.

Under U.S. GAAP, the amount of capital received in excess of par value would be credited to: a. Retained Earnings. b. Contributed Capital. c. Share Premium. d. Par value is not used under U.S. GAAP.

b. Contributed Capital.

Governance of the FASB involves: a. FASB, FAF, FASAC, and IOSCO. b. FASB, FAF, FASAC, and staff and task forces. c. FASB, FAF, IASB, and task forces. d. FASB, FAF, IASB, and the SEC.

b. FASB, FAF, FASAC, and staff and task forces.

Which of the following is true? a. Differential reporting for small- and medium-sized entities is required for all companies less than a certain size. b. IFRS SME accounting omits accounting topics not relevant for SMEs, such as earnings per share, and interim and segment reporting. c. U.S. GAAP provides no accounting alternatives for private companies. d. U.S. GAAP requires significantly more disclosures, since more items are subject to judgment.

b. IFRS SME accounting omits accounting topics not relevant for SMEs, such as earnings per share, and interim and segment reporting.

Which of the following statements is correct? a. Both IFRS and U.S. GAAP permit revaluation of property, plant, and equipment. b. IFRS permits revaluation of property, plant, and equipment, but not U.S. GAAP. c. Neither IFRS nor U.S. GAAP permit revaluation of property, plant, and equipment. d. U.S. GAAP permits revaluation of property, plant, and equipment, but IFRS does not.

b. IFRS permits revaluation of property, plant, and equipment, but not U.S. GAAP.

Which of the following statements is correct regarding income reporting under IFRS compared to U.S. GAAP? a. IFRS does not permit revaluation of property, plant, and equipment, and intangible assets. b. IFRS provides the same options for reporting comprehensive income as U.S. GAAP. c. Companies must classify expenses by nature. d. IFRS provides a definition for all items presented in the income statement.

b. IFRS provides the same options for reporting comprehensive income as U.S. GAAP.

Which of the following is required to be reported in an income statement under U.S. GAAP but not under IFRS? a. Discontinued operations. b. Income from operations. c. Cost of goods sold. d. Income tax.

b. Income from operations.

All of the following are key similarities between U.S. GAAP and IFRS with respect to accounting for inventories except: a. costs to include in inventories are similar. b. LIFO cost flow assumption where appropriate is used by both sets of standards. c. fair value valuation of inventories is prohibited by both sets of standards. d. guidelines on ownership of goods are similar.

b. LIFO cost flow assumption where appropriate is used by both sets of standards.

U.S. GAAP requires companies to use which of the following methods for reporting changes in accounting policies? a. Cumulative effect approach. b. Retrospective approach. c. Prospective approach. d. Averaging approach.

b. Retrospective approach.

Which of the following statements about IFRS and U.S. GAAP accounting and reporting requirements for the balance sheet is not correct? a. Both IFRS and U.S. GAAP distinguish between current and non-current assets and liabilities. b. The presentation formats required by IFRS and U.S. GAAP for the balance sheet are similar. c. Both IFRS and U.S. GAAP require that comparative information be reported. d. One difference between the reporting requirements under IFRS and those of the U.S. GAAP balance sheet is that an IFRS balance sheet may list non-current assets first.

b. The presentation formats required by IFRS and U.S. GAAP for the balance sheet are similar.

Which of the following is true? a. IFRS does not permit defined contribution plans. b. U.S. GAAP and IFRS accounts for defined contribution plans similarly. c. U.S. GAAP and IFRS amortize past service costs over the remaining service lives of employees. d. Like IFRS, U.S. GAAP recognizes both liability and asset gains and losses in other comprehensive income and does not "recycle" the losses into income in subsequent periods.

b. U.S. GAAP and IFRS accounts for defined contribution plans similarly.

Which statement is correct regarding U.S. GAAP? a. U.S. GAAP reverses the rules of debits and credits, that is, debits are on the right and credits are on the left. b. U.S. GAAP uses the same process for recording transactions as IFRS. c. The chart of accounts under U.S. GAAP is different because revenues follow assets. d. None of the above statements are correct.

b. U.S. GAAP uses the same process for recording transactions as IFRS.

Under GAAP: a. "probable" is defined as a level of likelihood of at least slightly more than 60%. b. a company should reduce a deferred tax asset when it is likely that some or all of it will not be realized by using a valuation allowance. c. a company considers only positive evidence when determining whether to recognize a deferred tax asset. d. deferred tax assets must be evaluated every 5 years.

b. a company should reduce a deferred tax asset when it is likely that some or all of it will not be realized by using a valuation allowance.

Under U.S. GAAP, receivables are reported on the balance sheet at: a. amortized cost. b. amortized cost less allowance for doubtful accounts. c. historical cost. d. replacement cost.

b. amortized cost less allowance for doubtful accounts.

For purposes of the statement of cash flows, under U.S. GAAP income taxes paid are treated as: a. cash flows from operating activities unless they can be separately identified as part of investing or financing activities. b. an operating activity in all cases. c. an investing or operating activity, depending on whether a refund is received. d. either operating, financing, or investing activity, but treated consistently to other companies in the same industry.

b. an operating activity in all cases.

Under IFRS, convertible bonds: a. are separated into the bond component and the expense component. b. are separated into debt and equity components. c. are separated into their components based on relative fair values. d. All of the above.

b. are separated into debt and equity components.

Mae Jong Corp. issues $1,000,000 of 10% bonds payable, which may be converted into 10,000 shares of $2 par value ordinary shares. The market rate of interest on similar bonds is 12%. Interest is payable annually on December 31, and the bonds were issued for total proceeds of $1,000,000. Under U.S. GAAP, in accounting for these bonds, Mae Jong Corp. will: a. first assign a value to the equity component, then determine the liability component. b. assign no value to the equity component since the conversion privilege is not separable from the bond. c. first assign a value to the liability component based on the face amount of the bond. d. use the "with-and-without" method to value the compound instrument.

b. assign no value to the equity component since the conversion privilege is not separable from the bond.

All of the following are key differences between U.S. GAAP and IFRS with respect to accounting for inventories except the: a. definition of the lower-of-cost-or-market test for inventory valuation differs between U.S. GAAP and IFRS. b. average-cost method is prohibited under IFRS. c. inventory basis determination for write-downs differs between U.S. GAAP and IFRS. d. guidelines are more principles-based under IFRS than they are under U.S. GAAP.

b. average-cost method is prohibited under IFRS.

Franco Company uses IFRS and reports a "reserve" in its statement of financial position. If Franco were reporting under U.S. GAAP, it would: a. be required to report a reserve in its balance sheet. b. be discouraged from using the term "reserve" in its financial statements. c. have the option to use the term "reserves." d. report the reserve in the liability section of its balance sheet.

b. be discouraged from using the term "reserve" in its financial statements.

Current assets under IFRS are listed generally: a. by importance. b. in the reverse order of their expected conversion to cash. c. by longevity. d. alphabetically.

b. in the reverse order of their expected conversion to cash.

Interim reporting under U.S. GAAP: a. is prepared using the discrete approach. b. is prepared using an integral approach. c. requires a complete set of financial statements for each interim period. d. permits companies to omit disclosure of material events subsequent to the interim reporting date.

b. is prepared using an integral approach.

All of the following are similarities with respect to the accounting for leases under IFRS and U.S. GAAP except: a. lessees recognize a right-of-use asset and related lease liability for leases with terms longer than one year. b. lessees use the same general lease classification criteria to determine whether lessees classify leases as finance or operating. c. lessors use the same model to account for sales-type leases. d. U.S. GAAP and IFRS have similar qualitative and quantitative disclosure requirements for lessees and lessors.

b. lessees use the same general lease classification criteria to determine whether lessees classify leases as finance or operating.

Under U.S. GAAP, significant non-cash transactions: a. are classified as operating, if they are related to income items. b. may be presented in the statement of cash flows as a separate schedule. c. are classified as an investing or financing activity. d. are classified as an operating activity, unless they can be specifically identified with financing or investing activities.

b. may be presented in the statement of cash flows as a separate schedule.

Under U.S. GAAP, bond issuance costs, including the printing costs and legal fees associated with the issuance, should be: a. expensed in the period when the debt is issued. b. recorded as a reduction in the carrying value of bonds payable. c. accumulated in a deferred charge account and amortized over the life of the bonds. d. reported as an expense in the period the bonds mature or are redeemed.

b. recorded as a reduction in the carrying value of bonds payable.

Lincoln Company has the following four deferred tax items at December 31, 2022. The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same tax authority. Temporary Difference: Rent collected in advance: recognized when a performance obligation is satisfied for accounting purposes and when received for tax purposes. $652,000 (Deferred Tax Asset). Use of straight-line depreciation for accounting purposes and accelerated depreciation for tax purposes. $330,000 (Deferred Tax Liability). Recognition of income on installment sales at the time of sale for accounting purposes and during period of collection for tax purposes. 64,000 (Deferred Tax Liability). Warranty liabilities: recognized for accounting purposes at time of sale and for tax purposes at time paid. 37,000 (Deferred Tax Liability). On Lincoln's December 31, 2022, balance sheet, it will report: a. $394,000 non-current deferred tax liability and $689,000 non-current deferred tax asset. b. $330,000 non-current liability and $625,000 current deferred tax asset. c. $295,000 non-current deferred tax asset. d. $295,000 current tax receivable.

c. $295,000 non-current deferred tax asset.

Stephens Company has a deductible temporary difference of $2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has $1,800,000 of income taxes payable. After a careful review of all available evidence, Stephens determines that it is probable that it will not realize $200,000 of this deferred tax asset. On Stephens Company's balance sheet (statement of financial position) at the end of its first year of operations, what is the amount of deferred tax asset recorded under U. S. GAAP? a. $2,000,000. b. $1,800,000. c. $800,000. d. $600,000.

c. $800,000.

At the end of the current period, Oxford Ltd. has a projected benefit obligation of $195,000 and pension plan assets with a fair value of $110,000. The amount of the vested benefits for the plan is $105,000. What amount related to its pension plan will be reported on the company's statement of financial position (balance sheet) under U.S. GAAP? a. $5,000. b. $90,000. c. $85,000. d. $20,000.

c. $85,000.

The expanded accounting equation under U.S. GAAP is as follows: a. Assets = Liabilities + Common Stock - Retained Earnings - Dividends + Revenues - Expenses. b. Assets + Liabilities = Common Stock + Retained Earnings - Dividends + Revenues - Expenses. c. Assets = Liabilities + Common Stock + Retained Earnings - Dividends + Revenues - Expenses. d. Assets = Liabilities + Common Stock - Retained Earnings - Dividends - Revenues - Expenses.

c. Assets = Liabilities + Common Stock + Retained Earnings - Dividends + Revenues - Expenses.

Which of the following is the correct accounting under U.S. GAAP for cash? a. Cash cannot be combined with cash equivalents. b. Restricted cash funds are reported as liabilities. c. Bank overdrafts are reported as liabilities. d. Cash on hand is not reported on the balance sheet as Cash.

c. Bank overdrafts are reported as liabilities.

Which of the following is false? a. In general, IFRS note disclosures are more expansive compared to U.S. GAAP. b. U.S. GAAP and IFRS have similar standards on subsequent events. c. Both IFRS and U.S. GAAP require interim reports, although the reporting frequency varies. d. Segment reporting requirements are very similar under IFRS and U.S. GAAP.

c. Both IFRS and U.S. GAAP require interim reports, although the reporting frequency varies.

Starfish Company (a company using U.S. GAAP and the LIFO inventory method) is considering changing to IFRS and the FIFO inventory method. How would a comparison of these methods affect Starfish's financials? a. During a period of inflation, working capital would decrease when IFRS and the FIFO inventory method are used as compared to U.S. GAAP and LIFO. b. During a period of inflation, the taxes will decrease when IFRS and the FIFO inventory method are used as compared to U.S. GAAP and LIFO. c. During a period of inflation, net income would be greater if IFRS and the FIFO inventory method are used as compared to U.S. GAAP and LIFO. d. During a period of inflation, the current ratio would decrease when IFRS and the FIFO inventory method are used as compared to U.S. GAAP and LIFO.

c. During a period of inflation, net income would be greater if IFRS and the FIFO inventory method are used as compared to U.S. GAAP and LIFO.

Which of the following is not classified as an accounting change by U.S. GAAP? a. Change in accounting policy. b. Change in accounting estimate. c. Errors in financial statements. d. None of the above.

c. Errors in financial statements.

Select the investment accounting approach with the correct valuation approach: Not Held-to-Maturity Held-to-Maturity a. Amortized cost Amortized cost b. Fair value Fair value c. Fair value Amortized cost d. Amortized cost Fair value

c. Fair value Amortized cost

GAAP (for U.S. companies) stands for: a. Government accepted accounting practices. b. Generally accepted auditing policies. c. Generally accepted accounting principles. d. Gevernment approved accounting principles.

c. Generally accepted accounting principles.

Which of the following statements is correct with regard to IFRS and GAAP? a. Under U.S. GAAP, all potential liabilities related to uncertain tax positions must be recognized. b. The tax effects related to certain items are reported in equity under U.S. GAAP; under IFRS, the tax effects are charged or credited to income. c. IFRS uses an affirmative judgment approach for deferred tax assets, whereas U.S. GAAP uses an impairment approach for deferred tax assets. d. IFRS classifies deferred taxes based on the classification of the related asset or liability.

c. IFRS uses an affirmative judgment approach for deferred tax assets, whereas U.S. GAAP uses an impairment approach for deferred tax assets.

One difference between U.S. GAAP and IFRS is that: a. IFRS uses accrual-accounting concepts, and U.S. GAAP uses primarily the cash basis of accounting. b. U.S. GAAP uses a different posting process than IFRS. c. IFRS uses more fair value measurements than U.S. GAAP. d. the limitations of a trial balance are different between U.S. GAAP and IFRS.

c. IFRS uses more fair value measurements than U.S. GAAP.

All of the following are similarities in the accounting for liabilities under IFRS and U.S. GAAP except: a. Bond issue costs are netted against the carrying amount of the bonds. b. Both U.S. GAAP and IFRS have similar liability definitions. c. Recognition of liabilities for future losses is allowed under U.S. GAAP and IFRS. d. Both U.S. GAAP and IFRS require the best estimate for a probable loss, with U.S. GAAP selecting the minimum amount in the range.

c. Recognition of liabilities for future losses is allowed under U.S. GAAP and IFRS.

Which of the following is true regarding the statement of cash flows under U.S. GAAP? a. The statement of cash flows has two major sections—operating and non-operating. b. The statement of cash flows has two major sections—financing and investing. c. The statement of cash flows has three major sections—operating, investing, and financing. d. The statement of cash flows has three major sections—operating, non-operating, and financing.

c. The statement of cash flows has three major sections—operating, investing, and financing.

Which of the following is not true with respect to lease accounting under U.S. GAAP? a. U.S. GAAP requires lessees to recognize a right-of-use asset and related lease liability for leases with terms longer than one year. b. U.S. GAAP has similar lease disclosure requirements as IFRS. c. U.S. GAAP permits recognition of selling profit on direct financing leases at lease commencement. d. IFRS uses essentially the same lessor accounting model as U.S. GAAP for leases classified as sales-type or operating.

c. U.S. GAAP permits recognition of selling profit on direct financing leases at lease commencement.

In the case of a bank overdraft: a. U.S. GAAP typically includes the amount in cash and cash equivalents. b. IFRS typically includes the amount in cash equivalents but not in cash. c. U.S. GAAP typically treats the overdraft as a liability and reports the amount in the financing section of the statement of cash flows. d. IFRS typically treats the overdraft as a liability, and reports the amount in the investing section of the statement of cash flows.

c. U.S. GAAP typically treats the overdraft as a liability and reports the amount in the financing section of the statement of cash flows.

Under U.S. GAAP, a company: a. should evaluate only equity investments for impairment. b. accounts for an impairment as an unrealized loss and includes it as a part of other comprehensive income and as a component of accumulated other comprehensive income until realized. c. accounts for an impairment loss on debt investments based on lifetime expected credit losses. d. All of the answer choices are correct.

c. accounts for an impairment loss on debt investments based on lifetime expected credit losses.

Companies that use U.S. GAAP: a. must report all their assets on the balance sheet (statement of financial position) at fair value. b. may report property, plant, and equipment and natural resources at fair value. c. are guided by a concept statement on estimating fair values when market data are not available. d. may only use historical cost as the measurement basis in financial reporting.

c. are guided by a concept statement on estimating fair values when market data are not available.

All of the following are key similarities between U.S. GAAP and IFRS with respect to accounting for property, plant, and equipment except: a. the definition of property, plant, and equipment is essentially the same. b. changes in depreciation method and changes in useful life are treated in the current and future periods. c. both U.S. GAAP and IFRS allow revaluation accounting. d. the accounting for plant asset disposals is the same under U.S. GAAP and IFRS.

c. both U.S. GAAP and IFRS allow revaluation accounting.

Under U.S. GAAP, biological assets: a. are accounted for the same way as under IFRS. b. are all to be accounted for in the same way. c. generally are not accounted for at net realizable value. d. None of the answer choices is correct.

c. generally are not accounted for at net realizable value.

All of the following are key differences between U.S. GAAP and IFRS with respect to accounting for property, plant and equipment except: a. under U.S. GAAP, component depreciation is permitted but is rarely used. b. U.S. GAAP does not permit revaluations of property, plant, and equipment, and mineral resources. c. in testing for impairments of long-lived assets, U.S. GAAP compares value-in-use to the carrying value of the asset. d. under U.S. GAAP, impairment testing is a two-step process.

c. in testing for impairments of long-lived assets, U.S. GAAP compares value-in-use to the carrying value of the asset.

Under U.S. GAAP, an impairment of property, plant, and equipment: a. may always be reversed if the fair value subsequently increases. b. is based on a two-step model, comparing value-in-use to the carrying value of the asset. c. may be reversed for assets held for sale. d. is measured based on total future undiscounted cash flows.

c. may be reversed for assets held for sale.

Companies that use IFRS: a. may report all their assets on the statement of financial position at fair value. b. are not allowed to net assets (assets − liabilities) on their statement of financial positions. c. may report non-current assets before current assets on the statement of financial position. d. do not have any guidelines as to what should be reported on the statement of financial position.

c. may report non-current assets before current assets on the statement of financial position.

All of the following are key similarities between U.S. GAAP and IFRS with respect to accounting for intangible assets except: a. for accounting purposes, costs associated with research and development activities are segregated into the two components. b. the accounting for intangibles acquired in a business combination. c. recovery of impairments on intangibles other than goodwill. d. the accounting for impairments of assets held for disposal.

c. recovery of impairments on intangibles other than goodwill.

The non-controlling interest section of the income statement is: a. required under U.S. GAAP but not under IFRS. b. required under IFRS but not under U.S. GAAP. c. required under IFRS and U.S. GAAP. d. not reported under U.S. GAAP or IFRS.

c. required under IFRS and U.S. GAAP.

U.S. GAAP reports cash and cash equivalents: a. similarly to IFRS. b. as separate items. c. similarly to IFRS, except for the reporting of bank overdrafts. d. always as the first items in the current assets section.

c. similarly to IFRS, except for the reporting of bank overdrafts.

All of the following are key similarities between U.S. GAAP and IFRS with respect to accounting for dilutive securities and EPS except: a. the model for recognizing share-based compensation. b. the calculation of basic and diluted EPS. c. the accounting for convertible debt. d. the accounting for modifications of share option, when the value increases.

c. the accounting for convertible debt.

All of the following are differences with respect to the accounting for leases under IFRS and U.S. GAAP except: a. IFRS has an additional lessee recognition and measurement exemption for leases of assets of low value (U.S. GAAP does not). b. IFRS allows alternative measurement bases for the right-of-use asset (e.g., the revaluation model). c. under IFRS, lessees use the same tests to determine whether a lease should be classified as finance or operating. d. IFRS permits recognition of selling profit on direct financing leases at lease commencement.

c. under IFRS, lessees use the same tests to determine whether a lease should be classified as finance or operating.

Assume that Darcy Industries had the following inventory values. Inventory cost (on December 31, 2022) $1,500 Inventory market (on December 31, 2022) amount between ceiling and floor $1,280 Inventory net realizable value (on December 31, 2022) $1,300 Under U.S. GAAP, what is the inventory carrying value on December 31, 2022? a. $1,500. b. $1,570. c. $1,300. d. $1,280.

d. $1,280.

Under U.S. GAAP, a purchase by a company of its own shares results in. a. an increase in treasury shares. b. a decrease in assets. c. a decrease in equity. d. All of the answer choices are correct.

d. All of the answer choices are correct.

The general policy for using proper currency signs (dollar, yen, pound, etc.) is the same for both U.S. GAAP and this textbook. This policy is as follows: a. Currency signs only appear in ledgers and journal entries. b. Currency signs are only shown in the trial balance. c. Currency signs are shown for all compound journal entries. d. Currency signs are shown in trial balances and financial statements.

d. Currency signs are shown in trial balances and financial statements.

Subsequent events are reviewed through which date under U.S. GAAP? a. Balance sheet (statement of financial position) date. b. Authorization date of the financial statements. c. Date of independent auditor's opinion. d. Financial statement issue date.

d. Financial statement issue date.

In recording a transfer of receivables: a. IFRS focuses on loss of control. b. U.S. GAAP focuses on loss of control and risks and rewards. c. IFRS and U.S. GAAP allow partial derecognition. d. IFRS allows partial derecognition.

d. IFRS allows partial derecognition.

Which of the following statements is correct? a. IFRS does not permit the equity method of accounting. b. U.S. GAAP permits recovery of impairment losses on investments. c. Under IFRS, non-trading equity investments are accounted for at amortized cost. d. IFRS and U.S. GAAP both have a trading debt investment classification.

d. IFRS and U.S. GAAP both have a trading debt investment classification.

Which of the following statements about the IASB and FASB conceptual frameworks is not correct? a. The IASB conceptual framework does not identify the element comprehensive income. b. The existing IASB and FASB conceptual frameworks are organized in similar ways. c. The FASB and IASB agree that the objective of financial reporting is to provide useful information to investors and creditors. d. IFRS does not allow use of fair value as a measurement basis.

d. IFRS does not allow use of fair value as a measurement basis.

Which of the following statements is correct? a. Both IFRS and U.S. GAAP permit revaluation of property, plant, and equipment and intangible assets (except for goodwill). b. U.S. GAAP permits capitalization of development costs. c. IFRS requires capitalization of research and development costs once economic viability is met. d. IFRS requires capitalization of development costs once economic viability is met.

d. IFRS requires capitalization of development costs once economic viability is met.

Towson Company has experienced tough competition for its talented workforce, leading it to enhance the pension benefits provided to employees. As a result, Towson amended its pension plan on January 1, 2022, and granted past service costs of $250,000. The average remaining service lives of its employees is 5 years. Under U.S. GAAP, what effect will the granting of the PSC have in 2022? a. Increase pension expense by $250,000. b. Have no effect on pension expense. c. Decrease pension expense by $50,000. d. Increase pension expense by $50,000.

d. Increase pension expense by $50,000.

Recovery of impairment is recognized under U.S. GAAP for all the following except: a. patent held for use. b. trademark. c. goodwill. d. None of the answer choices is correct; impairment reversals are not allowed under U.S. GAAP.

d. None of the answer choices is correct; impairment reversals are not allowed under U.S. GAAP.

Which of the following is not a required disclosure under IFRS and U.S. GAAP? a. Accounting policies followed. b. Judgments that management has made in the process of applying the entity's accounting policies. c. Key assumptions and estimation uncertainty that could result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. d. Number of employees.

d. Number of employees.

Oversight of accounting standard-setting is as follows: a. IASB oversees FASB. b. IOSCO oversees both the IASB and FASB. c. SEC oversees both the IASB and FASB. d. SEC oversees FASB, IOSCO oversees IASB.

d. SEC oversees FASB, IOSCO oversees IASB.

Which of the following statements is true? a. The IASB does not include the public interest in its governance. b. The IASB structure has both advisory and interpretation functions, but no Foundation. c. The IASB has been in existence longer than the FASB. d. The IASB structure is quite similar to the FASB's, with a Foundation, Board, Advisory Council, and Interpretations Committee.

d. The IASB structure is quite similar to the FASB's, with a Foundation, Board, Advisory Council, and Interpretations Committee.

The term "reserves" is used under U.S. GAAP with reference to all of the following except. a. gains and losses on revaluation of property, plant, and equipment. b. capital received in excess of the par value of issued shares. c. retained earnings. d. U.S. GAAP does not use the term reserves.

d. U.S. GAAP does not use the term reserves.

Which of the following is false? a. U.S. GAAP amortizes PSC over the remaining service lives of employees. b. IFRS recognizes PSC as a component of pension expense in income immediately. c. U.S. GAAP recognizes liability and asset gains and losses in "Accumulated other comprehensive income" and amortizes these amounts to income over remaining service live (generally using the "corridor approach"). d. U.S. GAAP has a single standard for the

d. U.S. GAAP has a single standard for the

All of the following are differences between IFRS and U.S. GAAP in accounting for liabilities except: a. When a bond is issued at a discount, U.S. GAAP records the discount in a separate contra liability account. IFRS records the bond net of the discount. b. Under IFRS and U.S. GAAP, bond issuance costs reduce the carrying value of the debt. c. U.S. GAAP, but not IFRS, uses the term "troubled-debt restructurings." d. U.S. GAAP, but not IFRS, uses the term "provisions" for contingent liabilities that are accrued.

d. U.S. GAAP, but not IFRS, uses the term "provisions" for contingent liabilities that are accrued.

Hilo Company has land that cost $350,000 but now has a fair value of $500,000. Which of the following statements is correct? a. Under IFRS, Hilo Company must continue to report the land at $350,000 (if using revaluation accounting). b. Under U.S. GAAP, Hilo Company would report a net income increase of $150,000 due to an increase in the value of the land. c. Under U.S. GAAP, Hilo Company would credit Unrealized Gain on Revaluation by $150,000. d. Under IFRS, Hilo Company would credit Unrealized Gain on Revaluation for $150,000.

d. Under IFRS, Hilo Company would credit Unrealized Gain on Revaluation for $150,000.

Which of the following statements is false? a. The monetary unit assumption is used under U.S. GAAP. b. Under IFRS, companies may use fair value for property, plant, and equipment. c. The FASB and IASB are no longer working on a joint conceptual framework project. d. Under IFRS, there are the same number of financial statement elements as in U.S. GAAP.

d. Under IFRS, there are the same number of financial statement elements as in U.S. GAAP.

Which of the following is false? a. Under U.S. GAAP, companies cannot record gains on transactions involving their own shares. b. Under U.S. GAAP, companies do not make an entry for a share split. c. Under U.S. GAAP, the statement of stockholders' equity is a required statement. d. Under U.S. GAAP, a company records a revaluation surplus when it experiences an increase in the price of its common stock.

d. Under U.S. GAAP, a company records a revaluation surplus when it experiences an increase in the price of its common stock.

Which of the following is stated correctly? a. Current liabilities follow non-current liabilities on the statement of financial position under U.S. GAAP but non-current liabilities follow current liabilities under IFRS. b. IFRS does not treat debt modifications as extinguishments of debt. c. Bond issuance costs are recorded as a reduction of the carrying value of the debt under U.S. GAAP but are recorded as an asset and amortized to expense over the term of the debt under IFRS. d. Under U.S. GAAP, bonds payable is recorded at the face amount and any premium or discount is recorded in a separate account. Under IFRS, bonds payable is recorded at the carrying value so no separate premium or discount accounts are used.

d. Under U.S. GAAP, bonds payable is recorded at the face amount and any premium or discount is recorded in a separate account. Under IFRS, bonds payable is recorded at the carrying value so no separate premium or discount accounts are used.

A loss on impairment of an intangible asset under U.S. GAAP is the asset's: a. carrying amount less the expected future net cash flows. b. carrying amount less its recoverable amount. c. recoverable amount less the expected future net cash flows. d. carrying value less its fair value.

d. carrying value less its fair value.

Under U.S. GAAP: a. companies must report comprehensive income in a single statement. b. companies must report comprehensive income using a two statement approach. c. companies must report income using a multiple step format. d. companies can report comprehensive income using either a one statement or two statement approach.

d. companies can report comprehensive income using either a one statement or two statement approach.

Under U.S. GAAP: a. lessees and lessors recognize right-of-use assets. b. lessees always use the operating method. c. lessees always recognize a right-of-use asset and lease liability for leases with terms less than one year. d. lessors distinguish between sales-type and direct financing leases.

d. lessors distinguish between sales-type and direct financing leases.

Under IFRS, share dividends declared after the statement of financial position date but before the end of the subsequent events period are: a. accounted for similarly to errors as a prior period adjustment. b. adjusted subsequent events, because they are paid from prior year earnings. c. not adjusted in the current year's financial statements. d. recognized on a prospective basis from the date of declaration.

d. recognized on a prospective basis from the date of declaration.

Common terminology under U.S. GAAP includes all of the following except: a. common stock. b. retained earnings. c. net income/loss. d. reserves.

d. reserves.

With respect to the FASB/IASB conceptual framework projects: a. work is being conducted together on each part of the project. b. work is being conducted with other national standard-setters. c. there was never a plan to develop a common conceptual framework. d. the IASB has worked at a faster pace than the FASB.

d. the IASB has worked at a faster pace than the FASB.

The issues that the FASB must still address in developing its updated conceptual framework include all of the following except: a. whether the characteristic of relevance should be traded off in favor of information that is verifiable. b. the qualitative characteristics of useful information. c. the objective of financial reporting. d. the asset and liability definitions.

d. the asset and liability definitions.