Acct 3302 Intermediate 1

The three types of accounting changes are a change in accounting principle, a change in accounting __________ and reporting __________

- accounting principle. - accounting estimate. - reporting entity.

Statement of Cash Flow

A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.

Which of the following is a category of accounting change? Multiple choice question. Liability classification Accounting principle Accounting structure Asset classification

Accounting principle

Other comprehensive income is reported in the current reporting period on the income statement or as an addition to the income statement, and ___________ other comprehensive income is reported on the balance sheet.

Accumulated

Revenues

An inflow of resources resulting from providing goods or services to customers

Cash flows from investing activities include inflows and outflows of cash related to the acquisition and disposition of long-term __________ used in operations. (Enter only one word.)

Assets

Which of the following is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding? Multiple choice question. Diluted earnings per share Basic earnings per share Price to earnings Return on equity

Basic earnings per share

Which of the following is a routine change in estimate that does not require a disclosure note if the amount is not material? (Select all that apply.) -Change in depreciation method. -Change in depreciable lives. -Change in revenue recognition method. -Change in estimate for uncollectible accounts.

Change in depreciable lives. Change in estimate for uncollectible accounts.

Which of the following items are reported as components of operating income for most manufacturing and merchandising companies?

Change in inventory methods. Change in revenue recognition methods. Change to a new standard issued by the FASB.

Which of the following are changes in accounting estimates? (Select all that apply.) Multiple select question. Changing the estimate for future warranty expenses. Changing inventory methods. Changing the bad debt estimate. Changing the useful life of an asset.

Changing the estimate for future warranty expenses. Changing the bad debt estimate. Changing the useful life of an asset.

Revenues, expenses, gains, losses, and income tax related to a(n)___________ ______________ must be removed from continuing operations and reported separately on the income statemen

Discontinued Operations

A change in the residual value of a depreciable asset is treated as a change in accounting estimates .

Estimates

True or false: Income tax expense may be disclosed either on the income statement or in the notes to the financial statements.

False

True or false: Income tax expense may be disclosed either on the income statement or in the notes to the financial statements.

False: Income tax expense must be disclosed as a separate line item on the income statement.

Cash borrowed or paid to a creditor is an example of a(n) Blank______ activity. investing operating financing

Financing

Where on the income statement is income tax expense reported?

In a separate line

Which of the following are accounting errors? (Select all that apply.) Multiple select question. Changing from LIFO to FIFO. Using a different depreciation method. Making a mistake in calculating depreciation expense. Forgetting to accrue salary expense.

Making a mistake in calculating depreciation expense. Forgetting to accrue salary expense.

Mint Corp. has net credit sales of $300,000 for year 2. Mint has the following information in its accounting records: End of Year 1 End of Year 2 Accounts receivable $ 50,000 $ 70,000 Inventory 80,000 120,000 Total assets 400,000 500,000 The receivables turnover ratio is Multiple choice question. 0.60 0.67 5 0.23 3

Net sales / avg account Rcvbls net 5% 300,000/((50,000+70000)/2)= 5%

Compute the asset turnover ratio using the following information: net sales is $100,000 for the year, last year's assets in place were $900,000 and this year's assets in place are $1,100,000. Receivables for both years are $50,000. Multiple choice question. 9% 20% 11% 10%

Net sales / avg total assets Reason: Net sales/average total assets = $100,000/[($900,000 + $1,100,000)/2] = 10%

What is the formula for the asset turnover ratio? Multiple choice question. Average assets divided by net sales. Net sales divided by average total assets. Net sales divided by average accounts receivable.

Net sales divided by average total assets.

Where are the elements of net income found on a cash basis rather than an accrual basis? Multiple choice question. In the statement of operations Operating activities section of the statement of cash flows In the statement of earnings Investing activities section of the statement of cash flows

Operating activities section of the statement of cash flows

Expenses

Outflows of resources incurred while generating revenues. Represent the cost of providing goods and services

Profit margin on sales, return on assets, and return on shareholders' equity are commonly used profitability ratios

Profitability

Select all that apply The purpose of the statement of cash flows includes which of the following? (Select all that apply.) Multiple select question. Provide information about cash disbursements on a specific date. Provide information about cash receipts on a specific date. Provide information about cash disbursements during a period. Provide information about cash receipts during a period.

Provide information about cash disbursements during a period. Provide information about cash receipts during a period.

______ costs include costs associated with shutdown or relocation of facilities.

Restructuring

Which of the following are commonly used to assess a company's profitability? Multiple select question. Return on assets Profit margin on sales Current ratio Return on equity Quick ratio

Return on assets Profit margin on sales Return on equity

Which is a significant noncash activity? Multiple choice question. Signing a note payable in exchange for land. Receiving proceeds from sale of stock. Collecting on customer accounts. Repurchasing common stock.

Signing a note payable in exchange for land

The two general approaches for preparing an income statement are the ____________ step and _________ step approaches.

Single and Multi-step (Multiple)

The financial statement that provides information about cash receipts and cash disbursements for the period is the Multiple choice question. statement of retained earnings. income statement. statement of cash flows. balance sheet.

Statement of cash flows

Nonoperating items that are not expected to continue into the future are considered a Blank______ component of earnings and should be Blank______ when forecasting future performance.

Temporary & Excluded

The single-step and the multiple-step formats are most commonly used in income statement preparation; however, there are no specific standards on how income from continuing operations must be displayed.

True

True or false: Reporting comprehensive income can be done with a single, continuous statement or in two separate, but consecutive statements.

True

The statement of cash flows is useful because Multiple choice question. it is prepared on an accrual basis. it provides more accurate information than the balance sheet. it is more accurate in measuring net income for the period. accrual-based income is not an indication of cash flows.

accrual-based income is not an indication of cash flows

Income smoothing describes the concept that

managers manipulate the pattern of income to not vary much between years.

In calculating basic earnings per share, Blank______ is divided by the weighted average common shares outstanding. Multiple choice question. average total assets at the end of the period ending retained earnings of the period net income less any preferred stock dividends net income plus preferred stock dividends

net income less any preferred stock dividends

Discontinued operations should be reported on the income statement

net of tax below income from continuing operations.

The correction of a material error in the prior year's financial statements is considered a Multiple choice question. change in accounting estimate. change in reporting entity. change in accounting principle. prior period adjustment.

prior period adjustment.

A change in depreciation method is accounted for by -retrospectively restating the prior year financial statement -adjusting the beginning balance of retained earnings and future balances -prospectively applying the new method

prospectively applying the new method

A change in depreciation method is accounted for by Multiple choice question. adjusting the beginning balance of retained earnings and future balances retrospectively restating the prior year financial statement prospectively applying the new method

prospectively applying the new method

True or false: Net income is a portion of comprehensive income.

true

Basic earnings per share is calculated as net income available to common shareholders divided by

weighted average common shares outstanding.

Basic earnings per share is calculated as net income available to common shareholders divided by ending retained earnings. average total assets. weighted average common shares outstanding. average stockholders' equity.

weighted average common shares outstanding.

Gains & Losses

••Increases or decreases in equity from peripheral or incidental transactions of an entity

Which of the following are acceptable methods for reporting comprehensive income? (Select all that apply.) Multiple select question. In one single statement of comprehensive income in two consecutive statements - income statement and comprehensive income statement in two consecutive statements - income statement and shareholders' equity statement in one single statement of shareholders' equity

-In one single statement of comprehensive income -in two consecutive statements - income statement and comprehensive income statement

The statement of cash flows is useful because (select all that apply) Multiple select question. it reveals the company's ability to generate positive cash flow from its normal operations it provides a more accurate prediction of the company's ability to generate future cash flows than income does it provides information about liquidity

-it reveals the company's ability to generate positive cash flow from its normal operations -it provides information about liquidity

To qualify as an operation for purposes of determining discontinued operations, which of the following must occur? (Select all that apply.)

1. A strategic shift is represented that will have a major effect on financial results. 2. A component of the entity has been sold, disposed of, or is held for sale.

How are discontinued operations reported? (Select all that apply.)

1. As a separate line item on the income statement. 2. Below income from continuing operations. 3. With separate reporting of the tax effect on the item of discontinued operations.

Which of the following situations qualifies for treatment as a change in accounting principle? (Select all that apply.) Multiple select question. Change from percent-of-completion to completed contract method. Change from LIFO to FIFO. Change from direct write-off method to allowance method. Change from aging method to percent-of-credit sales method for bad debts.

1. Change from percent-of-completion to completed contract method. 2. Change from LIFO to FIFO.

Which of the following terms are used to describe an income statement? (Select all that apply)

1. Statement of Operations 2. Statement of Earnings

In looking at earnings quality, analysts try to separate a company's___________ earnings effects from its ___________ earnings.

1. TEmporary 2. Permanent

Which of the following items are included in calculating operating income?

1. expenses related to primary revenue-generating activities 2. revenues related to primary revenue-generating activities

Which of the following items are reported as components of operating income for most manufacturing and merchandising companies? (Select all that apply.)

1. selling expenses 2 administrative expenses 3. revenues

Income Statement

a financial statement that gives operating results for a specific period. AKA State of Operations

Which of the following is a category of an accounting change?

accounting principal

Comprehensive Income

an income measure that includes gains and losses that are excluded from the determination of net income

The formula to compute the receivables turnover ratio is net credit sales divided by Multiple choice question. average accounts receivable cost of goods sold the receivable turnover ratio average total assets

average accounts receivable

Asset turnover ratio is net sales divided by Multiple choice question. average total assets. average current assets. average accounts receivable. average noncurrent assets.

average total assets.

Accumulated other comprehensive income (AOCI) is found on what financial statement?

balance sheet

Non-GAAP earnings are calculated

based on management's assumptions of permanent earnings.

Incidental Gains & Losses Example

can arise when a company sells investments or property, plant, and equipment for an amount that differs from their recorded amount.

The potential tax expense or benefits of items reported as components of Other Comprehensive Income Multiple choice question. can be shown separately for each item or aggregated and reported as one line item must be presented separately for each item must be aggregated for all items and reported as one line item

can be shown separately for each item or aggregated and reported as one line item

A discontinued operation is reported when a ____________ of an entity either (a) has been disposed of or (b) is classified as held for sale.

component

Net income is a part of Multiple choice question. comprehensive income cost of goods sold gross income gross margin

comprehensive income

Separate reporting as a(n) ____________ operation is required when the disposal of a component represents a strategic shift that has, or will have, a major effect on a company's operations and financial results.

discontinued

U.S. GAAP requires that a statement of cash flows must be presented for Multiple choice question. each period in which an income statement is not prepared. each period for which a balance sheet and income statement are prepared. every reporting period to date.

each period for which a balance sheet and income statement are prepared.

The evidence that a financial statement user or analyst might use as evidence to suggest that earnings have been smoothed is

earnings have a steady stream over time.

When a transaction is recorded incorrectly or is not recorded at all, this is treated as an accounting .

error

A change in the residual value of a depreciable asset is treated as a change in accounting ___________.

estimate

A change in depreciation method is treated as a change in accounting _______ that is achieved by a change in accounting _________

estimate , principal

Cash borrowed or paid to a creditor is an example of a(n) Blank______ activity. Multiple choice question. investing financing operating

financing

The classifications on the statement of cash flows are cash flows from (Select all that apply.)

financing activities. operating activities. investing activities.

What items must be removed from continuing operations and reported separately for a discontinued operation? (Select all that apply.) gains liabilities assets expenses Revenues tax expense

gains expenses Revenues tax expense

Management's assessment of permanent earnings are referred to as what?

non-gaap earnings

Select all that apply Investing activities involve the acquisition and sale of (Select all that apply.) Multiple select question. nonoperating investment assets. long-lived assets used in business operations. inventories sold in normal operations.

nonoperating investment assets. long-lived assets used in business operations.

In order to provide more complete information, U.S. GAAP allows that any significant noncash investing and financing activities may be reported (Select all that apply.) Multiple select question. in the statement of owners' equity. on the face of the statement of cash flows. in other comprehensive income. in the notes to financial statements.

on the face of the statement of cash flows. in the notes to financial statements.

Inflows and outflows of cash related to the transactions used to determine net operating income are what type of activities? Multiple choice question. Income Operating Financing Investing

operating

The statement of cash flows classifies items as Multiple choice question. operating, investing, and financing. current and noncurrent. operating and nonoperating. recurring and nonrecurring.

operating, investing, and financing.

The correction of a material error in the prior year's financial statements is considered a Multiple choice question. change in accounting estimate. change in accounting principle. change in reporting entity. prior period adjustment.

prior period adjustment.

Question Mode Fill in the Blank Question Fill in the blank question. Costs that are planned and controlled by management that materially change the scope of the business undertaken or the manner in which the business is conducted are called _________ costs

restructuring

Earnings quality refers to

the ability of reported earnings to predict future earnings.

A prior period adjustment requires an adjustment to -the beginning balance of retained earnings. net income in the current year and future years. -the income statement in the current year. the ending balance of other comprehensive income.

the beginning balance of retained earnings.

A prior period adjustment requires an adjustment to Multiple choice question. the beginning balance of retained earnings. the ending balance of other comprehensive income. net income in the current year and future years. the income statement in the current year.

the beginning balance of retained earnings.

Gains and losses from the sale of investments can affect earnings quality because

they are often nonrecurring.