Midterm 1 Acctn 121a

The basis for classifying assets as current or noncurrent is conversion to cash within

one year or the operating cycle, whichever is longer

On October 28, 2013, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2013, the end of the company's fiscal year. The division's loss from operations for 2013 was $2,000,000. The division's book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2013 income statement?

$2,500,000 loss

Tropical Tours reported revenue of $400,000 for its year ended December 31, 2009. Accounts receivable at December 31, 2008 and 2009, were $35,000 and $32,000, respectively. Using the direct method for reporting cash flows from operating activities, Tropical Tours would report cash collected from customers of:

$403,000.

Schneider Inc. had salaries payable of $60,000 and $90,000 at the end of 2008 and 2009, respectively. During 2009, Schneider recorded $620,000 in salaries expense in its income statement. Cash outflows for salaries in 2009 were:

$590,000.

Major Co. reported 2009 income of $300,000 from continuing operations before income taxes and a before-tax loss from discontinued operations of $80,000. All income is subject to a 30% tax rate. In the 2009 income statement, Major Co. would show the following line-item amounts for income tax expense and net income:

$90,000 and $154,000.

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:

Timeliness

A trial balance will not balance if

a journal entry is only partially posted.

Accounting standard-setting has been characterized as

A political process

Notes payable:

Cannot determine its classification without additional information.

The primary objective of financial accounting information is to provide useful information to:

Capital providers

Surefeet Corporation changed its inventory valuation method. Which characteristic is jeopardized by this change?

Consistency.

The quick ratio is:

Current assets minus inventory and prepaid items divided by current liabilities.

Gibson Company paid $3,600 on June 1, 2007 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2007 adjusting entry is

debit Prepaid Insurance and credit Insurance Expense, $2,550.

Lopez Company received $6,400 on April 1, 2007 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue account. The December 31, 2007 adjusting entry is

debit Rent Revenue and credit Deferred Rent, $1,600.

Big-Mouth Frog Corporation had revenues of $120,000, expenses of $200,000, and dividends of $30,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a

debit of $80,000.

Quirk Company purchased office supplies costing $6,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

Debit Office Supplies Expense, $3,600; Credit Office Supplies, $3,600.

The principal concern with accounting for related party transactions is:

Differences between economic substance and legal form.

Cash flows from financing activities include

Dividends paid.

Which of the following is not a long-term investment?

Equipments

Independent auditors express an opinion on the:

Fairness of financial statements

The FASB's conceptual framework's qualitative characteristics of accounting information include:

Faithful representation

Each of the following would be reported as items of other comprehensive income except:

Gains from the sale of equipment

The Maytag Corporation's income statement includes income from continuing operations and a loss from discontinued operations. Earnings per share information would be provided for:

Income from continuing operations, loss from discontinued operations and net income only.

When a company pays its bill from a plumber for previous services on account:

Its debt to equity ratio always decreases.

The conceptual framework's qualitative characteristic of faithful representation includes:

Neutrality.

Cal Farms reported supplies expense of $2,000,000 this year. The supplies account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of supplies the Cal Farms purchased during the year?

$2,200,000.

Lucia Ltd. reported net income of $135,000 for the year ended December 31, 2009. January 1 balances in accounts receivable and accounts payable were $29,000 and $26,000 respectively. Year-end balances in these accounts were $30,000 and $24,000, respectively. Assuming that all relevant information has been presented, Lucia's cash flows from operating activities would be:

$132,000.

At October 1, 2008, Deet Industries had an accounts payable balance of $30,000. During the month, the company made purchases on account of $25,000 and made payments on account of $40,000. At October 31, 2008, the accounts payable balance is

$15,000.

Employees at B Corporation are paid $5,000 cash every Friday for working Monday through Friday. The calendar year accounting period ends on Wednesday, December 31. How much salary expense should be recorded two days later on January 2, assuming no reverse entries were made?

$2,000

An exception that is so serious that a qualified opinion is not justified would result in:

An adverse opinion.

The Management Discussion and Analysis section of the annual report can best be described as:

Biased but informative.

The principal benefit of separately reporting discontinued operations is to enhance:

Predictive ability.

A change in depreciation method is accounted for:

Prospectively, like changes in accounting estimates.

The double-entry accounting system means

The dual effect of each transaction is recorded with a debit and a credit

In a recent annual report, Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of:

The matching principle

Long-term solvency refers to:

The riskiness of a company with regard to the amount of liabilities in its capital structure.

New Oaks Winery requires two months to make wine, two years to age it, one month to bottle it, two months to sell it, and one month to collect the receivable. Its operating cycle is:

Thirty months.

Debits

increase assets and decrease liabilities.

Accrual accounting is used because

it provides a better indication of ability to generate cash flows than the cash basis.

A decrease in net assets arising from peripheral or incidental transactions is called a(n)

loss.