Global Test 1
Cash equivalents are investments with original maturities of six months or less.
F
Under IFRS de-recognition of a receivable is determined by using lack of control as the primary criterion.
F
The cash paid for salaries and wages during 2015 was a. €99,700. b. €90,300. c. €90,800. d. €103,900.
b
Which of the following is a contra account? a. Premium on bonds payable b. Unearned service revenue c. Patents d. Accumulated depreciation
d
When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face value.
F
When using a perpetual inventory system, freight charges on goods purchased are debited to Freight-In.
F
Presented below are data for Bandkok Corp. (look to guide for more details) Equity at January 1, 2015 is a. Rp1,690. b. Rp1,798. c. Rp2,932. d. Rp2,986.
c
A trade discount that is granted as an incentive for a first-time customer or as a reward for large order should be accounted for by the purchaser as revenue.
F
Bank overdrafts are always included as part of cash in the statement of financial position.
F
Both merchandising and manufacturing companies normally have multiple inventory accounts.
F
Certificates of deposit are usually classified as cash on the statement of financial position.
F
Companies include postdated checks and petty cash funds as cash.
F
Freight charges on goods purchased are considered a period cost and therefore are not part of the cost of the inventory.
F
Freight costs incurred by the seller to ship merchandise to the purchaser are accounted for by the seller as part of inventory on the statement of financial position.
F
If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers the goods to the common carrier.
F
Interest costs incurred to manufacture large quantities of inventory that are produced routinely should be capitalized.
F
Receivables are classified in the statement of financial position as either trade or non-trade receivables.
F
Tang, Inc. sells collectible jewelry on consignment from various manufacturers and should include this consigned inventory on its statement of financial position.
F
The International Accounting Standards Board believes that historical cost for financial instruments provides more relevant and understandable information than fair value.
F
The International Accounting Standards Board has indicated that they believe that financial statements would be more transparent and understandable if companies recorded and reported all financial instruments at amortized cost.
F
The International Accounting Standards Board requires the specific identification method when unit price is low, inventory turnover is high, and inventory quantities are large.
F
The LIFO perpetual method results in the same ending inventory and cost of goods sold amounts as under the LIFO periodic method.
F
The accounts receivable turnover is computed by dividing net sales by the ending net receivables.
F
The cost flow assumption adopted must be consistent with the physical movement of the goods.
F
The percentage-of-receivables approach of estimating uncollectible accounts emphasizes matching over valuation of accounts receivable.
F
The percentage-of-sales and -receivables approaches are examples of impairment testing based on the individual assessment approach for long-term receivables.
F
The percentage-of-sales method results in a more accurate valuation of receivables on the balance sheet.
F
Trade receivables include notes receivable and advances to officers and employees.
F
U.S. GAAP permits the reversal of impairment losses recorded on receivables, with the reversal limited to the asset's amortized cost before the impairment.
F
Under IFRS, a company may select the fair value option or amortized cost for valuing a group of receivables at each statement of financial position date.
F
Under IFRS, a company will derecognize its receivables when it elects to use the fair value option for a receivable.
F
Under IFRS, the Cash Over and Short account is shown on the statement of financial position as an addition to (over) or subtraction from (short) the cash account.
F
When buying receivables with recourse, the purchaser assumes the risk of collectibility and absorbs any credit loss.
F
Presented below are data for Antwerp Corp. (look to guide for more details) Equity at January 1, 2014 is a. € 504. b. € 560. c. €1,220. d. €1,724.
c
A manufacturing concern would report the cost of units only partially processed as inventory in the statement of financial position.
T
Abnormal freight costs are not included on the statement of financial position as part of the cost of inventory.
T
Companies must allocate the cost of all the goods available for sale (or use) between the income statement and the statement of financial position.
T
Companies record and report long-term notes receivable on a discounted basis.
T
Goods in transit, shipped FOB shipping point, are included in the buyer's statement of financial position at the time of delivery to the common carrier
T
IFRS requires manufacturers to disclose their inventory components on the statement of financial position or in related notes.
T
Ideally, a company should measure receivables in terms of their present value, that is, the discounted value of the cash to be received in the future.
T
If a receivable is deemed to be individually impaired, the impairment loss is calculated as the difference between the carrying amount (generally the principal plus accrued interest) and the expected future cash flows discounted at the loan's historical effective-interest rate.
T
If both purchases and ending inventory are overstated by the same amount, net income is not affected.
T
If substantially all the risks and rewards of ownership of the receivables are transferred, then they are derecognised.
T
In the gross method, sales discounts are reported as a deduction from sales.
T
Purchase Discounts Lost is a financial expense and is reported in the "other income and expense" section of the income statement.
T
Savings accounts are usually classified as cash on the statement of financial position.
T
Short-term, highly liquid investments may be included with cash on the statement of financial position.
T
The International Accounting Standard Board requires that companies assess their receivables for impairment each reporting period and begin the impairment assessment by considering whether objective evidence indicates that one or more loss events have occurred.
T
The International Accounting Standard Board requires that when performing an impairment assessment, all receivables that are individually significant should be considered for impairment separately.
T
The International Accounting Standards Board (IASB) requires the specific identification method of inventory costing where individual items of inventory can be identified and costed.
T
Trade discounts are used to avoid frequent changes in catalogs and to alter prices for different quantities purchased.
T
Under IFRS, a company will derecognize its receivables when the contractual rights to the cash flows of the receivable no longer exist.
T
Under IFRS, agricultural inventories, such as wheat, oranges, etc., are recorded at their fair value less estimated selling costs at the point of harvest.
T
Caroline, Inc. had the following transactions during 2015: Exchanged land for a building $764,000 Purchased treasury shares 160,000 Paid cash dividend 380,000 Purchased equipment 212,000 Issued ordinary shares 588,000 What is Caroline, Inc.'s net cash provided (used) by investing activities? a. $212,000 used by investing activities. b. $552,000 provided by investing activities. c. $372,000 used by investing activities. d. $392,000 provided by investing activities.
a
During 2015 the DLD Company had a net income of W200,000. In addition, selected accounts showed the following changes: Accounts Receivable W12,000 increase Accounts Payable 4,000 increase Buildings 16,000 decrease Depreciation Expense 6,000 increase Bonds Payable 32,000 increase What was the amount of cash provided by operating activities? a. W198,000 b. W200,000 c. W206,000 d. W238,000
a
In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for a. operating activities. b. borrowing activities. c. lending activities. d. financing activities
a
In preparing a statement of cash flows, which of the following transactions would be considered an investing activity? a. Sale of equipment at book value b. Sale of merchandise on credit c. Declaration of a cash dividend d. Issuance of bonds payable at a discount
a
Packard Corporation reports the following information: Net cash provided by operating activities €275,000 Average current liabilities 150,000 Average non-current liabilities 100,000 Dividends declared 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard's cash debt coverage is a. 1.10. b. 1.83. c. 2.75. d. 6.11
a
Pedigo Corporation reports the following information: Net cash provided by operating activities £225,000 Average current liabilities 150,000 Average non-current liabilities 100,000 Dividends paid 60,000 Capital expenditures 110,000 Payments of debt 35,000 Pedigo's cash debt coverage is a. 0.90. b. 1.50. c. 2.25. d. 4.09.
a
Caroline, Inc. had the following transactions during 2015: Exchanged land for a building £764,000 Purchased treasury shares 160,000 Paid cash dividend 380,000 Purchased equipment 212,000 Issued ordinary shares 588,000 What is Caroline, Inc.'s net cash provided (used) by financing activities? a. £600,000 provided by financing activities. b. £48,000 provided by financing activities. c. £48,000 used by financing activities. d. £428,000 used by financing activities.
b
Cash debt coverage is computed by dividing net cash provided by operating activities by a. average non-current liabilities. b. average total liabilities. c. ending non-current liabilities. d. ending total liabilities.
b
Current cash debt coverage is often used to assess a. financial flexibility. b. liquidity. c. profitability. d. solvency.
b
In a statement of cash flows, payments to acquire debt instruments of other entities (other than cash equivalents) should be classified as cash outflows for a. operating activities. b. investing activities. c. financing activities. d. lending activities.
b
In preparing a statement of cash flows, sale of treasury stock at an amount greater than cost would be classified as a(n) a. operating activity. b. financing activity. c. extraordinary activity. d. investing activity.
b
Keisler Corporation reports: Cash provided by operating activities TL200,000 Cash used by investing activities 110,000 Cash provided by financing activities 140,000 Beginning cash balance 90,000 What is Keisler's ending cash balance? a. TL250,000. b. TL320,000. c. TL470,000. d. TL540,000.
b
Lohmeyer Corporation reports: Cash provided by operating activities $250,000 Cash used by investing activities 110,000 Cash provided by financing activities 140,000 Beginning cash balance 120,000 What is Lohmeyer's ending cash balance? a. $330,000. b. $400,000. c. $550,000. d. $620,000.
b
Making and collecting loans and disposing of property, plant, and equipment are a. operating activities. b. investing activities. c. financing activities. d. liquidity activities.
b
Net cash provided by operating activities divided by average total liabilities equals a. current cash debt coverage. b. cash debt coverage. c. free cash flow. d. the current ratio.
b
One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility. Which of the following explanations is a description of financial flexibility? a. The nearness to cash of assets and liabilities. b. The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities. c. The firm's ability to pay its debts as they mature. d. The firm's ability to invest in a number of projects with different objectives and costs.
b
Packard Corporation reports the following information: Net cash provided by operating activities $275,000 Average current liabilities 150,000 Average non-current liabilities 100,000 Dividends paid 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard's free cash flow is a. $70,000. b. $105,000. c. $165,000. d. $215,000.
b
Free cash flow is calculated as net cash provided by operating activities less a. capital expenditures. b. dividends. c. capital expenditures and dividends. d. capital expenditures and depreciation.
c
Harding Corporation reports the following information: Net income R$1,000,000 Depreciation expense 280,000 Increase in accounts receivable 120,000 Harding should report cash provided by operating activities of a. R$600,000. b. R$840,000. c. R$1,160,000. d. R$1,400,000.
c
In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from a. operating activities. b. financing activities. c. investing activities. d. selling activities.
c
In preparing a statement of cash flows, cash flows from operating activities a. are always equal to accrual accounting income. b. are calculated as the difference between revenues and expenses. c. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash. d. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash.
c
Rosalie Corporation is located in London but does business throughout Europe. The company builds and sells equipment used in manufacturing pharmaceuticals. On December 31, 2015, Rosalie has trading securities valued at £63,000; goodwill valued at £450,000; prepaid insurance valued at £36,000; patents valued at £210,000; and a customer list valued at £390,000. On Rosalie Corporation's statement of financial position at December 31, 2015, what amount should be reported as intangible assets? a. £1,113,000 b. £1,149,000 c. £1,050,000 d. £660,000
c
Sauder Corporation reports the following information: Net income HK$750,000 Depreciation expense 210,000 Increase in accounts receivable 90,000 Sauder should report cash provided by operating activities of a. HK$450,000. b. HK$630,000. c. HK$870,000. d. HK$1,050,000.
c
The financial statement which summarizes operating, investing, and financing activities of an entity for a period of time is the a. retained earnings statement. b. income statement. c. statement of cash flows. d. statement of financial position.
c
The statement of cash flows provides answers to all of the following questions except a. where did the cash come from during the period? b. what was the cash used for during the period? c. what is the impact of inflation on the cash balance at the end of the year? d. what was the change in the cash balance during the period?
c
The statement of cash flows reports all of the following except a. the net change in cash for the period. b. the cash effects of operations during the period. c. the free cash flows generated during the period. d. investing transactions.
c
Which of the following statements is incorrect regarding notes to the financial statements? a. IFRS requires specific note disclosures including disaggregation of inventories into classifications such as merchandise, production supplies, work in process, and finished goods. b. IFRS requires a maturity analysis for receivables. c. IFRS requires that all notes be clear, simple to understand, and non-technical in nature. d. All of the choices are correct regarding notes to the financial statements.
c
A complete set of financial statements includes each of the following except a. a statement of comprehensive income. b. a statement of changes in equity. c. notes. d. All of these answers are included.
d
A measure of a company's financial flexibility is a. cash debt coverage. b. current cash debt coverage. c. free cash flow. d. cash debt coverage and free cash flow.
d
Accounting policies include each of the following except a. principles. b. conventions. c. rules. d. All of these answers are included.
d
Caroline, Inc. exchanged a tract of land it held in Mississippi for a tract of land owned by Rosalie Corporation located in Illinois. How is this transaction reported on Caroline, Inc.'s statement of cash flows? a. As a cash inflow from investing activities and a cash outflow from financing activities. b. As a cash inflow and a cash outflow from investing activities. c. As a cash inflow and a cash outflow from financing activities. d. This transaction is not reported in the body of the statement of cash flows.
d
Caroline, Inc. hired a new controller in late 2015. The controller has not prepared financial statements using IFRS before and needs your assistance. In compiling a complete set of financial statements under IFRS, which of the following components must be included? a. A statement of financial position at the end of the period. b. Notes, including a summary of significant accounting policies. c. A statement of comprehensive income for the period. d. All of these choices are correct.
d
If ordinary shares were issued to acquire an CHF8,000 machine, how would the transaction appear on the statement of cash flows? a. It would depend on whether or not the direct method or the indirect method was used. b. It would be a positive CHF8,000 in the financing section and a negative CHF8,000 in the investing section. c. It would be a negative CHF8,000 in the financing section and a positive CHF8,000 in the investing section. d. It would not appear on the statement of cash flows but rather in a cash flow note.
d
In a statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from a. lending activities. b. operating activities. c. investing activities. d. financing activities.
d
On the statement of cash flows, which of the following items will affect both financing activities and operating activities? a. Issuance of equity securities. b. Collection of loans to other entities. c. Payment of dividends. d. Redemption of debt.
d
Preparing the statement of cash flows, using the indirect method, involves all of the following except determining the a. cash provided by operations. b. cash provided by or used in investing and financing activities. c. change in cash during the period. d. cash collections from customers during the period.
d
The presentation of non-current liabilities in the statement of financial position should disclose a. maturity dates. b. interest rates. c. conversion rights. d. All of these choices are correct.
d
Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows? a. Cash purchases of equipment. b. Cash purchases of bonds issued by another company. c. Cash received as repayment for funds loaned. d. Cash purchase of treasury stock.
d
Which of the following is not a method of disclosing pertinent information? a. Supporting schedules b. Parenthetical explanations c. Cross reference and contra items d. All of these are methods of disclosing pertinent information.
d
Which of the following statement of financial position classifications would normally require the greatest amount of supplementary disclosure? a. Current assets b. Current liabilities c. Plant assets d. Long-term liabilities
d
A document prepared to prove the equality of debits and credits after all adjustments have been prepared is the a. Adjusted statement of fianancial position. b. Adjusted trial balance. c. Adjusted financial statements. d. Post-closing trial balance.
b
A prepaid expense can best be described as an amount a. paid and currently matched with revenues. b. paid and not currently matched with revenues. c. not paid and currently matched with revenues. d. not paid and not currently matched with revenues.
b
A reversing entry should never be made for an adjusting entry that a. accrues unrecorded revenue. b. adjusts expired costs from an asset account to an expense account. c. accrues unrecorded expenses. d. adjusts unexpired costs from an expense account to an asset account.
b
An adjusted trial balance a. is prepared after the financial statements are completed. b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. c. is a required financial statement under international financial reporting standards. d. cannot be used to prepare financial statements.
b
An unearned revenue can best be described as an amount a. collected and reported on the income statement. b. collected and not reported on the income statement. c. not collected and reported on the income statement. d. not collected and not reported on the income statement.
b
Bread Basket provides baking supplies to restaurants and grocery stores. During December 2015, Bread Basket's employees worked 1,200 hours at an average rate of R20 per hour. At December 31, 2015, Bread Basket has paid R10,000 of salary expense. If Bread Basket fails to make the appropriate adjusting entry, which of the following is true regarding its December 31, 2015 statement of financial position? a. Equity is overstated by R10,000. b. Equity is overstated by R14,000. c. Liabilities are overstated by R14,000. d. Liabilities are overstated by R10,000.
b
Caroline, Inc. hired a new controller in late 2015. The controller has not prepared financial statements using IFRS before and needs your assistance. In compiling a complete set of financial statements under IFRS, in what order should the following items be reported in the equity section on the statement of financial position at December 31, 2015? If an item is not reported in the equity section, omit it from your answer. I. Share premium II. Retained earnings III. Investments IV. Non-controlling interest V. Accumulated comprehensive income VI. Share capital a. I, VI, IV, II, V, III b. VI, I, II, V, IV c. VI, I, IV, II, V d. III, VI, I, II, IV, V
b
Debra, Inc. is preparing its annual financial statements based on its adjusted trial balance. Which financial statement will Debra, Inc. prepare first? a. Statement of financial position. b. Income statement. c. Retained earnings statement. d. There is no particular order, any financial statement may be prepared first once the adjusted trial balance is prepared.
b
Earnings per share relate to a. preference shares only. b. ordinary shares only. c. both preference and ordinary shares. d. neither preference nor ordinary shares.
b
Garcia Corporation received cash of R$24,000 on August 1, 2015 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2015 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, R$10,000. b. debit Rent Revenue and credit Unearned Rent Revenue, R$14,000. c. debit Unearned Rent Revenue and credit Rent Revenue, R$10,000. d. debit Cash and credit Unearned Rent Revenue, R$14,000.
b
Prior years income statements are not restated for a. changes in accounting principle. b. changes in estimates. c. corrections of errors. d. All of these answer choices are correct.
b
Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for a. an unearned revenue. b. a prepaid expense. c. an accrued revenue. d. an accrued expense.
b
Reversing entries a. Impact the income statement only. b. Impact the statement of financial position and the income statement. c. Are not allowed under International Financial Reporting Standards(IFRS). d. Change amounts reported in the financial statements of the preceding peroid.
b
The accountant for the Lintz Sales Company is preparing the income statement for 2015 and the statement of financial position at December 31, 2015. The January 1, 2015, merchandise inventory balance will appear a. only as an asset on the statement of financial position. b. only in the cost of goods sold section of the income statement. c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the statement of financial position. d. as an addition in the cost of goods sold section of the income statement and as a current asset on the statement of financial position.
b
The cash received for interest during 2015 was a. €46,400. b. €53,900. c. €55,500. d. €57,100.
b
The definition of expenses includes a. losses only. b. expenses and losses. c. expenses only. d. expenses, losses and unrealized losses on available-for-sale securities.
b
The occurrence which most likely would have no effect on 2015 net income (assuming that all amounts involved are material) is the a. sale in 2015 of an office building contributed by a stockholder in 1987. b. collection in 2015 of a receivable from a customer whose account was written off in 2014 by a charge to the allowance account. c. settlement based on litigation in 2015 of previously unrecognized damages from a serious accident which occurred in 2013. d. worthlessness determined in 2015 of stock purchased on a speculative basis in 2011.
b
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings is the definition of a. quality of earnings. b. earnings management. c. smoothing of earnings. d. earnings averaging.
b
Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares? a. Non-cumulative only. b. Cumulative only. c. Neither non-cumulative nor cumulative. d. Both non-cumulative and cumulative.
b
Under IFRS other comprehensive income must be displayed (reported) in a. the equity section of the statement of financial position. b. a second income statement. c. the comprehensive income statement or the income statement and comprehensive income statement. d. the retained earnings the statement.
b
Under International Financial Reporting Standards (IFRS) a. The cash-basis method of accounting is accepted. b. Events are recorded in the period in which the event occurs. c. Net income will be lower under the cash-basis than accural-basis accounting. d. All of the choices are correct.
b
Wave Inn is a resort located in Canada. During December 2015, Spin Jammers held its annual conference at the resort. The charges related to the conference total $360,000, of which 25% has been paid by Spin Jammers. When Wave Inn makes the appropriate adjusting entry, which of the following is part of the adjustment made on December 31, 2015? a. Debit Cash $270,000. b. Credit revenue $270,000. c. Credit Cash $270,000. d. Two of these choices are correct.
b
Which method of income measurement is used in the preparation of the income statement? a. Capital maintenance approach. b. Transaction approach. c. Cash-flow approach. d. Income components approach.
b
Which of the following is included in comprehensive income? a. Investments by owners. b. Unrealized gains on non-trading equity securities. c. Distributions to owners. d. Changes in accounting principles.
b
Which of the following is not a selling expense? a. Advertising expense. b. Office salaries expense. c. Freight-out. d. Store supplies consumed.
b
Which of the following is not required to be presented on the income statement under IFRS? a. Revenue. b. Other gains/losses. c. Finance costs. d. Tax expense.
b
A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to a. beginning retained earnings for the earliest period presented. b. net income for the period in which the change occurred. c. comprehensive income for the earliest period presented. d. stockholders' equity for the period in which the change occurred.
a
How do these prepaid expenses expire? Rent & Supplies a.With the passage of time Through use and consumption b.With the passage of time With the passage of time c.Through use and consumption Through use and consumption d.Through use and consumption With the passage of time
a
Low Company received HK$9,600 on April 1, 2015 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2015 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, HK$2,400. b. debit Rent Revenue and credit Unearned Rent Revenue, HK$7,200. c. debit Unearned Rent Revenue and credit Rent Revenue, HK$2,400. d. debit Unearned Rent Revenue and credit Rent Revenue, HK$7,200.
a
The non-controlling interest section of the income statement is shown a. below net income. b. below income from operations. c. above other income and expenses. d. above income tax.
a
To compute interest expense for an adjusting entry, the formula is (principal X annual rate X a fraction). The numerator and denominator of the fraction are: Numerator Denominator a. Length of time note has been outstanding 12 months b. Length of note 12 months c. Length of time until note matures Length of note d. Length of time note has been outstanding Length of note
a
Unearned revenue on the books of one company is likely to be a. a prepaid expense on the books of the company that made the advance payment. b. an unearned revenue on the books of the company that made the advance payment. c. an accrued expense on the books of the company that made the advance payment. d. an accrued revenue on the books of the company that made the advance payment.
a
When an item of expense is paid and recorded in advance, it is normally called a(n) a. prepaid expense. b. accrued expense. c. estimated expense. d. cash expense.
a
Which of the following is not a generally practiced method of presenting the income statement? a. Including prior period adjustments in determining net income. b. The condensed income statement. c. The consolidated income statement. d. Including gains and losses from discontinued operations of a component of a business in determining net income.
a
Which of the following is not an acceptable way of displaying the components of other comprehensive income? a. Combined statement of retained earnings. b. Second income statement. c. Combined statement of comprehensive income. d. All of the above are acceptable.
a
Which of the following statements is false? a. Companies can prepare the income statement and the statement of financial position directly from the adjusted trial balance. b. Companies can prepare the statement of cash flows directly from the adjusted trial balance. c. The adjusted trial balance proves the equality of total debits and total credits after all adjustments. d. Each adjusting entry affects one statement of financial position account and one income statement account.
b
Which of the following would appear first in a statement of retained earnings? a. Net income. b. Prior period adjustment. c. Cash dividends. d. Share dividends.
b
Which of the following items will not appear in the retained earnings statement? a. Net loss. b. Prior period adjustment. c. Discontinued operations. d. Dividends.
c
A change in accounting principle requires what kind of adjustment to the financial statements? a. Current period adjustment. b. Prospective adjustment. c. Retrospective adjustment. d. Current and prospective adjustment.
c
An accrued revenue can best be described as an amount a. collected and reported on the income statement. b. collected and not reported on the income statement. c. not collected and reported on the income statement. d. not collected and not reported on the income statement.
c
At the end of 2015, Diego Company made four adjusting entries for the following items: 1. Depreciation expense, R$25,000. 2. Expired insurance, R$2,200 (originally recorded as prepaid insurance.) 3. Interest payable, R$6,000. 4. Rent receivable, R$10,000. In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is (are) a. Entry No. 3. b. Entry No. 4. c. Entry No. 3 and No. 4. d. Entry No. 2, No. 3 and No. 4.
c
Bread Basket provides baking supplies to restuarants and grocery stores. On November 1, 2015, Bread Basket signed a R500,000, 6-month note payable. The note requires Bread Basket to pay interest at an annual rate of 9%. Assuming Bread Basket makes the appropriate adjusting entry, what is the impact on its December 31, 2015 statement of financial position? a. An expense of R22,500. b. An expense of R7,500. c. A liability of R7,500. d. None of these answers are correct.
c
Changes in estimates affect reported amounts a. retrospectively only. b. prospectively only. c. currently and prospectively. d. currently and retrospectively.
c
Companies use intraperiod tax allocation for all of the following items except a. discontinued operations. b. prior period adjustments. c. changes in accounting estimates. d. income from continuing operations.
c
Comprehensive income includes all of the following except a. dividend revenue. b. losses on disposal of assets. c. investments by owners. d. unrealized holding gains.
c
Comprehensive income includes all of the following, except a. revenues and gains. b. expenses and losses. c. preference share dividends. d. unrealized gains and losses on non-trading equity securities.
c
Earnings per share should always be shown separately for a. net income and gross profit. b. net income and pretax income. c. income from continuing operations. d. discontinued operations and prior period adjustments.
c
Gains or losses on the disposal of investments should be shown in the income statement Net of Tax Disclosed Separately a. No No b. Yes Yes c. No Yes d. Yes No
c
Given the following income statement line items: Income from operations Income before income taxes Income from continuing operations Income from discontinued operations Net income How many earnings per share amounts are required to be disclosed? a. 5 b. 4 c. 3 d. 2
c
If a company prepares a consolidated income statement, IFRS requires that net income be reported for a. the majority interest only. b. the minority interest only. c. both the majority interest and the minority interest. d. as a single amount only.
c
Which of the following earnings per share figures must be disclosed on the face of the income statement? a. EPS for income before taxes. b. The effect on EPS from unusual items. c. EPS for gross profit. d. EPS for income from continuing operations.
d
If, during an accounting period, an expense item has been incurred and consumed but not yet paid for or recorded, then the end-of-period adjusting entry would involve a. a liability account and an asset account. b. an asset or contra asset account and an expense account. c. a liability account and an expense account. d. a receivable account and a revenue account.
c
In 2015, Milford Corporation determined that it overstated salaries payable and salaries expense by $20,000 in 2014. In 2015, which of the following accounts will have to be credited to correct this error? a. Salaries and Wages Payable. b. Salaries and Wages Expense. c. Retained Earnings. d. Income Summary.
c
In which section of the income statement is interest expense reported? a. Gross profit. b. Income from operations. c. Income before income taxes. d. Non-controlling interest.
c
Reversing entries are 1. normally prepared for prepaid, accrued, and estimated items. 2. necessary to achieve a proper matching of revenue and expense. 3. desirable to exercise consistency and establish standardized procedures. a. 1 b. 2 c. 3 d. 1 and 2
c
The closing entries a. Must debit or credit one income statement account and one statement of financial position account. b. Include closing the dividends account to income summary. c. Are posted to the appropriate general ledger accounts. d. All of these choices are correct.
c
The closing process a. Is done each time a transaction takes place and is journalized. b. Transfers all income statement items to their related statement of financial position account (for example, salaries/wages expense transfers to salaries/wages payable). c. Posts all closing entries to the appropriate general ledger account. d. All of these choices are correct.
c
The insurance expense on the income statement for 2015 was a. $9,700. b. $12,100. c. $12,700. d. $15,100.
c
The interest revenue on the income statement for 2015 was a. $37,300. b. $43,100. c. $44,700. d. $50,500.
c
The occurrence that most likely would have no effect on 2015 net income is the a. sale in 2015 of an office building contributed by a stockholder in 1966. b. collection in 2015 of a dividend from an investment. c. correction of an error in the financial statements of a prior period discovered subsequent to their issuance. d. stock purchased in 2001 deemed worthless in 2015.
c
The salaries and wages expense on the income statement for 2015 was a. $87,300. b. $108,500. c. $111,900. d. $133,100.
c
Using IFRS, which of the following items is matched correctly with its basis of valuation for purposes of reporting on the statement of financial position? Item Basis of Valuation I. Inventory A. Cost II. Prepaid expenses B. Estimated amount collectible III. Receivables C. Lower-of-cost-or net realizable value a. I and A b. II and C c. III and B d. II and B
c
When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as a. a prior period adjustment. b. an other income and expense item. c. an amount after continuing operations and before net income. d. a bulk sale of plant assets included in income from continuing operations.
c
When an item of revenue is collected and recorded in advance, it is normally called a(n) ___________ revenue. a. accrued b. prepaid c. unearned d. cash
c
When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual basis operating expenses? a. Add beginning accrued liabilities. b. Subtract beginning prepaid expense. c. Subtract ending prepaid expense. d. Subtract interest expense.
c
When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash receipts from customers to determine accrual basis service revenue? a. Subtract ending accounts receivable. b. Subtract beginning unearned service revenue. c. Add ending accounts receivable. d. Add cash sales.
c
Which of the following adjustments would require decreasing the liabilities reported on the statement of financial position? a. A company uses $400 worth of supplies during the year. b. A company records $400 worth of depreciation on equipment. c. A company has earned $400 of revenue collected at the beginning of the year. d. A company records $400 of wages earned by employees that will be paid next year.
c
Which of the following equations expresses the definition of "income"? a. Income = Revenues - Expenses b. Income = (Revenues + Gains) - (Expenses + Losses) c. Income = Revenues + Gains d. Income = Gains - Losses
c
Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business? a. The gain or loss on disposal should be reported as an other income item. b. Results of operations of a discontinued component should be disclosed immediately below income from operations. c. Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement. d. The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.
c
Which of the following statements best describes the purpose of closing entries? a. To facilitate posting and taking a trial balance. b. To determine the amount of net income or net loss for the period. c. To reduce the balances of temporary accounts to zero so that they may be used to accumulate the revenues, expenses and dividends of the next period. d. To complete the record of various transactions that were started in a prior period.
c
Which of the following statements is false regarding adjusting entries? a. Cash is neither debited nor credited as a result of adjusting entries. b. Each adjusting entry affects one statement of financial position account and one income statement account. c. Each adjusting entry affects one revenue account and one expense account. d. Adjusting entries involve accruals or deferrals.
c
Which type of account is always debited during the closing process? a. Dividends. b. Expense. c. Revenue. d. Retained earnings.
c
A company must make adjusting entries a. To ensure that the revenue recognition and expense recognition principles are followed. b. Each time it prepares an income statement and a statement of financial position. c. To account for accruals or deferrals. d. All of these choices are correct.
d
A correction of an error in prior periods' income will be reported In the income statement Net of tax a. Yes Yes b. No No c. Yes No d. No Yes
d
Adjusting entries a. Are often prepared after the statement of financial position date, but dated as of the statement of financial position date. b. Are necessary to enable the financial statements to conform to International Financial Reporting Standard (IFRS). c. Include both accruals and deferrals. d. All of the choices are correct.
d
Adjusting entries are necessary to 1. obtain a proper matching of expense to revenue. 2. achieve an accurate statement of assets and equities. 3. adjust assets and liabilities to their fair value. a. 1 b. 2 c. 3 d. 1 and 2
d
Adjusting entries that should be reversed include a. all accrued revenues. b. all accrued expenses. c. those that debit an asset or credit a liability. d. All of these answers are correct.
d
An accrued expense can best be described as an amount a. paid and currently matched with earnings. b. paid and not currently matched with earnings. c. not paid and not currently matched with earnings. d. not paid and currently matched with earnings.
d
Big-Mouth Frog Corporation had revenues of $210,000, expenses of $120,000, and dividends of $30,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a a. debit of $60,000. b. debit of $90,000. c. credit of $60,000. d. credit of $90,000.
d
IFRS requires that a single amount be disclosed within the income statement for a. the post-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal of discontinued operational assets. b. the pre-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal of discontinued operational assets. c. the pre-tax profit/loss on discontinued operations and the pre-tax gain/loss on the disposal of discontinued operational assets. d. the post-tax profit/loss on discontinued operations and the post-tax gain/loss on the disposal of discontinued operational assets.
d
If ending accounts receivable exceeds the beginning accounts receivable: a. cash collections during the period exceed the amount of revenue recognized. b. net income for the period is less than the amount of cash basis income. c. no cash was collected during the period. d. cash collections during the year are less than the amount of revenue recognized.
d
Income taxes are allocated to a. continuing operations. b. discontinued operations. c. prior period adjustments. d. All of these answers are correct.
d
Reversing entries do not apply to which of the following items? a. Unearned revenue. b. Accrued wages. c. Prepaid insurance. d. Depreciation.
d
The Supplies account had a balance at the beginning of year 3 of £4,000 (before the reversing entry). Payments for purchases of supplies during year 3 amounted to £25,000 and were recorded as expense. A physical count at the end of year 3 revealed supplies costing £5,750 were on hand. Reversing entries are used by this company. The required adjusting entry at the end of year 3 will include a debit to: a. Supplies Expense for £1,750. b. Supplies for £1,750. c. Supplies Expense for £23,250. d. Supplies for £5,750.
d
The cash paid for insurance premiums during 2015 was a. €8,500. b. €8,100. c. €10,000. d. €9,200.
d
The earnings per share computation is not required for a. Net income. b. Gain on disposal of discontinued operation, net of tax. c. Income from continuing operations. d. Income from operations.
d
The post-closing trial balance a. Consists of statement of financial position accounts only. b. Will balance if a transaction is not journalized and posted, or if a transaction is journalized and posted twice. c. Shows that the accounting equation is in balance at the end of the accounting period. d. All of these choices are correct.
d
Under the cash basis of accounting, revenues are recorded a. when they are recognized and realized. b. when the performance obligation is satisfied. c. when they are recognized. d. when the company receives cash.
d
Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as a. an increase in depreciation expense for the year in which the error is discovered. b. a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. c. an other expense item for the year in which the error was made. d. a prior period adjustment.
d
When an item of revenue or expense has been earned or incurred but not yet collected or paid, it is normally called a(n) ____________ revenue or expense. a. prepaid b. adjusted c. estimated d. None of these answers are correct.
d
Which of the following does not appear on a statement of retained earnings? a. Net loss. b. Prior period adjustments. c. Preference share dividends. d. Other comprehensive income.
d
Which of the following is true about intraperiod tax allocation? a. It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return. b. It is required for the cumulative effect of accounting changes but not for prior period adjustments. c. Its purpose is to allocate income tax expense evenly over a number of accounting periods. d. Its purpose is to relate the income tax expense to the items which affect the amount of tax.
d
Which of the following must be considered in estimating depreciation on an asset for an accounting period? a. The original cost of the asset b. Its useful life c. The decline of its fair value d. Both the original cost of the asset and its useful life.
d
Which of the following situations involving different accounting methods or accounting estimates results in comparison difficulties between companies? a. Estimated useful lives for depreciable assets. b. Inventory methods. c. Estimates of bad debts. d. All of the above.
d
Which of the following statements regarding reversing entries is incorrect? a. Deferrals are generally entered in statement of financial position accounts, thus making reversing entries unnecessary. b. All accruals should be reversed. c. Adjusting entries for depreciation and bad debts are never reversed. d. Reversing entries change amounts reported in the statement of financial position for the previous period.
d
Which of the following would not be a correct form for an adjusting entry? a. A debit to a revenue and a credit to a liability b. A debit to an expense and a credit to a liability c. A debit to a liability and a credit to a revenue d. A debit to an asset and a credit to a liability
d
Year-end net assets would be overstated and current expenses would be understated as a result of failure to record which of the following adjusting entries? a. Expiration of prepaid insurance b. Depreciation of fixed assets c. Accrued wages payable d. All of these answers are correct.
d