Financial Accounting

Under ASC Topic 606 for revenue recognition, which of the following factors is not an indicator of the principal/agent determination? A) Inventory risk. B) Credit risk. C) Shipping terms. D) Control of prices of the goods or services.

C) Shipping terms.

The expense matching principle states that: A) Expenses are recognized when paid. B) All expenses are recognized when the corresponding revenue is recorded. C) Some expenses are recognized when the corresponding revenue is recognized and some are spread over time. D) Expenses are recognized when the invoice is received.

C) Some expenses are recognized when the corresponding revenue is recognized and some are spread over time.

Net property, plant and equipment are reported on the balance sheet at: A) current market value. B) historical cost. C) historical cost minus accumulated depreciation. D) net realizable value

C) historical cost minus accumulated depreciation.

The real accounting issue in net income recognition is the: A) quantity of income recognized. B) type of income recognized. C) timing of the recognition. D) basis of net income recognition.

C) timing of the recognition.

Adjusting entries are used in all but which of the following situations? A) Prepayments. B) Deferred Revenue and Expenses. C) Accrued Revenue and Expenses. D) Prepayments, Deferred Revenue, Accrued Expenses, Accrued Revenue.

B) Deferred Revenue and Expenses.

Investors and analysts must have certain capabilities regarding financial reporting which include: A) an understanding of current financial reporting standards. B) recognition that management selects the financial reporting standards used. C) an ability to recognize that financial statement information reported is grounded in judgment as well as facts. D) all of these answer choices are correct.

D) all of these answer choices are correct.

A component of an entity may be a/an: A) reportable or operating segment. B) subsidiary. C) asset group. D) reportable or operating segment, subsidiary, or asset group.

D) reportable or operating segment, subsidiary, or asset group.

Which of the following is not correct with respect to accrual accounting? A) Accrual accounting can produce large discrepancies between the firm's reported profit performance and the amount of cash generated from operations. B) The principles that govern revenue and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cashbasis accounting. C) Reported accrual accounting net income for a period always provides an accurate picture of underlying economic performance. D) Accrual accounting does not decouple measured earnings from operating cash inflows and outflows.

D) Accrual accounting does not decouple measured earnings from operating cash inflows and outflows.

Accounting information is heavily regulated: A) To increase reporting efficiency. B) With the intention of preventing market failure. C) To prevent abuse given that the incentives of information producers are not necessarily aligned with those of users. D) All of these answer choices

D) All of these answer choices

Identify the correct order of the three steps constituting the FASB's "due process" procedure. A) Publichearing stage, exposure-draft stage, and voting stage. B) Discussionmemorandum stage, publichearing stage, and voting stage. C) Exposuredraft stage, discussionmemorandum stage, and voting stage. D) Discussionmemorandum stage, exposuredraft stage, and voting stage

D) Discussion memorandum stage, exposure draft stage, and voting stage

Which item below does not describe a politically vulnerable firm? A) The firm has contracts controlled by the government. B) The firm may face antitrust litigation or loss of protective import quotas. C) The firm is in a highly visible industry such as oil & gas or pharmaceuticals. D) The firm may be attacked in the financial and popular press for generating high earnings

A) The firm has contracts controlled by the government.

Which of the following statements is correct regarding revenue and expense accounts? A) These are really owners' equity accounts. B) These are really contributed capital accounts. C) They have no impact on the balance sheet. D) These are balance sheet accounts.

A) These are really owners' equity accounts.

Black & Decker decides to discontinue producing toasters in lieu of more versatile toaster ovens. In the process of discontinuing this line, the company disposes of the old production equipment and buys new equipment. The disposal of the old equipment would be reported in the income statement as: A) gain or loss on the sale of equipment as part of continuing operations. B) gain or loss on the sale of production equipment as part of cost of goods manufactured and sold. C) gain or loss on the disposal of discontinued business component. D) income from operation of a discontinued business component.

A) gain or loss on the sale of equipment as part of continuing operations.

The best measure of a firm's sustainable income is: A) income from continuing operations. B) income before income tax. C) income before unusual items and change in accounting principle. D) net income.

A) income from continuing operations.

Margot reviews the financial statements of a potential investment target. She notices that in the company's multiple-step income statement a separately listed gain is reported as part of "income from continuing operations." Based on this information, Margot should: A) not assume that the gain will recur regularly. B) assume that the gain will recur regularly. C) assume that the gain will never recur. D) make no assumption regarding the validity of the information.

A) not assume that the gain will recur regularly.

Which statement is not true regarding the conservatism convention in accounting? A) Conservatism guides us to choose the approach that leads to lower assets or higher liabilities. B) Conservatism means we only record that of which we are 100% certain. C) Conservatism is sometimes used to defend poor accounting judgments. D) Conservatism strives to ensure that business risks and uncertainties are adequately reflected in the financial statements

B) Conservatism means we only record that of which we are 100% certain.

In designing audit procedures the auditor will include all of the following except: A) Industry conditions. B) Global economic trends. C) Assessing the reasonableness of the numbers in relation to the company's activities. D) Fraud risk factors that may be present.

B) Global economic trends.

A special one-time charge resulting from corporate restructurings would be reported on the income statement as a/an: A) operating item before gross profit. B) special item in continuing operations. C) special item in continuing operations, shown net of tax. D) special item in discontinued operations, shown net of tax

B) special item in continuing operations.

Revenue is recognized when: A) a contract is signed by both parties. B) the seller completes performance required by an agreement. C) the buyer completes payment required under an agreement. D) the buyer accepts delivery and completes required payments.

B) the seller completes performance required by an agreement.

It is common for shareholders to initiate litigation when: A) the company reports record profits, but does not declare dividends B) there is a sudden drop in stock price shortly after the company released new financial information. C) the company introduces new products that are found to be harmful to the environment. D) rumors about the company appear in the media that, if true, would result in slower growth in future profits.

B) there is a sudden drop in stock price shortly after the company released new financial information.

The Financial Accounting Standards Board has responsibility for the establishment of U.S. accounting standards and: A) full statutory power to enforce compliance with GAAP. B) authority from the SEC to enforce compliance with GAAP. C) no authority or responsibility to enforce compliance with GAAP. D) responsibility imposed by AICPA to enforce compliance with GAAP

C) no authority or responsibility to enforce compliance with GAAP.

A firm's financial statements contain trends that give users insight into the firm's: A) future market share. B) position within its industry. C) profitability, productivity, and liquidity. D) current market price for common and preferred stock

C) profitability, productivity, and liquidity.

ASC content is organized A) alphabetically by topic. B) in chronological order based on the issue date of the major pronouncement on which the content is based. C) without numerical reference to the original standard from which the content was derived. D) in the manner prescribed by the IASB

C) without numerical reference to the original standard from which the content was derived.

Mr.

Pappendick

What will Richard score on this test

ight

What is Will Russell's middle name?

Trick question; does not have one

The Canon Corporation sells ten copiers to the Title Company on October 15 for $40,000. Canon delivers the copiers to Title on October 20 and Title pays $16,000, agreeing to pay the balance on November 10. Under the accrual basis, how much revenue should Canon recognize in November? A) $0 B) $16,000 C) $24,000 D) $40,000

A) $0

230) Which of the following transactions would be reported within the investing activities section of the cash flow statement? A) The cash sale of a building at a loss. B) The sale of a building in exchange for a parcel of land. C) The exchange of a stock investment in order to retire a long-term debt. D) The acquisition of treasury stock in exchange for cash.

A) The cash sale of a building at a loss.

Borden Construction entered into the following contracts with Lovely Landscaping, LLP: (1) construct a paver patio, (2) plant trees, and (3) landscape planting beds for a new home construction project. Lovely Landscaping should treat the contracts: A) as a single contract. B) as three separate contracts. C) as two contracts—one for hardscaping and one for landscaping. D) None of the answer choices are correct.

A) as a single contract.

Which of the following is an acceptable accounting approach for distributions under the equity method? A) cumulative earnings approach B) net accumulated benefits approach C) nature of income approach D) net unrealized appreciation approach

A) cumulative earnings approach

Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. Joe would use an increase in Accumulated Depreciation to: A) increase cash flow from operating activities. B) increase cash flow from investing activities. C) decrease cash flow from investing activities. D) decrease cash flow from operating activities.

A) increase cash flow from operating activities.

Assuming the requirements for recognizing revenue over time are met, the profit to be recognized in any year is based on the completion ratio of: A) incurred contract costs divided by estimated total contract costs. B) incurred contract costs multiplied by estimated total contract costs. C) estimated total contract costs divided by incurred contract costs. D) estimated total contract costs multiplied by incurred contract costs

A) incurred contract costs divided by estimated total contract costs.

Which of the following are primary qualitative characteristics of accounting information? A) Relevance and Timeliness. B) Relevance and Faithful Representation. C) Comparability and Timeliness. D) Verifiability and Understandability.

B) Relevance and Faithful Representation.

Which of the following accounting standards permit(s) companies to apply short-term lease accounting rules to low-value assets? A) U.S. GAAP only. B) IFRS only. C) Both U.S. GAAP and IFRS. D) Neither U.S. GAAP nor IFRS.

B) IFRS only.

Which of the following statements is not true regarding the software developer example provided in ASC Topic 606 guidance for revenue recognition? A) The example deals with the license of software. B) Software installation, software updates, and technical support are not addressed. C) The example covers four distinct performance obligations. D) All the performance obligations can be separately identified.

B) Software installation, software updates, and technical support are not addressed.

In a common-size balance sheet, each balance sheet account is expressed as a percentage of total: A) liabilities. B) assets. C) shareholders' equity. D) assets plus shareholders' equity.

B) assets.

160) Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. An increase in the Computer Equipment account would: A) decrease cash flow from financing activities. B) decrease cash flow from investing activities. C) increase cash flow from operating activities. D) increase cash flow from investing activities

B) decrease cash flow from investing activities.

The indirect method of presenting cash flow from operating activities: A) is strongly recommended by both U.S. GAAP and IFRS. B) focuses on how cash flows deviate from a natural benchmark - net income. C) presents cash transactions related to the determination of net income. D) is more difficult than the direct method to incorporate working capital changes into a financial model.

B) focuses on how cash flows deviate from a natural benchmark - net income.

Current liabilities are reported on the balance sheet at: A) current market value. B) historical cost. C) discounted present value. D) future value.

B) historical cost

Peter Inc. currently holds cash denominated in Euros. In its consolidated balance sheet, Peter Inc. should report the cash A) in Euros. B) in Dollars. C) at its present value. D) at its future value.

B) in Dollars.

235) Investing transactions that do not directly and immediately affect cash are: A) included in the cash flow statement. B) included on a supplemental schedule to the cash flow statement. C) reported separately in the cash flow statement. D) reported separately in the retained earnings statement.

B) included on a supplemental schedule to the cash flow statement.

Burgers and More operates a chain of fast-food restaurants across the United States. The restaurants are franchised operations. Under the franchise agreement, restaurant owners have the right to use the Burgers and More trade name, financing arrangements for franchisees, and management training at the corporate headquarters as well as the right to use training videos for their employees. The Burgers and More franchise contracts contain the following separate performance obligations: A) intellectual property, training B) intellectual property, financing, and training C) intellectual property D) financing and training

B) intellectual property, financing, and training

Donald Company, which operates in the life sciences industry, routinely fulfills services subject to ongoing negotiations that determine reimbursement of regulated rates. Donald properly applies the "variable revenue" guidance under ASC 606. Donald should: A) defer revenue until the reimbursement rate is fixed. B) recognize revenue over time. C) recognize revenue at the inception of the related contract. D) defer revenue until the reimbursement rate can be estimated with 90% certainty.

B) recognize revenue over time.

Internet companies that simply act as agent or broker for the transfer of goods must record revenue based on: A) the cost of the product sold. B) the fees it charges sellers. C) the sales price of the product. D) the gross profit of the product sold

B) the fees it charges sellers.

Inventory purchases $ 40,000 Advertising costs 8,000 Delivery costs 2,000 Hickory sold $32,000 of the inventory and has agreed to pay warranty expenses for its customers. These are expected to be $1,600 and occur evenly over the next four months (i.e., starting in June). What is the amount of Hickory's May expenses when applying the matching principle? A) $33,600 B) $42,400 C) $43,600 D) $50,000

C) $43,600

Which of the following transactions would not be reported within the financing activities section of the cash flow statement? A) The payment of a cash dividend. B) An issue of preferred stock in exchange for cash. C) An issue of common stock in order to retire a bond liability. D) The payment of cash to acquire shares of common stock to be held as treasury stock.

C) An issue of common stock in order to retire a bond liability.

Which of the following statements is not correct with respect to accounting for Guarantees? A) When one company guarantees the debt of another company, that contingency must be disclosed even if the contingency is only remotely possible. B) The Guarantee liability account represents deferred revenue associated with the stand ready fee. C) Both the "stand ready obligation" and the contingent future obligation are recorded at fair value. D) The Guarantee liability account decreases over the life of the loan as revenue is earned.

C) Both the "stand ready obligation" and the contingent future obligation are recorded at fair value.

The FASB decided that the allocation of income taxes paid to operating, financing, and investing activities would be complex and arbitrary, and relied on which one of the following justifications for its decision? A) Materiality constraint B) Historical cost C) Cost-benefit constraint D) Revenue recognition principle

C) Cost-benefit constraint

Under ASC Topic 606 for revenue recognition, which of the following statements is not accurate regarding performance obligations? A) Firms must disclose qualitative information about their performance obligations. B) Firms must disclose warranties provided. C) Firms are not required to disclose any judgments used to apply the standard. D) Firms must disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations.

C) Firms are not required to disclose any judgments used to apply the standard.

On balance sheets prepared in accordance with U.S. GAAP: A) assets are generally listed from least liquid to most liquid. B) liabilities are generally netted against assets. C) assets are generally listed from most liquid to least liquid. D) both tangible and intangible long-lived assets can be revalued upward periodically.

C) assets are generally listed from most liquid to least liquid.

Smith Company elected to use the cumulative earnings approach for distributions from its equity-method investment purchased at the beginning of 20X1. During 20X1, Smith earned $244,000 on the investment and received $110,000 in dividends. In its statement of cash flows— direct method, Smith should report the dividends as a(n): A) investing activity. B) financing activity. C) operating activity. D) noncash investing and financing activity

C) operating activity.

Hargren Publishing offers its Accounting textbooks as e-texts through its online homework management system. Purchase of an access code provides the student with access to the e-text and online learning materials for six months. During that time, students have access to updates to the text and learning materials. Hargren should recognize revenue for purchases of access codes: A) at the end of the six-month access period. B) when they occur. C) over the sixmonth period during which the customer has access. D) at the beginning of the semester in which the student will use the access code.

C) over the sixmonth period during which the customer has access.

Which one of the following equations explains why successive balance sheets can be used to prepare a firm's cash flow statement? A) Assets = Liabilities − Equity B) Cash - Noncash assets = Liabilities − Equity C) Δ Cash = Δ Liabilities − Δ Noncash assets + Δ Stockholders' equity D) Δ Cash = Δ Liabilities + Δ Stockholders' equity

C) Δ Cash = Δ Liabilities − Δ Noncash assets + Δ Stockholders' equity

Yashito Corporation sells cameras and accessories. The company's newest model, popular with preteens, takes wallet-sized instant photos. The wholesale price for this camera is $50. In addition, the company sells carrying cases ($25), film cartridges ($15), and selfie lenses ($10) made especially for this camera. During the holiday season, Yashito offers the camera, film, carrying case, and selfie lens as a package for $75. For each package sold, the transaction price allocated to the camera is: A) $100. B) $75. C) $50. D) $37.50

D) $37.50

Cash flows from operating activities include: A) cash payments received from customers. B) increases in Accumulated Depreciation. C) deferred income taxes. D) All of these would be included in cash flows from operating activities

D) All of these would be included in cash flows from operating activities

Which of the following disclosures is not required by ASC Topic 606 guidance for revenue recognition? A) Explanation of significant changes in contract assets and liabilities. B) Beginning and ending balances of contract assets and liabilities. C) Amount of revenue recognized in the current period that was included in the beginning contract liability balance. D) Financial stability of major customers.

D) Financial stability of major customers.

240) Which of the following is not an indicator that operating activities cash flows might be increased through distortion or manipulation? A) A significantly large increase in accounts payable. B) A significantly large decrease in accounts receivable. C) A significantly large increase in accrued liabilities. D) Increasing the credit period for a customer with an excellent credit history.

D) Increasing the credit period for a customer with an excellent credit history.

Which of the following statements is not true regarding ASC Topic 606? A) Long-term construction contracts is an area where the new standard clearly differs from existing guidance. B) Adoption for calendar reporting public entities is first required for calendar 2018. C) Current guidance on longterm contracts gives more flexibility to firms for determining when revenue is recognized. D) The new standard precludes the use of percentage-ofcompletion method for longterm construction contracts.

D) The new standard precludes the use of percentage-ofcompletion method for longterm construction contracts.

Examples of variable consideration include all of the following except: A) penalties for not completing performing on a contract on time. B) bonuses for completing performance on a contract early. C) discounts on transaction prices. D) all of the answer choices are correct

D) all of the answer choices are correct

A right of return exists when: A) the customer is entitled to a full or partial refund. B) the customer is entitled to a credit against amounts owed. C) the customer is entitled to another product in exchange. D) any one of these conditions is met.

D) any one of these conditions is met.

The key accounting issue related to bundled products such as software licenses and technical support: A) is the method of revenue recognition. B) is the amount of revenue to recognize over the life of the contract. C) depends on whether the customer is able to pay for the contracted services. D) concerns the amount of transaction price to allocate to each contract element.

D) concerns the amount of transaction price to allocate to each contract element.

As part of a new franchise agreement, the franchisor provides quarterly training of the franchisee's employees, periodic promotion of the franchisee's weekly specials, annual seminars for the franchisee's key personnel, as well as allowing the franchisee to utilize the franchisor's name and logo. This agreement likely includes: A) one performance obligation. B) two performance obligations. C) three performance obligations. D) four performance obligations.

D) four performance obligations.

Balance sheets prepared in compliance with U.S. GAAP reflect a mixture of: A) historical cost and future cash values. B) current value and discounted future cash flows. C) discounted cash flows and future values. D) historical cost, fair value, net realizable value, and discounted present values.

D) historical cost, fair value, net realizable value, and discounted present values.

Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. A decrease in the balance of the Accounts Receivable account would: A) decrease cash flow from financing activities. B) increase cash flow from investing activities. C) decrease cash flow from operating activities. D) increase cash flow from operating activities.

D) increase cash flow from operating activities.

Goodwill arising from a business combination is reported on the balance sheet as a(n): A) current asset. B) fair value asset. C) impaired asset. D) intangible asset.

D) intangible asset.

What is a Joe?

Joe.

What is a Richard?

Science, nor reasoning, can be applied to answer this question

What is the house sandwich?

The #6 from sub shop

Earnings management can occur through a variety of manipulations including: A) Manipulating accrual estimates to impact expenses. B) Misapplications of GAAP deemed immaterial on an account by account basis. C) Big bath restructuring charges. D) All of these answer choices are correct.

D) All of these answer choices are correct.

Accumulated other comprehensive income increases or decreases A) Net income. B) Income from continuing operations. C) Shareholders' Equity. D) Earnings per share.

C) Shareholders' Equity.

If a company fails to disclose information about a lawsuit because it might be embarrassing to the company, it is violating: A) relevance. B) verifiability. C) neutrality. D) timeliness.

C) neutrality.

GAAP requires that each set of EPS numbers includes separately reported numbers for all of the following except: A) special or unusual items. B) income from continuing operations. C) discontinued operations. D) net income.

A) special or unusual items.

Michel Company owns 75% of the outstanding common stock of Aber Corp. On its current consolidated income statement, Michel Company should report: A) 100% of Aber's revenue and expenses. B) 75% of Aber's revenue and expenses. C) 75% of Aber's net income. D) none of Aber's revenue, expenses, and income.

A) 100% of Aber's revenue and expenses.

Which of the following best describes the reporting for discontinued operations? A) Discontinued operations will not generate future cash flows and thus the results of transactions related to operations the firm intends to discontinue, or has already discontinued, must be reported separately from other income items on the income statement. B) Discontinued operations presentation is used only when a component of an entity has been sold. C) There are 4 criteria that must be met to classify a disposal group as held for sale. D) Discontinued operations may generate future cash flows and thus there will be results of transactions related to operations the firm intends to discontinue. If the firm does generate future transactions before disposing of the disposal group, it will report that revenue in continuing operations revenue.

A) Discontinued operations will not generate future cash flows and thus the results of transactions related to operations the firm intends to discontinue, or has already discontinued, must be reported separately from other income items on the income statement.

Which of the following does not represent the impact of the use of stock options when comparing operating cash flows? A) Firms not using stock options will generally have lower compensation expense and higher net income. B) Stock based compensation is a simultaneous operating and financing transaction and must appear in both sections of the statement of cash flows. C) Stock based compensationexpe nse is not presented in the statement of cash flows. D) Stock based compensation impacts income taxes and that impact is reflected in the statement of cash flows.

A) Firms not using stock options will generally have lower compensation expense and higher net income.

Which of the following properly represents the preparation of the statement of cash flows prepared using IFRS rules? A) Firms using the direct method are not required to provide a reconciliation of net income to cash flows from operations. B) The presentation of the statement of cash flows differs to those following U.S. GAAP as a result of prescribed classification differences under IFRS. C) The presentation of the statement of cash flows is the same for all companies preparing statements under IFRS. D) The flexibility provided under IFRS guidance for the preparation of the statement of cash flows increases the comparability of results between companies

A) Firms using the direct method are not required to provide a reconciliation of net income to cash flows from operations.

Which of the following regarding the recognition of contingencies is a correct statement? A) IFRS uses the term contingent liability to include possible but unrecognized contingent obligations. B) U.S. GAAP discloses contingent liabilities in the notes to the financial statements only for recognized contingent loss obligations. C) The threshold for recognition of a contingent obligation is the same under both GAAP and IFRS. D) If the estimated liability is a range in which no value is deemed more reliable than another - both IFRS and GAAP will record the mid-point of the range as the value.

A) IFRS uses the term contingent liability to include possible but unrecognized contingent obligations.

Which of the following statements is correct regarding reporting of "Extraordinary gains and losses" as a separate category on the income statement? A) It is no longer permitted under U.S. GAAP. B) It is permitted under U.S. GAAP, if the related event is both unusual in nature and infrequent in occurrence. C) Is permitted under IFRS, but not U.S. GAAP. D) It is permitted under U.S. GAAP, but not IFRS.

A) It is no longer permitted under U.S. GAAP.

Which of the following would not be considered a revenue recognition abuse? A) Recording goods on consignment as part of inventory when there is a right of return. B) Recording goods on layaway for a customer as a final sale. C) Recording revenue on a large shipment to a customer whose ability to pay is not reasonably assured. D) Recording revenue on goods produced during the current period.

A) Recording goods on consignment as part of inventory when there is a right of return.

Which of the following methods can be used to recognize revenue when a performance obligation is satisfied over time? A) The output method. B) The present value method. C) The future value method. D) The fair value method

A) The output method.

Which one of the following is part of other comprehensive income (OCI)? A) Unrealized gains resulting from remeasuring foreign currency financial statements of majority-owned subsidiaries to U.S. dollar amounts. B) Gains on sales of treasury stock. C) Receipt of land donated by a governmental unit. D) Sale of common stock above par.

A) Unrealized gains resulting from remeasuring foreign currency financial statements of majority-owned subsidiaries to U.S. dollar amounts.

A temporary difference is the result of: A) a revenue or expense item reported in different periods for book purposes and tax purposes. B) fluctuations in the exchange rate. C) adjustments between the trial balance and general ledger. D) delays between the sale of a product and the recording of the account receivable.

A) a revenue or expense item reported in different periods for book purposes and tax purposes.

On a balance sheet prepared under U.S. GAAP: A) accounts receivable is presented at net realizable value. B) inventories are presented at current market price. C) any cash denominated in a foreign currency is disclosed in a footnote. D) most shortterm investments are presented at historical cost.

A) accounts receivable is presented at net realizable value.

When adjusting accrual earnings to obtain cash flows from operations, A) an increase in Accounts Payable is added to determine cash flow from operations. B) a decrease in Accounts Payable is added to determine cash flow from operations. C) an increase in Accounts Payable is deducted to determine cash flows from operations. D) it is not necessary to consider any changes to Accounts Payable.

A) an increase in Accounts Payable is added to determine cash flow from operations.

5) A company's financial statements can be used for all of the following purposes except: A) as a scorecard on the company's social responsibility. B) as a management report card. C) as an early warning signal. D) as a measure of accountability

A) as a scorecard on the company's social responsibility.

Accrual accounting net income can differ from operating cash flows for all of the following reasons except: A) dividend declaration and payment dates. B) useful lives of assets. C) future pension and healthcare benefits. D) estimates of uncollectible accounts.

A) dividend declaration and payment dates.

In 2017, Borden Construction was contracted to build an apartment complex for its client, Deer Park Realty Management. The project was estimated to cost $15 million; however, on December 31, 2017, when the project was 75% complete, Borden estimated that the project costs would be much less, and agreed to adjust the contract price to $10 million. Prior to December 31, 2017, Borden Construction had recognized revenue of $10 million. At year end, Borden should A) make a correction for $2.5 million in overrecognized revenue. B) record nothing. C) record additional $5 million in revenue. D) make a correction for $5 million in overrecognized revenue.

A) make a correction for $2.5 million in overrecognized revenue.

The analyst would most likely understand that the change in the balance sheet account for property, plant, and equipment does not reconcile with the account change included in the statement of cash flows because of a write-off due to impairments which the analyst discovered when examining the: A) notes to the financial statements. B) balance sheet. C) capital stock account. D) investments account.

A) notes to the financial statements.

When the year-to-year changes in comparative balance sheet accounts do not coincide with the changes implied from amounts reported on the statement of cash flows, the analyst may find useful information for reconciliation in notes to the financial statements and the: A) operating activities section of the cash flow statement. B) capital stock account. C) balance sheet. D) investments account.

A) operating activities section of the cash flow statement

The market analysis known as fundamental analysis: A) predicts future trends in the financial drivers of a company's economic success or failure. B) relies on price and volume movement of stock. C) has no insights about company value beyond current market price. D) uses microeconomic data to forecast stock values.

A) predicts future trends in the financial drivers of a company's economic success or failure.

Vogel Inc. reports income related to discontinued operations in its current-year multiplestep income statement. Financial statement users should expect that the line item "income tax expense": A) relates only to income from continuing operations. B) includes all income tax from continuing as well as discontinued operations. C) related only to income derived from gross profit. D) relates only to income from discontinued operations.

A) relates only to income from continuing operations.

170) Under U.S. GAAP, assets are presented in decreasing order of liquidity. Under IFRS, A) tangible assets may be presented first followed by the current assets displayed in increasing order of liquidity. B) the current assets are displayed in increasing order of liquidity. C) investments are listed first in descending order of maturity. D) a company may present its assets in alphabetical order if it so desires.

A) tangible assets may be presented first followed by the current assets displayed in increasing order of liquidity.

In the case of goods delivered to a consignee under a consignment arrangement, A) the consignor should not recognize revenue until the goods are transferred to a third party. B) the cash received to date should be recognized by the consignor as deferred revenue until merchandise is delivered to the consignee. C) revenue should be recognized when the consignor collects payment from the consignee. D) the seller should recognize revenue although the goods have not yet been transferred to a third party.

A) the consignor should not recognize revenue until the goods are transferred to a third party.

Financial reporting philosophies differ across countries. These philosophies evolve from and reflect several factors including all of the following except: A) the language(s) spoken in the country. B) the specific political institutions within the country. C) the specific financial institutions within the country. D) the country's social customs.

A) the language(s) spoken in the country.

The Canon Corporation sells ten copiers to the Title Company on October 15 for $40,000. Canon delivers the copiers to Title on October 20 and Title pays $16,000, agreeing to pay the balance on November 10. Under the cash basis, how much revenue should Canon recognize in October? A) $0 B) $16,000 C) $24,000 D) $40,000

B) $16,000

Which of the following is not an accurate statement related to the demand for financial reporting? A) Economically realistic reporting standards are low when there are few important capital providers. B) Cross-country differences have no impact on capital funding opportunities and financial reporting practices. C) External investors who provide capital demand a reporting system that accurately depicts a company past economic performance and its future prospects. D) Comprehensive financial data is demanded when there is a broad base of external investors

B) Cross-country differences have no impact on capital funding opportunities and financial reporting practices.

Which of the following properly reflects the impact of foreign currency translations on inventory valuations? A) The change in inventory value presented in the balance sheet and statement of cash flows will map directly. B) Differences in inventory valuation affect only firms using the current rate method of translation. C) Differences in inventory valuation affect only firms using the temporal method. D) Differences in inventory valuation occur under both the current and temporal methods of translation.

B) Differences in inventory valuation affect only firms using the current rate method of translation.

______ accounting standards require companies to group items within OCI based on __________: A) U.S. GAAP; whether they will be reclassified subsequently into net income or whether they will be subsequently reclassified into income when specific conditions are met. B) IFRS; whether they will be reclassified subsequently into net income or whether they will be subsequently reclassified into income when specific conditions are met. C) U.S. GAAP; their expected future categorization on the income statement into income from continuing operations and discontinued operations. D) IFRS; their expected future categorization on the income statement into income from continuing operations and discontinued operations.

B) IFRS; whether they will be reclassified subsequently into net income or whether they will be subsequently reclassified into income when specific conditions are met.

Current assets are assets expected to: A) be converted to cash within twelve months. B) be converted to cash within twelve months or one operating cycle if the operating cycle is longer than twelve months. C) remain on the books for at least twelve months. D) remain on the books for at least twelve months or one operating cycle if the operating cycle is longer than twelve months.

B) be converted to cash within twelve months or one operating cycle if the operating cycle is longer than twelve months.

Cash collected from customers can be derived: A) by analyzing changes in the Accounts Payable balance. B) by appropriately adjusting revenue for changes in accounts receivable. C) by appropriately adjusting revenue for changes in accounts payable. D) by analyzing changes to the reserve for doubtful accounts.

B) by appropriately adjusting revenue for changes in accounts receivable.

When reporting unusual or infrequent items in the income statement which of the following is not correct? A) If a material event is either unusual in nature or an infrequent occurrence it is classified on the income statement as a special or unusual item in continuing operations. B) If a material event is either unusual in nature or an infrequent occurrence—such as a one-time charge resulting from a major restructuring—it may be classified on the income statement as a special or unusual item in continuing operations or treated as an extraordinary item if it has been a number of years since the company's last major restructuring. C) Firms that use early debt retirement will report the associated gains and losses as part of income from continuing operations with separate line-item disclosure. D) The write-off of obsolete inventory would be reported on the income statement as a special item in continuing operations.

B) If a material event is either unusual in nature or an infrequent occurrence—such as a one-time charge resulting from a major restructuring—it may be classified on the income statement as a special or unusual item in continuing operations or treated as an extraordinary item if it has been a number of years since the company's last major restructuring.

The discontinued operations section of the income statement is comprised of which one of the following? A) Income from the operation of a discontinued business component and gain or loss from the disposal of the discontinued component. B) Income from the operation of a discontinued business component, net of tax, and gain or loss from the disposal of the discontinued component, net of tax. C) Income from the operation of a discontinued business component, net of tax, and gain or loss from the disposal of the discontinued component. D) Gain or loss from the disposal of the discontinued component, net of tax.

B) Income from the operation of a discontinued business component, net of tax, and gain or loss from the disposal of the discontinued component, net of tax.

Which of the following would be reported in the cash flow from operating activities section of the cash flow statement under the direct method? A) Increase in taxes payable. B) Interest and dividends received. C) Issuance of common stock. D) Cash payments made on short-term notes.

B) Interest and dividends received.

Which of the following would be included in the statement of cash flows in the financing activities section? A) Issuing common stock in exchange for a building. B) Issuing a new class of common stock. C) Issuing common stock in exchange for land. D) Issuing common stock in exchange for equipment will create a cash outflow in the investing activities section of the cash flow statement and a cash inflow in the financing activities section of the cash flow statement.

B) Issuing a new class of common stock.

150) Elaine Company, a clothing store, sells clothing for a total selling price of $50,000 with a related cost of $35,000. Customers have a right of return within 30 days. Elaine Company estimates that 10% of the sales will be returned by customers. The journal entry to recognize the sales will include a credit to A) Unearned sales revenue. B) Refund liability. C) Sales returns and allowances. D) Inventory recovery

B) Refund liability.

Which of the following statements regarding IFRS is incorrect? A) All companies listed on the London Stock Exchange must use IFRS. B) The SECrequired Form 20- F must be filed with the SEC by foreign issuers within 30 days. C) The European Commission must "endorse" IFRS for required use by EU companies. D) The SEC has expressed concern that transitioning to IFRS might be prohibitively expensive and might lessen U.S. influence over standard setting.

B) The SECrequired Form 20- F must be filed with the SEC by foreign issuers within 30 days.

Which one of the following contingencies must be accrued on the balance sheet? A) The likely loss on a lawsuit that the firm's attorneys believe will be dropped. B) The probable loss on a lawsuit that the firm's attorneys believe will be settled for $50,000. C) The reasonably possible loss on a lawsuit that the firm's attorneys believe will be dropped. D) The reasonably possible loss on a lawsuit that the firm's attorneys believe will be settled for $50,000.

B) The probable loss on a lawsuit that the firm's attorneys believe will be settled for $50,000.

The statement of cash flows is used by outside parties in all but which of the following ways? A) To assess equity values since the firm's value is dependent on the discounted present value of its expected future cash flows. B) To assess if the proper amount of income taxes is reported and can be paid from current funds. C) To assess credit risk, as cash flows provide the resources for periodic interest and principal repayment. D) To assess whether to underwrite an issue of debt or equity securities, using the firm's expected operating cash flows in the analysis.

B) To assess if the proper amount of income taxes is reported and can be paid from current funds.

145) Which of the following statements is not true regarding the adoption of ASC Topic 606 guidance for revenue recognition? A) Upon adoption, entities can choose between the retrospective approach or the cumulative effect approach. B) When using the cumulative approach, the prior three years of financial statements need to be restated. C) Under the cumulative effect, the firm determines how the balance sheet would differ as of the first day of the year of adoption. D) Under the retrospective approach, each period presented is restated to what the financial statements would have been had the new standard always been in place.

B) When using the cumulative approach, the prior three years of financial statements need to be restated.

Any increase in an asset may be offset by: A) a corresponding decrease in a liability. B) a decrease in some other asset account. C) a corresponding decrease in owner' equity. D) an increase in another asset account

B) a decrease in some other asset account.

Which one of the following events would be considered an unusual or infrequent event? A) a tornado in Kansas. B) an earthquake in New York. C) a flood in St. Louis near the Mississippi River. D) an earthquake in southern California.

B) an earthquake in New York.

190) A contingent liability that is probable and can be reasonably estimated will immediately result in: A) an increase in both liabilities and stockholders' equity. B) an increase in liabilities and a decrease in net income. C) an increase in liabilities without any need for financial statement disclosure. D) an increase in liabilities and a decrease in assets.

B) an increase in liabilities and a decrease in net income.

Under ASC Topic 606 guidance for revenue recognition, all of the following conditions must be met to account for a contract with a customer, except: A) the contract has commercial substance. B) collection is likely. C) each party's rights are identified regarding goods or services to be exchanged. D) all parties to the contract have approved the

B) collection is likely.

Some countries' philosophy of financial reporting differs from U.S. GAAP because their financial reports are required to: A) be verifiable. B) conform to tax and/or commercial law. C) be reported and measured in a similar manner across companies. D) use the same accounting methods for similar events period to period.

B) conform to tax and/or commercial law.

When a company changes from straight-line to the declining balance method of accounting for depreciation, the financial statements lack: A) comparability. B) consistency. C) neutrality. D) faithful representation.

B) consistency.

Assuming the requirements for recognizing revenue over time are met, the measure of completion is computed by dividing A) profits earned to date by estimated total profits. B) costs incurred to date by estimated total costs. C) costs incurred to date by the contract price. D) profits earned to date by the contract price.

B) costs incurred to date by estimated total costs.

Income statements are classified into sections to: A) separate revenue recognized from deferred revenue. B) distinguish between sustainable and transitory income. ) separate real income from book income. D) distinguish between book income and taxable income.

B) distinguish between sustainable and transitory income.

Investors who presume that they have no insights about company value beyond the current market price and use financial statement data to assess firm-specific attributes believe in the: A) market-tomarket hypothesis. B) efficient market hypothesis. C) fundamental market hypothesis. D) technical market hypothesis

B) efficient market hypothesis.

Investors who follow a fundamental analysis approach: A) determine the value the company's assets would yield if sold individually. B) estimate the value of a stock by assessing the amount, timing, and uncertainty of future cash flows that will accrue to the issuing company. C) assess the company's ability to meet its debtrelated financial obligations. D) assess the company's ability to raise additional cash by selling assets, issuing stock, or borrowing more.

B) estimate the value of a stock by assessing the amount, timing, and uncertainty of future cash flows that will accrue to the issuing company.

The rationale behind the rules for multiple-step income statements is to subdivide the income in a manner that facilitates: A) cash flows. B) forecasting. C) tax return preparation. D) audits.

B) forecasting.

Financial statements follow: A) rigid guidelines that require specific adherence to regulated procedures. B) generally accepted guidelines that allow management a degree of flexibility in choices. C) general guidelines with little choice among different procedures. D) legal requirements for uniform presentation and disclosure.

B) generally accepted guidelines that allow management a degree of flexibility in choices.

Companies that have projected operating cash flows that are more than sufficient to meet debt payments are A) financially risky. B) good credit risk companies. C) undervalued. D) overvalued.

B) good credit risk companies.

Which of the following most accurately describes the SEC's current role in sustainability reporting? The SEC: A) requires that all public companies report on their impact on climate change. B) has outlined how climate change could affect Regulation S-K disclosures. C) requires that Fortune 500 companies issue formal sustainability reports. D) is working closely with the GRI on uniform sustainabilityrelated disclosure requirements.

B) has outlined how climate change could affect Regulation S-K disclosures.

Current U.S. GAAP permits firms to display the components of other comprehensive income in which of the following formats? A) as a schedule appearing in the notes to the financial statements. B) in a twostatement approach, one in which net income comprises one statement and a second, which presents a separate statement of comprehensive income. C) as part of the statement of changes in stockholders' equity. D) as a part of the statement of cash flows.

B) in a twostatement approach, one in which net income comprises one statement and a second, which presents a separate statement of comprehensive income.

The matching principle requires that expenses be recognized: A) in the same period in which all the assets are used up. B) in the same period in which the revenue generated by these expenses is recognized. C) when the costs are paid by the entity. D) in the same period in which the revenue generated by these expenses is received.

B) in the same period in which the revenue generated by these expenses is recognized.

Smidt Company reports a loss related to a recent warehouse flood. Financial statement users should expect to find the related loss reported on the Smidt's multiple-step income statement as part of: A) income from discontinued operations. B) income from continuing operations. C) income from extraordinary events. D) other comprehensive income

B) income from continuing operations.

Net income recognition always increases: A) assets. B) net assets. C) liabilities. D) net liabilities.

B) net assets.

The Additional Paid-In Capital account is reported on the balance sheet at the A) current market value of the stock minus par value. B) original sales price of the stock minus the par value. C) net realizable value of the stock minus par value. D) discounted present value of the future dividends minus par value

B) original sales price of the stock minus the par value.

When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e., nonrecurring) gains or losses and certain other non-cash charges, such earnings are frequently referred to as: A) normal earnings. B) pro forma earnings. C) sustainable earnings. D) real earnings.

B) pro forma earnings.

111) Muenster Company sells its network servers with a warranty than includes preventive maintenance. Muenster should account for the warranty as a(n): A) integral part of the equipment sales. B) separate contract. C) separate performance obligation. D) accrued expense

C) separate performance obligation

T-account analysis can be used to gain insights into why accrual basis earnings and cash basis earnings differ and to: A) journalize future transactions. B) reconstruct transactions that have occurred during a given reporting period. C) post transactions that have occurred during a given reporting period. D) determine the current market price of common stock.

B) reconstruct transactions that have occurred during a given reporting period.

Business enterprises enter into many different types of contracts. Examples of such contracts that often contain language that refers to verifiable financial statement numbers include all of the following except: A) royalty contracts with inventors. B) sales contracts with customers. C) compensation contracts with managers. D) debt contract with bankers

B) sales contracts with customers.

The costs of providing financial information is ultimately borne by: A) management. B) shareholders. C) auditors. D) professional analysts.

B) shareholders.

Which of the following statements is not true regarding the treatment of warranties under the new revenue recognition guidance in ASC Topic 606? A) A warranty that assures the product is free of defects is not a distinct performance obligation. B) Warranties that provide services beyond assuring the product is defectfree at the time of sale are separate performance obligations. C) A warranty that covers services that are normally considered routine maintenance is an assurance warranty. D) The length of the warranty period should be considered.

C) A warranty that covers services that are normally considered routine maintenance is an assurance warranty.

Which statement below best describes when to record an expense? A) When the expense is paid. B) When the resource is consumed or a benefit is derived. C) Always taken in one period only. D) Never is recognized before revenue is recognized.

C) Always taken in one period only.

Other Comprehensive Income (OCI) is used both in U.S. GAAP and IFRS. Which of the following statements is correct? A) As a general rule, U.S. GAAP allows more opportunities for managers to change balance sheet valuations of certain assets even when management has no intention to sell these assets. B) Changes in the valuation of property, plant, and equipment create a Revaluation Surplus used in both IFRS and U.S. GAAP. C) Both IFRS and U.S. GAAP require companies to report in other comprehensive income each period the valuation changes from changes in actuarial estimates affecting defined benefit pension plans. D) U.S. GAAP requires a separate statement of OCI to immediately follow the income statement in the financial reporting statement.

C) Both IFRS and U.S. GAAP require companies to report in other comprehensive income each period the valuation changes from changes in actuarial estimates affecting defined benefit pension plans.

The change in a firm's cash position between successive balance sheet dates will not equal the reported net income for that period for all the following reasons except: A) Reported net income usually will not equal cash flow from operating activities because noncash revenues and expenses are often recognized as part of accrual income. B) Reported net income usually will not equal cash flow from operating activities because certain operating cash inflows and outflows are not recorded as revenues or expenses under accrual accounting in the same period the cash flows occur. C) Changes in cash are also caused by nonoperatingrelated investing activities like the purchase of treasury stock. D) Additional changes in cash are caused by financing activities like the repayment of a bank loan

C) Changes in cash are also caused by nonoperatingrelated investing activities like the purchase of treasury stock.

Which of the following does not describe how FASB endeavors to draft pronouncements? 30) A) Provide enough implementation guidance for consistent application. B) Explain the accounting principles being applied. C) Clearly define bright-line rules. D) Avoid bright line rules.

C) Clearly define bright-line rules.

Which of the following statements is correct with respect to economic incentives to release financial information? A) Because companies have an economic incentive to supply information investors want, regulatory groups have little influence over the amount and type of financial information that companies disclose. B) Because financial disclosures are regulated, owners and managers have little economic incentive to supply the amount and type of financial information that will enable them to raise capital most cheaply. C) Companies have an economic incentive to supply the information investors want in order to raise capital at the lowest possible cost. D) Owners and managers do not have an economic incentive to supply the amount and type of financial information because it has no effect on the company's ability to raise capital at the lowest cost.

C) Companies have an economic incentive to supply the information investors want in order to raise capital at the lowest possible cost.

Which one of the following types of disclosure costs is the cost of disclosing the company's pricing strategies? A) Political cost B) Litigation cost C) Competitive disadvantage cost D) Information collection, processing, and dissemination cost

C) Competitive disadvantage cost

The Canon Corporation sells ten copiers to the Title Company on October 15 for $40,000. Canon delivers the copiers to Title on October 20 and Title pays $16,000, agreeing to pay the balance on November 10. Using the accrual basis, which one of the following entries would properly record Canon's revenue recognition for October? A) DR Cash 40,000 CR Copier sales 40,000 B) DR Cash 16,000 CR Copier sales 16,000 C) DR Cash 16,000 DR Accounts receivable 24,000 CR Copier sales 40,000 D) DR Accounts receivable 40,000 CR Copier sales 40,000

C) DR Cash 16,000 DR Accounts receivable 24,000 CR Copier sales 40,000

When comparing U.S. GAAP and IFRS standards, which of the following is not correct? A) IFRS is principles-based while U.S. GAAP is rules-based. B) U.S. GAAP standards provide too many scope exceptions. C) IFRS provides more detailed guidance than U.S. GAAP. D) U.S. GAAP provides more detailed guidance than IFRS.

C) IFRS provides more detailed guidance than U.S. GAAP.

When transitory earnings are present, which of the following correctly depicts the order used on the income statement A) Income from continuing operations, unusual items, income tax expense, discontinued operations, net income. B) Income from continuing operations, discontinued operations, income tax expense, net income. C) Income tax expense, income from continuing operations, discontinued operations, net income. D) Income tax expense, income from continuing operations, unusual items, discontinued operations, net income.

C) Income tax expense, income from continuing operations, discontinued operations, net income.

To achieve Faithful Representation, accounting information presented must meet which of the following requirements? A) It must be comparable so that analysts can use it. B) It must have predictive and confirmatory value. C) It must depict the underlying economic event, be complete, neutral, and free from material error. D) It must meet a materiality threshold.

C) It must depict the underlying economic event, be complete, neutral, and free from material error.

When actuarial estimates related to defined benefit pension plans are adjusted: A) Both U.S. GAAP and IFRS require companies to report these valuation changes in OCI each period. B) Only U.S. GAAP requires companies to report these valuation changes in OCI each period. C) Only IFRS requires companies to report these valuation changes in OCI each period. D) Neither U.S. GAAP nor IFRS requires companies to report these valuation changes in the financial statements.

C) Only IFRS requires companies to report these valuation changes in OCI each period.

140) Which of the following is not a necessary condition for a firm to account for a customer contract under the ASC Topic 606 guidance for revenue recognition? A) The contract has commercial substance. B) Collection is probable. C) Payment terms may not include a variable component. D) The rights of each party can be identified.

C) Payment terms may not include a variable component.

Differences between IFRS and U.S. GAAP include all of the following except: A) Reversal of inventory writedowns. B) Carrying value of investment property. C) Revenue recognition. D) Research and development costs.

C) Revenue recognition.

200) Which of the following statements is not true regarding the cash flow statement? A) The cash flow statement provides information about changes in all the balance sheet accounts. B) The change in cash is classified into cash flow from three categories: operating activities, investing activities and financing activities. C) The cash flow statement generally shows that cash flows and accrual earnings are substantially the same. D) The cash flow statement explains the causes for year-to-year changes in cash and cash equivalents.

C) The cash flow statement generally shows that cash flows and accrual earnings are substantially the same.

Which of the following statements is not true regarding cash flow from operating activities? A) Most firms use the indirect method for presentation. B) Each line item in a direct method Statement of Cash Flows is actually a cash flow. C) The direct method begins with net income and then shows the differences between operating cash flow and net income. D) There are two methods for presenting cash flow from operating activities.

C) The direct method begins with net income and then shows the differences between operating cash flow and net income.

Which item is not correct with respect to the treatment of sustainable and transitory items and a company's income statement? A) Financial reporting assists statement users in forecasting future cash flows by providing an income statement format that segregates components of net income. B) Income statements prepared in accordance with GAAP differentiate between income components that are believed to be sustainable and those that are transitory. C) The income statement isolates a key figure called "income from sustainable operations." D) Transitory items are disclosed separately on the income statement so that statement users can place less weight on these earnings components when forecasting future profitability.

C) The income statement isolates a key figure called "income from sustainable operations."

According to ASC Topic 606 guidance for revenue recognition, which of the following statements is true regarding customer options when identifying performance obligations in a contract? A) There is an additional performance obligation for additional goods or services if the customer could obtain the same rights to additional goods or services without entering into the current contract agreement. B) There is an additional performance obligation for additional goods or services if the option in the contract provides for the additional goods or services at their standalone selling price C) There is an additional performance obligation for additional goods or services if the customer could obtain the same rights to additional goods or services elsewhere but the additional good or services are provided for free or at a discount in the current contract. D) There is no additional performance obligation for additional goods or services if they will be received for free or at a discount, as long as the goods or services are similar to the other goods in the current contract

C) There is an additional performance obligation for additional goods or services if the customer could obtain the same rights to additional goods or services elsewhere but the additional good or services are provided for free or at a discount in the current contract.

The Retained Earnings account is comprised of A) cash retained in the business. B) cash reinvested in the business by shareholders. C) the cumulative earnings less dividends since the inception of the corporation. D) the earnings of the corporation for the current year

C) the cumulative earnings less dividends since the inception of the corporation.

Under the new revenue recognition guidelines in ASC Topic 606, which of the following statements is not true regarding performance obligations satisfied over time? A) The firm must determine at each reporting date the extent to which the performance obligation has been satisfied. B) Output and input methods may be used for measurement purposes. C) To obtain quality measurement, input methods must always be closely related to the transfer of the goods or services to the customer. D) Usable input measures include labor hours, costs incurred, and time elapsed.

C) To obtain quality measurement, input methods must always be closely related to the transfer of the goods or services to the customer.

When is it permissible to issue financial statements that contain a material departure from GAAP? A) It is never permitted. B) When it is a non-US corporation. C) When the auditor can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading. D) When management does not like the GAAP results.

C) When the auditor can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading.

Properly prepared statements of cash flows: A) include stock issued for cash as an investing activity. B) present depreciation as a subtraction from net income to arrive at a firm's cash flow from operations under the indirect method. C) are frequently used by investment analysts to cash flows from operations across two or more companies. D) will show the change in cash during a period to be equal to the net income for the period.

C) are frequently used by investment analysts to cash flows from operations across two or more companies.

Strafford Inc. elected to use the nature of distribution approach for distributions from its equity-method investment purchased at the beginning of 20X1. In the statement of cash flows, Strafford should classify dividends received from its investment: A) as operating activity. B) as investing activity. C) based on the nature of the earnings generated by the investee company. D) as part operating activity and part investing activity

C) based on the nature of the earnings generated by the investee company.

180) The U.K. Equity account "Share premium" is reported on U.S. GAAP balance sheets as: A) capital reserve. B) revaluation reserve. C) capital in excess of par. D) an accumulated other comprehensive income account.

C) capital in excess of par.

Common-size balance sheets may be used for all the following except: A) gaining insights into the nature of a company's operations. B) analyzing a company's asset and financial structure. C) determining how management assesses the risks a company faces. D) learning about the underlying economics of an industry

C) determining how management assesses the risks a company faces.

Accrued liabilities represent: A) income that has not yet been recognized on the income statement. B) expenses that have not yet been recognized on the income statement. C) expenses that have been recognized on the income statement but not yet been paid. D) income that has been recognized on the income statement but not yet collected.

C) expenses that have been recognized on the income statement but not yet been paid.

A company manages a large portfolio of marketable securities and sells only stocks with substantial gains in poor income years or sells only stocks with substantial losses in good income years. This strategy is an indication of: A) securities fraud. B) unstable portfolio management. C) income smoothing. D) violating security trading laws.

C) income smoothing.

Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. He notices that the Retained Earnings account increased from the beginning of the year. This information is used to: A) increase cash flow from financing as it indicates receipt of payments from customers. B) decrease cash flow from investing as it indicates payment of debt. C) increase cash flow from operations as it signifies a net income. D) decrease cash flow from operations as it indicates a net loss.

C) increase cash flow from operations as it signifies a net income.

One financial disclosure cost is the possibility that competitors may use the information to harm the company providing the disclosure. All of the following disclosures might create a competitive disadvantage except: A) detailed information about company operations, such as sales and cost figures for individual product lines. B) information about the company's technological and managerial innovations. C) information showing the company's amount of spending on research and development. D) details about the company's strategies, plans and tactics.

C) information showing the company's amount of spending on research and development.

Companies needing to access new and ever larger sources of capital in response to increased international competitiveness face a severe disadvantage if their financial reporting: A) is in accordance with IFRS. B) is in accordance with U.S. GAAP. C) is based on a commercial and tax law approach. D) is based on an economic performance approach.

C) is based on a commercial and tax law approach.

Goodwill: A) is a tangible asset recognized as part of a business combination. B) is not subject to impairment. C) is initially measured as the difference between the consideration given in an acquisition and the fair value of the separately identifiable net assets acquired on the acquisition date. D) is classified on the balance sheet as a current asset.

C) is initially measured as the difference between the consideration given in an acquisition and the fair value of the separately identifiable net assets acquired on the acquisition date.

The basic accounting equation may be expressed as: A) assets = liabilities − owners' equity B) liabilities = assets + owners' equity C) owners' equity = assets − liabilities D) assets = owners' equity − liabilities

C) owners' equity = assets − liabilities

Donna is reviewing the income statement of Brier Company. She notices that Brier's income statement includes an item labeled "income attributable to noncontrolling interests." Donna should assume that Brier Company: A) is not partially owned by another company. B) owns 100% of the outstanding shares of another company. C) owns a controlling interest in another company that is less than 100%. D) sold a subsidiary during the current fiscal period.

C) owns a controlling interest in another company that is less than 100%.

Long-term debt is reported on the balance sheet at: A) current market value. B) net realizable value. C) present value. D) future value.

C) present value.

Revenue for goods to be sold under a consignment arrangement of a manufacturer and a retail store should be recognized by the manufacturer when: A) the manufacturer delivers the product to a retail store. B) the seller promises to pay the manufacturer. C) the goods are sold by the retail store. D) the seller receives payment for the goods.

C) the goods are sold by the retail store.

130) In the case of sales where the customer is billed before delivery of the goods, A) the seller should always recognize revenue before the products are delivered to the customer. B) the goods belong to the customer and revenue recognition is deferred until delivery. C) the seller may recognize revenue if control of the goods has been transferred to the customer even though physical delivery has not taken place. D) revenue will not be recognized until the goods are shipped to the customer.

C) the seller may recognize revenue if control of the goods has been transferred to the customer even though physical delivery has not taken place.

Under ASC Topic 606, revenue should be recognized for services when: A) the customer promises to pay for the service and the service date is confirmed. B) the service contract is in writing and signed. C) the service performance obligation is satisfied. D) it is assured that there will be no need for warranty performance after service is rendered.

C) the service performance obligation is satisfied.

CPA Now developed an app to help prepare for the CPA exam. Customers may separately purchase (a) the app, (b) updates to the app, and (c) coaching support for the exam, or a package that includes the app and free updates coaching support until they pass the exam. The package deal includes performance obligation(s) A) one B) two C) three D) zero

C) three

Contributed capital might be a negative dollar amount because: A) net losses exceeded net income over the years. B) excess liabilities reduced contributed capital. C) treasury stock was in excess of stock originally issued. D) dividends paid were in excess of net income accumulated in retained earnings.

C) treasury stock was in excess of stock originally issued.

Wilson, Inc. sells, installs and maintains manufacturing equipment. The contract with its customers to purchase equipment includes installation and includes a one-year maintenance contract, renewable for up to five years. Because the useful life of the equipment is expected to be five years, the company can reasonably expect its customers to renew the maintenance contracts for the full five years. Wilson records the cost of installation of the equipment as a capitalized contract and amortizes the cost over the five-year maintenance agreement period. Because of a defect in model A5403, Wilson anticipates that many of its customers will trade in the model and not renew the maintenance contracts. Wilson, Inc. should: A) write down the full amount received for maintenance contracts for the full five years. B) write down the full amount of installation costs. C) write down the contract asset and recognize a loss equal to the difference between the amount of maintenance contracts expected and the carrying amount. D) do nothing until the customers fail to renew the maintenance contracts.

C) write down the contract asset and recognize a loss equal to the difference between the amount of maintenance contracts expected and the carrying amount.

Which of the following statements is not applicable to ASC Topic 606 guidance for revenue recognition? A) A contract asset is written down if it is deemed impaired and any related loss is recognized. B) A contract asset is impaired if the carrying amount exceeds the recoverable amount. C) The recoverable amount is the remaining expected consideration to be received less the costs of providing the goods and services that have not yet been expensed. D) A contract asset is written down if it is deemed impaired and any related loss is deferred.

D) A contract asset is written down if it is deemed impaired and any related loss is deferred.

195) Which one of the following contingencies requires financial statement disclosure? A) A lawsuit that the firm's attorneys believe will be dropped. B) A lawsuit that the firm's attorneys believe will probably be settled for $75,000. C) A reasonably possible loss on a lawsuit that the firm's attorneys cannot estimate the loss. D) A reasonably possible loss on a lawsuit that the firm's attorneys believe will be settled for $100,000.

D) A reasonably possible loss on a lawsuit that the firm's attorneys believe will be settled for $100,000.

Munster Inc, a U.S.-based multinational company, voluntarily issues a sustainability report consistent with the guidelines of the Global Reporting Initiative (GRI). The company's report is audited by one of the Big 4 accounting firms. Munster reports significant detail related to the company's environmental impact, use of renewable energy, and programs that benefit the community. Consistent with GRI guidelines, Munster Inc. also should report information on the following issues: A) Corporate strategies. B) Governance. C) Stakeholder engagement. D) All of the these must be reported consistent with GRI guidelines.

D) All of the these must be reported consistent with GRI guidelines.

Which of the following create a competitive disadvantage according to the full disclosure principle? A) Details about the company's strategies, plans and tactics. B) Information about the company's technological and managerial innovations. C) Detailed information about the company's operations. D) All of these answer choices are correct

D) All of these answer choices are correct

What type of trends and relationships can be gleaned from a company's financial statements? A) Rates of sales and accounts receivable growth B) Rates of expense growth and expenses as a percentage of sales. C) How the company's growth rates compare to their competitors. D) All of these answer choices are correct.

D) All of these answer choices are correct.

Which of the following may cause fully diluted EPS to differ from basic EPS? A) Convertible preferred stock. B) Warrants. C) Management stock options. D) All of these answer choices are correct.

D) All of these answer choices are correct.

For a disposal group to be considered held for sale, which of the following conditions are required to be met? A) Management has committed to a plan to see the component. B) The sale is probable and is expected to be completed within one year. C) The component is available for immediate sale in its present condition subject only to usual and customary terms for such sales. D) All of these conditions must be met.

D) All of these conditions must be met.

205) Under U.S. GAAP, which of the following is not included in net cash flow from operating activities under the direct method? A) Cash collected from customers (including lessees and licensees) B) Interest and dividends received C) Cash paid for cost of goods sold D) Cash dividends paid

D) Cash dividends paid

Under U.S. GAAP, contingent gains are not recognized until certain. This is most consistent with the principle or concept of: A) Matching B) Relevance C) Consistency D) Conservatism

D) Conservatism

Which of the following statements is not applicable to contract acquisition costs under ASC Topic 606 guidance for revenue recognition? A) Incremental costs of acquiring a contract must be capitalized and amortized over the life of the contract. B) Costs that would be incurred regardless of whether a contract is obtained are not capitalized. C) The capitalization requirement is subject to a practical expedient. D) Costs must be capitalized even if the amortization period is one year or less

D) Costs must be capitalized even if the amortization period is one year or less

Exeter Company reports all revenues and expenses of Gregg Company on its consolidated income statement. Which of the following conditions must have been met? A) Exeter owns 100% of Gregg Company's common stock. B) Exeter owns 90% or more of Gregg Company's common stock. C) Exeter owns 50% of Gregg Company's common stock. D) Exeter owns more than 50% of Gregg Company's common stock

D) Exeter owns more than 50% of Gregg Company's common stock

Which of the following statements is not true regarding transactions involving intellectual property? A) A transaction involving intellectual property can represent a sale or a license. B) The revenue recognition approach depends on whether the transaction is considered a sale or a license. C) If a contract is considered a license, the firm must determine if the license is a distinct performance obligation. D) If the customer's right to use the intellectual property is not limited, the contract is considered a license.

D) If the customer's right to use the intellectual property is not limited, the contract is considered a license.

In accounting for revenue recognition under ASC Topic 606, when there is a modification of a contract, which of the following is correct? A) If the modification adds distinct goods or services to the original contract, then a new contract must be created. B) If the new contract price does not reflect the stand-alone selling price of the additional goods or services to be exchanged, then a new contract must be created. C) If the modification adds distinct goods or services to the original contract and the change in the original contract price reflects the standalone price of the additional goods or services to be exchanged, then a new contract need not be created. D) If the modification adds distinct goods or services to the original contract and the change in the original contract price reflects the standalone price of the additional goods or services to be exchanged, then a new, separate contract must be created.

D) If the modification adds distinct goods or services to the original contract and the change in the original contract price reflects the standalone price of the additional goods or services to be exchanged, then a new, separate contract must be created.

Which statement below is not correct with respect to earnings management? A) It is increasingly common because of the pressure to meet analysts' expectations. B) More firms just beat rather than just miss the analyst expectations. C) In a recent survey, more than 65% of CFOs surveyed indicated that reporting a profit is an important benchmark. D) In a recent survey, more than 80% of CFOs surveyed indicated that meeting or beating consensus EPS is an important benchmark.

D) In a recent survey, more than 80% of CFOs surveyed indicated that meeting or beating consensus EPS is an important benchmark.

Which of the following statements does not apply to the principal/agent relationship under ASC Topic 606 guidance for revenue recognition? A) An agent reports revenue only for the net amount retained. B) An agent may recognize revenue when its performance obligation to the principal is satisfied. C) A principal recognizes revenue for the gross amount paid by the customer. D) Inventory risk is not an important factor in determining the relationship.

D) Inventory risk is not an important factor in determining the relationship.

Under IFRS in accounting for revenue recognition, for collection to be probable in order for revenue to be recognized on a contract, "probable" means: A) Likely to occur. B) More likely to occur. C) Most likely than not to occur. D) More likely than not to occur

D) More likely than not to occur

Which of the following statements regarding the recognition of contingencies is not correct? A) IFRS guidance is built around a balance sheet perspective B) Both IFRS and U.S. GAAP require recognition of a contingent liability when it is both probable and can be reasonably estimated. C) U.S. GAAP relies on an income statement perspective. D) Only U.S. GAAP requires recognition of a contingent liability.

D) Only U.S. GAAP requires recognition of a contingent liability.

215) For a firm using the indirect method, which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities? A) An increase in wages payable will be added to net income. B) A decrease in accrued interest payable will be deducted from net income. C) Amortization of bond discount will be added to net income. D) Patent amortization expense will be deducted from net income.

D) Patent amortization expense will be deducted from net income.

Analysts' preferences regarding use of the direct method or indirect method may be based on all except which of the following reasons? A) The direct method facilitates cash flow projections. B) The indirect method provides a means to evaluate the quality of earnings. C) The reconciliation between accrual earnings and operating cash flows for firms using the direct method enhances the comparability of operating cash flows to those of firms using the indirect method. D) The indirect method facilitates cash flow projections.

D) The indirect method facilitates cash flow projections.

Which of the following transactions would be reported within the financing activities section of the cash flow statement? A) An issue of preferred stock in exchange for a parcel of land. B) The accrual of a cash dividend. C) The cash payment of interest associated with bonds payable. D) The sale of treasury stock for cash.

D) The sale of treasury stock for cash.

Under ASC Topic 606, which of the following is not a criteria for revenue recognition? A) Rights regarding goods or services have been identified. B) Delivery has occurred or services have been rendered. C) Collectability is probable. D) The shipping terms are clearly stated in the contract

D) The shipping terms are clearly stated in the contract

Which of the following statements is true regarding the new ASC Topic 606 for revenue recognition? A) The focus is on when the firm has earned the consideration to which it is entitled. B) Early adoption is not allowed. C) The new rules are more rulesbased than principle-oriented. D) Under IFRS, both public and non-public firms must adopt by 2018.

D) Under IFRS, both public and non-public firms must adopt by 2018.

In the U.S., disclosure of climate change risks and performance is: A) Required by law. B) Required by FASB. C) Required by the SASB. D) Voluntary.

D) Voluntary.

155) Balance sheets prepared in other countries using international accounting standards (IFRS) might use different account titles than are allowed for US. GAAP, such as: A) Capital reserve. B) Share premium. C) Hedging reserve. D) all of these answer choices might be used in balance sheets prepared using IFRS.

D) all of these answer choices might be used in balance sheets prepared using IFRS.

If consideration is received before a contract is identified and the consideration is nonrefundable, revenue may be recognized if: A) the contract has been terminated. B) goods have been delivered. C) there is no remaining obligation to transfer goods. D) any of these answer choices is correct

D) any of these answer choices is correct

125) Under the new revenue recognition guidance in ASC Topic 606, a performance obligation is satisfied over time if: A) the customer simultaneously receives and consumes the goods and services provided by the firm. B) the firm's performance creates or enhances an asset under the customer's control. C) the firm's performance does not create an asset with an alternative use and the firm has a right to receive payment for its performance to date. D) any of these answer choices is correct.

D) any of these answer choices is correct.

If the financial reporting environment were unregulated, disclosure would occur voluntarily: A) as long as other companies in the reporting company's industry voluntarily disclosed financial information. B) only to analysts that the company believes will report favorably on the company's prospects. C) only when managers wanted to raise additional capital. D) as long as the incremental benefits to the company from supplying financial information exceeded the incremental costs of providing the information

D) as long as the incremental benefits to the company from supplying financial information exceeded the incremental costs of providing the information

94) Adjusting entries must be made: A) to correct errors in the accounts. B) to reconcile the accounts to the budget. C) because auditing standards require them. D) because certain types of events will otherwise not be recorded in the accounts.

D) because certain types of events will otherwise not be recorded in the accounts.

165) Cash interest from investments is recorded as _______ in statements of cash flows for U.S. GAAP, but can be recorded as ________ when using IFRS. A) cash flows from investing activities / cash flows from financing activities B) cash flows from financing activities / cash flows from operating activities C) cash flows from operating activities / cash flows from financing activities D) cash flows from operating activities / cash flows from investing activities

D) cash flows from operating activities / cash flows from investing activities

Kunze Company, an information technology firm, routinely discloses internet traffic to its product line-up site. Financial statement users may be using this information to help predict future A) equity. B) assets. C) liabilities. D) cash outflows.

D) cash outflows.

The goal of generally accepted accounting principles is to ensure that a company's financial statements: A) do not contain any representation that could jeopardize management. B) provide stockholders all of the information they need to assess management's performance. C) are accurate and free from fraud. D) clearly represent its economic condition and performance of the company.

D) clearly represent its economic condition and performance of the company.

9) Analytical review procedures include all of the following except: A) simple ratio and trend analysis. B) complex statistical techniques. C) general reasonableness tests. D) comparison of the company's reported financial results to benchmarks established by the SEC

D) comparison of the company's reported financial results to benchmarks established by the SEC

IFRS frequently: A) are automatically approved for any foreign listed company, as soon as a new standard is issued. B) permit only one accounting treatment for similar business transactions and events to promote comparability. C) allow firms less latitude when compared to U.S. GAAP. D) follow a more generalized overview approach than do U.S. GAAP counterpart standards.

D) follow a more generalized overview approach than do U.S. GAAP counterpart standards.

GAAP requires firms to report comprehensive income: A) at the end of the income statement. B) as one separate statement of comprehensive income. C) in the statement of changes in stockholders' equity. D) in a statement that is displayed with the same prominence as other financial statements.

D) in a statement that is displayed with the same prominence as other financial statements.

Omissions or misstatements within a financial statement which could influence the decisions of the user of the statement violates: A) neutrality. B) consistency. C) conservatism. D) materiality.

D) materiality.

Cash flow from operating activities: A) is very comparable across firms within the same industry. B) is very comparable across all firms reporting under U.S. GAAP. C) is very comparable across all firms within the same industry regardless of whether they report under IFRS or U.S. GAAP. D) may not be comparable across firms.

D) may not be comparable across firms.

185) A balance sheet prepared in accordance with U.S. GAAP typically: A) includes both "noncurrent liability" and "long-term obligation" sections. B) reports inventory at historical costs. C) reports cash at its current market value. D) reports retained earnings comprised of the cumulative earnings less dividends since the inception of the entity.

D) reports retained earnings comprised of the cumulative earnings less dividends since the inception of the entity.

Financing activities include the cash effects of: A) producing and delivering goods and services. B) purchasing and disposing of productive assets used in production of revenue. C) purchasing and disposing of debt securities of other companies. D) selling stocks and bonds to raise capital used to produce revenue.

D) selling stocks and bonds to raise capital used to produce revenue.

When financial statements are used by shareholders and investors to evaluate the performance of a company's top executives it is referred to as the _____________ function of financial reports. A) proxy. B) fundamental. C) technical. D) stewardship.

D) stewardship.

The organization responsible for establishing auditing standards and inspecting and investigating auditing practices of public accounting firms is: A) Congress under the authority of the Sarbanes-Oxley Act (SOX). B) the American Institute of Certified Public Accountants (AICPA). C) the Securities and Exchange Commission (SEC). D) the Public Company Accounting Oversight Board (PCAOB).

D) the Public Company Accounting Oversight Board (PCAOB).

The balance sheet provides information on all of the following except: A) how management invested its money. B) where the money came from. C) assessing rates of return. D) the market price of the company's stock.

D) the market price of the company's stock.

135) The cost-plus approach: A) refers to contracts that are modified from their original terms during the course of the contract. B) refers to contracts where the contractor is not expected to recover all costs incurred in completing the project. C) is not allowed under ASC Topic 606 guidance for revenue recognition. D) uses an assumed reasonable profit margin to determine the stand-alone price.

D) uses an assumed reasonable profit margin to determine the stand-alone price.

Professional analysts need information on a company's future earnings and cash flow to evaluate audit vulnerabilities, to assess debt repayment prospects and to: A) certify good values in the stock market. B) indemnify creditors against losses. C) certify that no fraud exists in the company. D) value its equity securities.

D) value its equity securities.