ACCT 321: Final Exam
A primary advantage of the multiple-step format of the income statement over the single-step format is that the multiple-step format: A)classifies expenses by function. B)results in a higher amount of net income. C)separately lists income tax expense. D)lists revenues and expenses in order of their dollar amount.
A
An asset that is generally not expected to be converted to cash or consumed within one year or the operating cycle, whichever is longer, is: A)Building. B)Accounts receivable. C)Inventory. D)Supplies.
A
Cash equivalents would not include: A) Cash not available for current operations. B) Money market funds. C) U.S. Treasury Bills. D) Commercial paper.
A
Change in equity from non-owner sources is: A) Comprehensive income. B) Revenues. C) Expenses. D) Gains and Losses.
A
Compensating balances represent: A)Cash in a bank account that can't be spent. B)Balances in a payroll checking account. C)Accounts that are subject to bank service charges. D)Accounts on which banks pay interest, e.g., NOW accounts
A
Dollar-value LIFO: A)Starts with ending inventory measured at current costs and re-creates LIFO layers for measuring inventory costs. B)Increases the recordkeeping costs of LIFO. C)Only is allowed for internal reporting purposes. D)None of these answer choices are correct.
A
Elements of financial statements do not include: A)Monetary unit. B)Investments by owners. C)Comprehensive income. D)Losses.
A
If a company uses LIFO, a LIFO liquidation causes a company's income taxes to increase: A) When inventory purchase costs are rising. B) When inventory purchase costs are declining. C) Whether inventory purchase costs are declining or rising. D) LIFO liquidation has no effect on a company's income taxes.
A
In a periodic inventory system, the cost of purchases is debited to: A) Purchases. B) Cost of goods sold. C) Inventory. D) Accounts payable.
A
In a periodic inventory system, the cost of purchases is debited to: A)Purchases. B)Cost of goods sold. C)Inventory. D)Accounts payable.
A
In a perpetual average cost system: A) A new weighted-average unit cost is calculated each time additional units are purchased. B) The cost allocated to ending inventory is generally the same as ti would be in a periodic inventory system. C) The moving-average unit cost is determined following each sale. D) The average is determined by dividing the total number of units sold by the cost of units purchased during the period.
A
LeAnn wishes to know how much she should invest now at 7% interest in order to accumulate a sum of $5,000 in four years. She should use a table for the: A)Present value of $1. B)Future value of $1. C)Present value of an ordinary annuity of $1. D)Future value of an annuity due of $1.
A
Of the following, the most important objective for financial reporting is to provide information useful for: A) Making decisions. B) Determining taxable income C) Providing accountability. D) Increasing future profits.
A
On June 17, the Lattern Company issued 120,000 shares of its $0.10 par value common stock in exchange for land. On the date of the transaction, the fair value of the common stock, evidenced by its market price, was $10 per share. The journal entry to record this transaction includes: A) Debit: Land, $1,200,000. B) Credit: Cash, $1,200,000. C) Debit: Land, $12,000. D) No entry for this exchange.
A
Peecher accepted a three-year, noninterest-bearing note in exchange for merchandise sold. Which of the following is true? A)Peecher would credit a discount on notes receivable when recording the sale.B)Peecher would debit interest revenue over the life of the note.C)Peecher would debit notes receivable when the note is collected.D)Peecher would multiply sales revenue by the effective interest rate to determine interest revenue each period.
A
Permanent accounts do not include: A)Cost of goods sold. B)Inventory. C)Current liabilities. D)Accumulated depreciation.
A
Permanent accounts do not include: A)Interest expense. B)Salaries payable. C)Prepaid rent. D)Deferred sales revenue.
A
Prepayments occur when: A)Cash flow precedes expense recognition. B)Sales are delayed pending credit approval. C)Customers are unable to pay the full amount due when goods are delivered. D)Manufactured goods await quality control inspections.
A
Pronouncements issued by the Committee on Accounting Procedures: A)Dealt with specific accounting and reporting problems. B)Were based on exposure drafts and public comment letters. C)Originated from congressional studies and SEC directives. D)Were the outcome of research studies and a theoretical framework.
A
Recent financial statement data for Harmony Health Foods (HHF) Inc. is shown below. Total Liabilities: $540 Total liabilities and equity: $1,20 Income before interest and taxes: $125 Interest expense: $36 Income before tax: $89 Income tax: $27 Net income: $62 HHF's times interest earned ratio is (round to 2 decimal places): A) 3.47 B) 1.73 C) 2.47 D) 10.0
A
Reporting comprehensive income can be accomplished by each of the following methods except: A)in the statement of shareholders' equity. B)a single, continuous statement of comprehensive income. C)in two separate, but consecutive statements. D)all of these answer choices are acceptable methods.
A
Revenue typically should not be recognized until: A) The seller has transferred goods or services to a customer. B) Contracts have been signed and payment has been received. C) Work has been performed and customer has been billed. D) Collection has been made and warrantees have expired.
A
SFAC 8 of the conceptual framework focuses on: A)Objective and qualitative characteristics. B)Presentation and disclosure. C)Recognition and measurement. D)Elements of financial statements
A
Temporary accounts do not include: A)Salaries payable. B)Depreciation expense. C)Supplies expense. D)Cost of goods sold.
A
The conceptual framework's qualitative characteristic of relevance includes: A)Predictive value. B)Verifiability. C)Completeness. D)Neutrality.
A
The conceptual framework's recognition and measurement concepts recognize which one of the following as an assumption? A)Going concern. B)Historical cost. C)Full disclosure. D)Realization.
A
The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be: A) FIFO. B) LIFO. C) Weighted average. D) None of these answer choices are correct.
A
The principal benefit of separately reporting discontinued operations is to enhance: A)predictive ability of future profitability. B)consistency in reporting. C)intraperiod continuity. D)comprehensive reporting
A
Under the LIFO retail method, the denominator in the cost-to-retail percentage includes: A)Net markups and net markdowns. B)Neither net markups nor net markdowns. C)Net markups, but not net markdowns. D)Net markdowns, but not net markups.
A
Under the retail inventory method: A)A company measures inventory on its balance sheet by converting retail prices to cost. B)A company measures inventory on its balance sheet at current selling prices. C)A company measures inventory on its balance sheet on a LIFO basis. D)None of the other answer choices are correct.
A
Under the retail method, in determining the cost-to-retail percentage for the current year: A)Net markups are included. B)Net markdowns are excluded. C)Beginning inventory is excluded. D)All of these answer choices are correct.
A
Which of the following would be disclosed in the summary of significant accounting policies disclosure note? A) Composition of LT Debt: No. Depreciation Method: Yes. B) Composition of LT Debt: Yes. Depreciation Method: No. C) Composition of LT Debt: Yes. Depreciation Method: Yes. D) Composition of LT Debt: No. Depreciation Method: No.
A
A company has the following information available that was used to report ending inventory using the dollar-value LIFO method. Year Year-End Cost. Cost Index 12/31/2020. $320,000 1.05 12/31/2021 347,000 1.08 For the year ended 12/31/2021, the company reported ending inventory at its year-end cost of $347,000. Which of the following statements is correct? A)The company should have multiplied $347,000 by 1.08 to determine ending inventory. B)Most of the ending inventory should be reported at a cost index of 1.05, with the remainder at 1.08. C)The company should have divided $347,000 by 1.05 to determine ending inventory. D)Most of the ending inventory should be reported at a cost index of 1.08, with the remainder at 1.05.
B
A series of equal periodic payments in which the first payment is made one compounding period after the date of the contract is: A)A deferred annuity. B)An ordinary annuity. C)An annuity due. D)A delayed annuity.
B
Accruals occur when cash flows: A)Occur before expense recognition. B)Occur after revenue or expense recognition. C)Are uncertain. D)May be substituted for goods or services.
B
Adjusting entries are needed primarily for: A)Cash basis accounting. B)Accrual accounting. C)Current value accounting. D)Manual accounting systems.
B
Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair value of the old equipment were $82,000 and $90,000, respectively. Assuming that the exchange has commercial substance, Alamos would record a gain/loss of: A) $26,000 B) $8,000 C) ($8,000) D) $0
B
Cash that is restricted and not available for current operations is reported in the balance sheet as: A)Equity. B)Investments. C)Liabilities. D)A separate section between liabilities and equity.
B
Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in: A) Accounts receivable. B) Allowance for uncollectible accounts. C) Bad debt expense. D) Retained earnings.
B
Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in: A)Accounts receivable. B)Allowance for uncollectible accounts. C)Bad debts expense. D)Retained earnings.
B
Comprehensive income is the change in equity from: A)Owner transactions. B)Nonowner transactions. C)Owner and nonowner transactions. D)Capital transactions.
B
Confirmatory value is central to the concept of "earnings quality" because A)It helps investors predict a company's future earnings. B)It allows investors to verify or change their prior assessments of a company's performance. C)It helps investors predict a company's future cash flows. D)It allows investors to compare the performance of a company over time.
B
Consider the following items: Land Equipment Accounts Receivable Notes Receivable (due in 3 months) Accounts Payable Retained Earnings Prepaid Rent Deferred Revenue Buildings Notes Payable (due in 6 months) How many of the items listed above are generally long-term assets? A) Two. B) Three. C) Four. D) Five.
B
Enhancing qualitative characteristics of accounting information include each of the following except: A)Timeliness. B)Materiality. C)Comparability. D)Verifiability.
B
Enhancing qualitative characteristics of accounting information include: A)Relevance and comparability. B)Comparability and timeliness. C)Understandability and relevance. D)Neutrality and consistency.
B
Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition): 40 units at $100 per unit 70 units at $80 per unit 170 units at $60 per unit Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. Ending inventory using the LIFO method is: A) $650 B) $1,000 C) $707 D) $600
B
Galaxy sells used video games for cash and provides a one-week return right. Returns are material and reasonably predictable. Galaxy should: A) Not record sales until the right to return has expired. B) Record a contra-receivable in the year of the sale. C) Recognize a refund liability associated with estimated returns. D) Credit sales in the period of the return.
B
In a perpetual inventory system, which of the following is recorded at the time of the sale? A)Sales revenue only. B)Both sales revenue and cost of goods sold. C)Cost of goods sold only. D)Neither sales revenue nor cost of goods sold
B
Janson Corporation Co.'s trial balance included the following account balances at December 31, 2021: Accounts Receivable: $12,000 Inventory: $40,000 Patent: $12,000 Investments: $30,000 Prepaid insurance: $6,000 Notes receivable, due 2024: $50,000 Investments consist of treasury bills that were purchased in November, 2021, and mature in January, 2022. Prepaid insurance is for two years. What amount should be included in the current assets section of Janson's December 31, 2021, balance sheet? A) $88,000 B) $85,000 C) $55,000 D) $135,000
B
Liquidity refers to: A)The amount of cash on hand at a given time. B)The readiness of an asset to be converted to cash. C)The period until cash is used and refinancing becomes necessary. D)Financial leverage.
B
On April 1 of the current year, Troubled Company factored receivables with a carrying value of $85,000 for $60,000 in cash from Scrooge Lenders. The transfer was made without recourse. The arrangement also includes a factoring fee equal to 4% of the total factored amount. On April 1, Troubled would: A)Credit Deferred Interest Expense for $25,000. B)Credit Accounts Receivable for $85,000. C)Debit Discount on Liability for $25,000. D) Debit Loss on Sale of Receivables for $25,000.
B
On January 1, 2021, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2022. Expenditures on the project were as follows: January 1, 2021: $300,000 September 1, 2021: $450,000 December 31, 2021: $450,000 March 31, 2022: $450,000 September 30, 2022: $300,000 Dreamworld had $5,000,000 in 12% bonds outstanding through both years. Dreamworld's average accumulated expenditures for 2021 was: A) $300,000 B) $450,000 C) $525,000 D) $600,000
B
On July 1, 2021, Cromartie Furniture established a $150 petty cash fund. A check for $150 was made out to the petty cash custodian. During July, the petty cash custodian paid the following bills form the petty cash fund: Office supplies: $36 Postage: $22 Delivery charges: $40 Bottled water: $28 Total: $126 At the end of July the petty cash fund was replenished. The journal entry to establish petty cash fund includes: A) A credit to petty cash and a debit to cash for $150. B) A debit to petty cash and a credit to cash for $150. C) A credit to cash and a debit to various expenses for $126. D) A credit to petty cash and a debit to various expenses for $126.
B
On July 1, 2021, Larkin Co. purchased a $590,000 tract of land that is intended to be the site of a new office complex. Larkin incurred additional costs and realized salvage proceeds during 2021 as follows: Demolition of existing building on site- $81,000 Legal and other fees to close escrow- $13,000 Proceeds form sale of demolition scrap- $9,000 What would be the balance in the land account as of December 31, 2021? A) $684,000 B) $675,000 C) $671,000 D) $590,000
B
Reba wishes to know how much would be in her savings account if she deposits a given sum in an account and leaves it there at 6% interest for five years. She should use a table for the: A)Future value of an ordinary annuity of $1. B)Future value of $1. C)Future value of an annuity of $1. D)Present value of an annuity due of $1.
B
Rent collected in advance is: A)An asset account in the balance sheet. B)A liability account in the balance sheet. C)A shareholders' equity account in the balance sheet. D)A temporary account, not in the balance sheet at all.
B
The FASB issues accounting standards in the form of: A) Accounting Research Bulletins. B) Accounting Standards Updates. C) Financial Accounting Standards. D) Financial Technical Bulletins.
B
The FASB issues accounting standards in the form of: A)Accounting Research Bulletins. B)Accounting Standards Updates. C)Financial Accounting Standards. D)Financial Technical Bulletins.
B
The FASB's conceptual framework's qualitative characteristics of accounting information include: A)Full disclosure. B)Relevance. C)Going concern. D)Historical cost.
B
The conceptual framework's qualitative characteristic of faithful representation includes: A)Predictive value. B)Neutrality. C)Confirmatory value. D)Timeliness.
B
The difference between single-step and multiple-step income statements is primarily an issue of: A)Consistency. B)Presentation. C)Measurement. D)Valuation.
B
The enhancing qualitative characteristic of understandability means that information should be understood by: A)Those who are experts in the interpretation of financial information. B)Those who have a reasonable understanding of business and economic activities. C)Financial analysts. D)CPAs.
B
The purpose of closing entries is to transfer: A) Accounts receivable to retained earnings when an account is fully paid. B) Balances in temporary accounts to a permanent account. C) Inventory to cost of goods sold when merchandise is sold. D) Assets and liabilities when operations are discontinued.
B
Using the dollar-value LIFO retail method for inventory: A)Is the same as dollar-value LIFO, except that the inventory is measured at retail, rather than at cost. B)Combines retail LIFO accounting with dollar-value LIFO accounting. C)Allows companies to report inventory on the balance sheet at retail prices. D)All of these answer choices are correct.
B
When a registrant company submits its annual filing to the SEC, it uses: A)Form 10-A. B)Form 10-K. C)Form 10-Q. D)Form S-1.
B
Which of the following best explains why the taxes on discontinued operations are reported separately from taxes on continuing operations? A)The tax rate applied to discontinued operations typically is lower than that applied to continuing operations. B)The taxes on discontinued operations are not expected to recur in future years. C)The tax rate applied to discontinued operations typically is higher than that applied to continuing operations. D)Companies are allowed to delay tax payments for discontinued operations for up to five years.
B
Which of the following is most likely to be classified as discontinued operations? A)Sale of a small equity method investment in another company. B)Sale of a group of assets that represents a strategic shift in operations. C)Sale of undeveloped land due to lack of customer demand for additional store locations. D)All of the other answers would be classified as discontinued operations.
B
Which of the following is not a concern regarding IFRS adoption by the U.S.? A)Need for the U.S. to have strong influence on the standard-setting process and ensure that standards meet U.S. needs. B)Geographic dispersion of standard setters make it unlikely that boards can interact to achieve consensus. C)The high costs to companies of converting to IFRS. D)The fact that many laws, regulations and private contracts reference U.S. GAAP.
B
Which of the following is true regarding equity? A)It represents how much the owner profits from the business. B)It represents the owner's residual interest in the assets of the business. C)It represents the owner's return for investing in the business. D)It represents the accumulated earnings of the business over time.
B
Which of the following was the first private-sector entity that set accounting standards in the U.S.? A) Accounting Principles Board B) Committee on Accounting Procedure C) Financial Accounting Standards Board D) AICPA
B
A company acquired an office building on 3 acres of land for a lump-sum price of $3,350,000. The building was completely equipped. According to independent appraisals, the fair values were $1,920,000, $1,920,000, and $2,560,000 for the building, land, and equipment, respectively. At what amount would the company record the building? A) $1,860,000 B) $1,940,000 C) $1,005,000 D) None of these answer choices are correct.
C
A company has decided to discontinue a component of its business but, when the reporting period ends, the component has not yet been sold. The amount that the company would report as income from discontinued operations is (ignore tax effects): A)income from operations for the year and the amount by which the component's fair value less cost to sell is greater than book value. B)only the amount by which the component's fair value less cost to sell is less than book value. C)income from operations for the year and the amount by which the component's fair value less cost to sell is less than book value. D)only the component's income from operations for the year.
C
A company uses the allowance method to account for bad debts. What is the effect on each of the following accounts of the collection of an account previously written off? Allowance for Accounts Uncollectible Accounts Receivable a. Increase Decrease b. No effect Decrease c. Increase No effect d. No effect No effect A)Option A B)Option B C)Option C D)Option D
C
A company uses the dollar-value LIFO method to report inventory. In the current year, the cost index for inventory has increased. If the company reports ending inventory at its year-end cost, which of the following statements is correct? A) Reported ending inventory is understated. B) Reported ending inventory is correct. C) Reported ending inventory is overstated. D) Cannot determine with the information given.
C
A company would classify a six-month prepaid insurance policy as: A)Property, plant, and equipment. B)Investment. C)Current asset. D)Goodwill.
C
Allison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,700 and payment terms of 4/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at: A) $6,700 B) $3,216 C) $6,432 D) $6,968
C
An omission in the notes to the financial statements that is so serios that even a qualified opinion is not justified would result in: A) A disclaimer. B) An unqualified opinion. C) An adverse opinion. D) A consistency exception.
C
Assets do not include: A)Property, plant, and equipment. B)Investments. C)Paid-in capital. D)Nontrade receivables.
C
Cash flows from investing do not include cash flows from: A)lending money to another corporation. B)the sale of equipment. C)borrowing. D)the purchase of other corporation's securities.
C
Cash may not include: A) Foreign currency. B) Money orders. C) Restricted cash. D) Undeposited customer checks.
C
Cash may not include: A)Foreign currency. B)Money orders. C)Restricted cash. D)Undeposited customer checks.
C
Chen Inc. accepted a two-year noninterest-bearing note for $605,000 on January 1, 2021. The not was accepted as payment for merchandise with a fair value of $500,000. The effective interest rate is 10%. What is the correct entry to record the note? A) Debit: Notes Receivable, $605,000. Credit: Accounts Receivable, $605,000. B) Debit: Notes Receivable, $500,000. Credit: Accounts Receivable, $500,000. C) Debit: Notes Receivable, $605,000. Credit: Discount on Notes Receivable, $105,000 Credit: Accounts Receivable, $500,000. D) Debit: Notes Receivable, $605,000. Credit: Interest Revenue, $105,000. Credit: Accounts Receivable, $500,000.
C
During periods when costs are rising and inventory quantities are stable, cost of goods sold will be: A)Higher under FIFO than LIFO. B)Higher under FIFO than average cost. C)Lower under average cost than LIFO. D)Lower under LIFO than FIFO.
C
Ending inventory is equal to the cost of items on hand plus: A) Items in transit sold f.o.b. shipping point. B) Purchases in transit f.o.b. destination. C) Items in transit sold f.o.b. destination. D) None of these answer choices is correct.
C
Fundamental qualitative characteristics of accounting information are: A) Relevance and comparability. B) Comparability and consistency. C) Faithful representation and relevance. D) Neutrality and consistency.
C
Fundamental qualitative characteristics of accounting information are: A)Relevance and comparability. B)Comparability and consistency. C)Faithful representation and relevance. D)Neutrality and consistency.
C
Horton Stores exchanged land and cash of $5,000 for similar land. The book value and the fair value of the old equipment were $90,000 and $100,000, respectively. Assuming that the exchange lacks commercial substance, Horton would record land and gain/(loss) on exchange of assets in the amounts of: A) Land: $105,000. Gain/(loss): $0. B) Land: $105,000. Gain/(loss): $10,000. C) Land: $95,000. Gain/(loss): $0. D) Land: $95,000. Gain/(loss): $10,000.
C
In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is: A) Weighted average. B) Moving average. C) FIFO. D) LIFO.
C
In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is: A)Weighted average. B)Moving average. C)FIFO. D)LIFO.
C
In a perpetual inventory system, the cost of inventory sold is: A)Debited to accounts receivable. B)Credited to cost of goods sold. C)Debited to cost of goods sold. D)Not recorded at the time goods are sold.
C
In a perpetual inventory system, the cost of purchases is debited to: A)Purchases. B)Cost of goods sold. C)Inventory. D)Accounts payable.
C
Interest is not capitalized for: A) Assets that are constructed as discrete projects for sale or lease. B) Assets constructed for a company's own use. C) Inventories routinely and repetitively produced in large quantities. D) Interest is capitalized for all of these items.
C
Lanson Corporation Co.'s trial balance included the following account balances at December 31, 2021: Accounts payable: $25,000 Bonds payable: $22,000 Salaries payable: $16,000 Notes payable, due 2022: $20,000 Notes payable, due 2026: $40,000 What amount should be included in the current liabilities section of Lanson's December 31, 2021, balance sheet? A) $63,000 B) $41,000 C) $61,000 D) $101,000
C
Maltec Corporation has started placing its quarterly financial statements on its web page, thereby reducing by 10 days the time to get information to investors and creditors. The qualitative concept improved is: A) Comparability. B) Consistency. C) Timeliness. D) Faithful representation.
C
Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows: Selling price. Costs to sell Replacement cost $620,000 30,000. 520,000 What should be the reported value of Montana's inventory? A)$600,000. B)$520,000. C)$590,000. D)$620,000.
C
Notes payable that are due in two years are: A)Current liabilities. B)Long-term intangible assets. C)Long-term liabilities. D)Long-term investments.
C
On December 31, 2021, the end of Larry's Used Cars' first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the 2021 balance sheet will be valued at: A)$53,600. B)$54,800. C)$52,400. D)$1,200.
C
On September 30, 2021, Corso Steel acquired a patent from Thermo Steel. The agreement specified that Corso will pay Thermo $1,000,000 immediately an then another $1,000,000 on September 30, 2023. An interest rate of 8% reflects the time value of money for this type of loan agreement. (PV value factor is .85734) Corso should record the acquisition of the patent on September 30, 2021, for what amount? A) $2,000,000 B) $1,912,385 C) $1,857,340 D) $1,714,678
C
Present and future value tables of $1 at 11% are presented below. (PVA5,11%= 3.6959) On October 1, 2021, Justine Company purchased equipment form Napa Inc. in exchange for a noninterest-bearing note payable in five equal annual payments of $500,000, beginning Oct 1, 2022. Similar borrowings have carried an 11% interest rate. The equipment would be recorded at: A) $2,500,000 B) $2,225,000 C) $1,847,950 D) $2,115,270
C
The Claxton Company manufactures children's toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to GAAP. How should Claxton report the sale in its income statement? A)Report it as restructuring costs. B)Report it as a discontinued operation. C)Report the income or loss from operations of the division in discontinued operations. D)Report it as a gain on sale of investments included in income from continuing operations.
C
The FASB's conceptual framework's qualitative characteristics of accounting information include: A)Historical cost. B)Realization. C)Faithful representation. D)Full disclosure.
C
The International Accounting Standards Board: A)Was the predecessor to the IASC. B)Can overrule the FASB when their policies disagree. C)Promotes the use of high-quality, understandable global accounting standards. D)Has its headquarters in Geneva.
C
The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year: A)Plus revenues, minus liabilities. B)Plus accruals, minus deferrals. C)Plus net income, minus dividends. D) Plus assets, minus liabilities.
C
The first step, when using dollar-value LIFO retail method for inventory, is to: A)Determine the estimated ending inventory at current year retail prices. B)Determine the estimated cost of goods sold for the current year. C)Determine the cost-to-retail percentage for the current year transactions. D)Price index adjust the LIFO inventory layers.
C
The recognition of which of the following expenses exemplifies the application of matching expenses with the revenues they produced? A) President's salary. B) Research and development. C) Cost of goods sold. D) Advertising.
C
The statement of cash flows reports cash flows from the activities of: A)operating, purchasing, and investing. B)borrowing, paying, and investing. C)financing, investing, and operating. D)using, investing, and financing.
C
When there is agreement between a measure or description and the phenomenon it represents, information possesses which characteristic? A)Verifiability. B)Predictive value. C)Faithful representation. D)Timeliness.
C
Which of the following does not provide guidance about GAAP for companies that are publicly listed on a stock exchange? A)FASB B)IASB C)GASB D)EITF
C
Which of the following has the statutory authority to set accounting standards in the United States? A)FASB. B)IRS. C)SEC. D)AICPA.
C
Which of the following is considered a sale of receivables? A)Pledging receivables. B)Assigning receivables. C)Factoring receivables without recourse. D)None of these answer choices are correct.
C
Which of the following is not a current liability account? A)Accrued payroll. B)Dividends payable. C)Prepaid rent. D)Subscriptions collected in advance from customers.
C
A classified balance sheet _______________: A)Shows only current assets and current liabilities. B)Shows changes in assets, liabilities, revenues and expenses. C)Contains confidential information. D)Shows subtotals for current assets and current liabilities.
D
A company has decided to discontinue a component of its business and sells the component by the end of the year. The amount that the company would report as income from discontinued operations is (ignore tax effects): A)only income from operations for the year. B)only the gain or loss on the disposal of the component's assets. C)income from operations for the year and only a loss on the disposal of the component's assets. D)income from operations for the year and either a gain or loss on the disposal of the component's assets.
D
A series of equal periodic payments that starts more than one period after the agreement is called: A)An annuity due. B)An ordinary annuity. C)A future annuity. D)A deferred annuity.
D
An example of a contra account is: A)Depreciation expense. B)Accounts receivable. C)Sales revenue. D)Accumulated depreciation.
D
Brockton Carpet Cleaning prepares a bank reconciliation at the end of every month. At the end of July, the balance in the general ledger checking account was $2,750 and the bank balance on te bank statement was $2,980. Outstanding checks totaled $680 and deposits in transite were $400. The bank statement revealed that a check written for $120 was incorrectly recorded by Brockton as $220 disbursement. The bank statement listed service charges and NSF check charges totaling $150. The corrected cash balance is: A) $2,270 B) $2,550 C) $2,470 D) $2,700
D
Current assets include cash and all other assets expected to become cash or be consumed: A)Within one year. B)Within one operating cycle. C)Within one year or one operating cycle, whichever is shorter. D)Within one year or one operating cycle, whichever is longer.
D
During periods when costs are rising and inventory quantities are stable, ending inventory will be: A)Higher under LIFO than FIFO. B)Lower under average cost than LIFO. C)Higher under average cost than FIFO. D)Higher under FIFO than LIFO.
D
For companies using FIFO or average cost, inventory is valued at: A)Net realizable value. B)Cost. C)Replacement cost. D)Lower of cost or net realizable value
D
For companies using LIFO, inventory is valued at: A)Net realizable value. B)Cost. C)Replacement cost. D)Lower of cost or market.
D
Four different competent accountants independently agree on the amount and method of reporting an economic event. The concept demonstrated is: A) Reliability. B) Comparability. C) Completeness. D) Verifiability.
D
GAAP is an abbreviation for: A)Generally authorized accounting procedures. B)Generally applied accounting procedures. C)Generally accepted auditing practices. D)Generally accepted accounting principles.
D
If a company has declared bankruptcy, its financial statements likely violate: A) The fair value measurement approach. B) The present value measurement approach. C) The stable monetary unit assumption. D) The going concern assumption.
D
If a company uses the balance sheet approach to estimate bad debt expense, bad debt expense for a period can be determined by: A) Multiplying net credit sales by the bad debt experience ratio. B) Adding the beginning balance in the allowance for uncollectible accounts to the provision for uncollectible accounts and deducting the desired ending abalance in the allowance for uncollectible accounts. C) Multiplying ending accounts receivable in each age category by the expected loss ratio for each age category. D) Taking the difference between the unadjusted balance in the allowance account and the desired balance of the allowance account.
D
In applying LCM, market cannot be: A)Less than net realizable value. B)Greater than the normal profit. C)Less than the normal profit margin. D)Greater than net realizable value.
D
Long-term productive assets used in the normal course of business are typically classified as: A)Current assets. B)Investments. C)Intangible assets. D)Property, plant and equipment.
D
Long-term solvency refers to: A) The efficiency with which a company manages its resources. B) The profitability of a company over a long-term period of time. C) The amount of current assets relative to long-term assets. D) The risk that a company will not be able to pay its long-term debt.
D
Long-term solvency refers to: A)The efficiency with which a company manages its resources. B)The profitability of a company over a long-term period of time. C)The amount of current assets relative to long-term assets. D)The risk that a company will not be able to pay its long-term debt.
D
Making insurance payments in advance is an example of: A)An accrued receivable transaction. B)An accrued liability transaction. C)A deferred revenue transaction. D)A prepaid expense transaction.
D
On April 1 of the current year, Troubled Company factored receivables with a carrying value of $85,000 for $60,000 in cash from Scrooge Lenders. The transfer was made without recourse. On April 1, Troubled would: A) Credit deferred interest expense for $25,000. B) Debit cash for $85,000. C) Credit accounts receivable for $60,000. D) Debit loss on sale of receivables for $25,000.
D
On January 1, 2021, Kendall Inc. began construction of an automated cattel feeder system. The system was finished and ready for use on September 30, 2022. Expenditures on the project were as follows: January 1, 2021: $200,000 September 1, 2021: $300,000 December 31, 2021: $300,000 March 31, 2022: $300,000 September 30, 2022: $200,000 Kendall borrowed $750,000 on a construction loan at 12% interest on January 1, 2021. This loan was outstanding throughout the construction period. The company had $4,500,000 in 9% bonds payable outstanding in 2021 and 2022. Interest (using the specific interest method) capitalized for 2021 was: A) $48,000 B) $42,000 C) $60,000 D) $36,000
D
Operating cash outflows would include: A)Purchase of investments. B)Purchase of equipment. C)Payment of cash dividends. D)Purchases of inventory
D
Recording revenue before it is collected is an example of: A)A prepaid expense transaction. B)A deferred revenue transaction. C)An accrued liability transaction. D)An accrued receivable transaction.
D
Regarding convergence of accounting standards, the FASB and IASB: A)Have agreed to combine their organizations to form the BUSYB. B)Have achieved full convergence with respect to financial instruments. C)Do not intend to work together to achieve convergence where possible. D)Are not likely to achieve full convergence of accounting standards in the near future.
D
The accounting processing cycle: A)Is a three-wheeled vehicle used to deliver audit papers to clients. B)deals only with internal transactions. C)Is the process of bringing the company's financial information up to date before preparing the financial statements. D)Is the process used to identify, analyze, record, and summarize transactions and prepare financial statements.
D
The acquisition costs of property, plant, and equipment do not include: A) The ordinary and necessary costs to bring the asset to its desired condition and location for use. B) The net invoice price. C) Legal fees, delivery charges, installation, and any applicable sales tax. D) Maintenance costs during the first 30 days of use.
D
The purpose of assigning accounts receivable is to: A)Satisfy a court order. B)Complete the legal prerequisites to record their sale. C)Comply with form and content rules of bankruptcy proceedings. D)Provide collateral for a loan.
D
The second step, when using dollar-value LIFO retail method for inventory, is to determine the estimated: A)Ending inventory at current year retail prices. B)Cost of goods sold for the current year. C)Ending inventory at cost. D)Ending inventory at base year retail prices.
D
The transferor is considered to have surrendered control over its receivables if: A) The transferred assets have been isolated form the transferor. B) Each transferee has the right to pledge or exchange the assets it received. C) The transferor does not maintain effective control over the transferred assets through either repurchase or redemption agreements before maturity or the ability to cause the transferee to return the assets. D) All of these answer choices must occur.
D
The transferor is considered to have surrendered control over its receivables if: A)The transferred assets have been isolated from the transferor. B)Each transferee has the right to pledge or exchange the assets it received. C)The transferor does not maintain effective control over the transferred assets through either repurchase or redemption agreements before maturity or the ability to cause the transferee to return the assets. D)All of these answer choices must occur.
D
To understand the components of a company's profitability, an analyst may compute the ratio of each major expense classification to total sales. This type of analysis is known as: A) Cost analysis. B) Horizontal analysis. C) Comparative analysis. D) Vertical analysis.
D
Under the retail method, the denominator in the cost-to-retail percentage does not include: A)Purchases. B)Purchase returns. C)Abnormal shortages. D)Freight-in.
D
When a company accrues salaries at the end of the accounting period: A) Its acid-test ratio increases. B) Its current ratio increases. C) Its debt to equity ratio decreases. D) Its debt to equity ratio increases.
D
When a magazine company collects cash for selling a subscription, it is an example of: A)An accrued liability transaction. B)An accrued receivable transaction. C)A prepaid expense transaction. D)A deferred revenue transaction.
D
Which financial statement provides information for a point in time only? A)Statement of cash flows. B)Income statement. C)Statement of shareholders' equity. D)Balance sheet.
D
Which of the following potentially limit the usefulness of the balance sheet? A) Many valuable resources of the company are not recorded as assets. B) Many items in the balance sheet reflect estimates and judgements of management. C) Property, plant, and equipment are recorded at their book values rather than fair values. D) All of the other answers represent potential limitations.
D
Other things being equal, the present value of an annuity due will be less than the present value of an ordinary annuity. True False
False
Cost of goods sold is debited for the amount of the increase in the LIFO reserve. True False
True
Discounts on notes receivable are recognized as interest earned over the term of the related note. True False
True
Given identical current amounts owed and identical interest rates, annual payments of an ordinary annuity will be greater than annual payments of an annuity due. True False
True