ACT-3365-XTIA

Which of the following accounting changes should be accounted for prospectively?

A change from straight-line to declining balance, a change in the expected salvage value of a depreciable asset, and a change from declining balance to straight-line.

Which of the following is accounted for as a change in accounting principle for a publicly traded corporation?

A change from the FIFO method of costing inventories to the LIFO method.

Which of the following is not a performance obligation?

A right of return.

Retrospective restatement is usually appropriate for a chance in:

Accounting principle

When an accounting change is reported under the retrospective approach, account balances in the general ledger.

Adjusted to what they would have been had the new method been used in previous years.

Which of the following is the best definition of a current liability?

An obligation expected to be satisfied with current assets or by the creation of other liabilities.

Which of the following is not a liability?

An unused line of credit.

Which of the following changes is not usually accounted for retrospectively?

Change from FIFO to LIFO

Retrospective restatement usually is not used for a:

Change in accounting estimate

Retrospective restatement can be used for a

Change in accounting principle, change in error, and change in entity

The prospective approach usually is required for:

Change in estimate

Which of the following is a characteristic of a contract for the purpose of revenue recognition?

Commercial substance

The core revenue principle states that

Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services.

What is the core revenue recognition principle?

Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services.

When is it appropriate to recognize revenue over a period of time?

Companies should recognize revenue over time as the service or product is being provided.

When a change in accounting principle is reported, what is sometimes sacrificed?

Consistency

A discount on a noninterest-bearing note payable is classified in the balance sheet as a:

Contra liability

The exclusive right to benefit from a creative work, such as a film, is a:

Copyright

An accounting change that is reported by the prospective approach is reflected in the financial statements of:

Current and future years

Which of the following is true about deferred revenue?

Deferred revenue is a liability, customer prepayments typically require recognition of deferred revenue, and deferred revenue with respect to gift cards is recognized as revenue when the gift cards expire.

Which of the following is not true about deferred revenue?

Deferred revenue is recognized on credit sales when collectability can be estimated.

The rate of interest that actually is incurred on a notes payable is called the:

Effective rate

Which of the following is considered a performance obligation?

Extended warranties on electronic products

A contractual arrangement under which one party grants another party the exclusive right to use a trademark or tradename

Franchise

Which of the following is true concerning goodwill?

Goodwill is recorded when a company is purchased for more than the fair value of its identifiable net assets.

During 2021, Hoffman Co. decides to use FIFO to account for its inventory transactions. Previously, it had used LIFO.

Hoffman has made a change in accounting principle requiring retrospective approach.

A change that uses the prospective approach is accounted for by:

Implementing it in the current year

The cumulative effect of most changes in accounting principle is reported:

In the balance sheet accounts affected

When is it appropriate to recognize revenue at a single point in time?

It is recognized when the performance obligation is satisfied when the control of the goods or services is transferred from the seller to the customer.

Which of the following is not a characteristic of a liability?

It must be payable in cash.

Disclosure notes related to a change in accounting principle under the retrospective approach should include:

Justification for the change

The cost of constructing a new parking lot at the company's office building would be recorded as:

Land improvement

At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided. These customer advances represent:

Liabilities until the product or service is provided.

Property, plant, and equipment and intangible assets are:

Long-term revenue producing assets

The acquisition costs of property, plant, and equipment do not include:

Maintenance cost during the first 30 days of use

Revenue is likely recognized over time for all the following arrangements except for:

Manufacturing generally stocked items ordered by a favored customer.

Current liabilities are normally recorded at their

Maturity amount

Large, highly-rated firms sometimes sell commercial paper:

To borrow funds at a lower rate through a bank

Regardless of the type of accounting change that occurs, the most important responsibility is.

To communicate that a change has occurred.

The exclusive right to display a symbol of product identification is:

Trademark

Assets acquired under multi-year deferred payment contracts are:

Valued at the present value of the payments required by the contract

The customer is more likely to control a good or service if the customer has:

1. An obligation to pay the seller. 2. Legal title to the asset. 3. Physical possession of the asset. 4. Assumed the risks and rewards of ownership. 5. Accepted the asset.

What are the five steps used to apply the core revenue recognition principle?

1. Identity the contract with a customer. 2. Identity the performance obligation(s) in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to each performance obligation. 5. Recognize revenue when (or as) each performance obligation is satisfied.

What is the criteria for recognizing revenue over time?

1. The customer consumes the benefit of the seller's work as it is performed. 2. The customer controls the asset as it is created. 3. The seller is creating an asset that has no alternative use to the seller, and the seller has the legal right to receive payment for progress to date.

Productive assets that are physically consumed in operations are:

Natural resources

Companies should report the cumulative effect of an accounting change in the income statement:

Never

Which of the following is generally associated with accounts payable?

No interest expense and not reported at present value

The most common type of liability is:

One to be paid in cash and for which the amount and timing are known.

An exclusive 20-year right to manufacture a product or to use a process is a:

Patent

The capitalized cost of land excludes:

Property taxes for the first year owned.

Prior years' financial statements are restated under the:

Retrospective approach

The rate of interest printed on the face of a note payable is called the:

Stated rate

Which of the following is not one of the approaches for reporting accounting changes?

The change approach

For contracts that include more than one separate performance obligation:

The contract price is allocated to each performance obligation in proportion to the obligation's stand-alone selling price?

Which of the following should not be accounted for prospectively?

The correction of an error

Goodwill is

The excess of the fair value of a business over the fair value of all net identifiable assets.

For a typical manufacturing company, the most common critical point for recognizing revenue is the date:

The product is delivered

A contract does not exist for the purposes of applying the revenue recognition principle in all of the following cases except for when

The seller and buyer did not sign a formalized written contract

Which of the following changes in inventory costing usually should not be reported by revising the financial statements in prior periods?

The weighted-average method to the LIFO method.

Assets acquired in a lump-sum purchase are valued based on:

Their relative fair values