Intermed Final

current issues in accounting discussed in class that publicly-traded companies are experiencing do not include the following

changes in depreciation methods standards

The valuation allowance account that is used in conjunction with deferred tax assets is a(n):

contra asset

Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable.

$0

List Corporation reported pretax accounting income of $90,000, but due to temporary differences, taxable income is only $50,000. Assuming a tax rate of 40%, the income statement should report net income of:

$54,000 $90,000 − ($90,000 × 40%) = $54,000.

Can you think of any reasons why the SEC relies on private sector bodies to set accounting standards, rather than undertaking the task itself

- The SEC now has a buffer group... - SEC employees may not... - By relying on a private sector body to set standards, the cost.. - By relying on a private sector body to set standards, standards may gain..

Executive stock options are outstanding all year that permit executives to buy 12 million common shares at $50. The average market price of the common stock was $60. When calculating diluted earnings per share, the assumed exercise of these options will increase the weighted average number of shares outstanding by:

2 million shares

A small stock dividend is defined as one that is less than:

25%

Treasury stock transactions may cause:

A decrease in the balance of retained earnings.

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes creates:

A deferred tax liability.

Which of the following is not true with regard to pension plans?

A defined contribution pension plan creates a liability for the employer.

The compensation associated with restricted stock units (RSUs) under a stock award plan is:

Allocated to expense over the service period which usually is the vesting period.

The key elements of a defined benefit pension plan include each of the following except:

Amortized future benefits.

Sources of shareholders' equity include each of the following except:

Amounts borrowed from financial institutions.

Which of the following creates a deferred tax liability?

An unrealized gain from recording investments at fair value.

Which of the following is not disclosed regarding earnings per share?

Cash paid per share.

Which of the following is not usually accounted for retrospectively?

Change from FIFO to LIFO.

Which of the following is not a change in accounting principle that usually is accounted for by retrospectively revising prior financial statements?

Change from SYD to DDB depreciation

Which of the following is accounted for prospectively?

Change in the percentage used to determine warranty expense.

When calculating the weighted average number of shares outstanding, the number of shares are not time-weighted by the fraction of the reporting period they are (are not) outstanding for:

Common shares issued during the period as a stock dividend.

Which of the following statements is true regarding diluted earnings per share?

Contingently issuable shares are considered outstanding in the computation of diluted EPS when any conditions for issuance are currently being met.

Which of the following would not be a component of cash flows from investing activities?

Dividends paid

A business is deemed to have a complex capital structure when it has outstanding:

Executive stock options

When calculating earnings per share, the effect of after-tax interest expense paid on convertible bonds that are dilutive is to:

Increase net income for diluted earnings per share and not for basic earnings per share.

Which of the following typically causes a permanent difference between taxable income and pretax accounting income?

Interest income on municipal bonds

Which of the following causes a permanent difference between taxable income and pretax accounting income?

Investment expenses incurred to obtain tax-exempt income

Common stock options that are antidilutive generally affect the calculation of: Basic EPS and Diluted EPS

No No

Retrospective restatement usually is appropriate for a change in: Accounting estimate and Accounting principle

No Yes

A simple capital structure might include:

Nonconvertible preferred stock.

Which of the following is not an uncertainty that complicates determining how much to set aside each year to ensure that sufficient funds are available to provide the benefits promised under a defined benefit plan?

Number of employees who retired last year

From the perspective of the lessor, two possible lease classifications are:

Operating or Sales-Type

Which of the following does not represent potential shares for an EPS calculation?

Participating preferred stock

A change in the residual value of equipment is accounted for:

Prospectively.

Typically, the tax effects of an operating loss carryforward on net income are:

Recognized in the year the loss occurs.

Which of the following describes defined benefit pension plans?

Retirement benefits are based on the plan benefit formula.

Which of the following is not usually part of the pension formula under a defined benefit plan?

Seniority at time of retirement

The five criteria provided in GAAP for distinguishing a finance lease from an operating lease do not include which of the following?

The collectibility of the lease payments must be reasonably predictable.

Which of the following is not true regarding the correction of an error?

The correction is reported prospectively; previous financial statements are not revised.

In the previous question, an accompanying disclosure note would include each of the following except:

The cumulative effect of the change.

The compensation associated with executive stock option plans is:

The estimated fair value of the options.

which of the following statements is true regarding the statement of cash flows

The indirect method derives cash flows indirectly by starting with sales revenue and "working backwards" to convert that amount to a cash basis

Which of the following describes defined benefit pension plans?

The investment risk is borne by the employer.

What is the FASB Accounting Standards codification?

The single source of authoritative U.S. generally accepted accounting principles.

For a cash dividend, the ex-dividend date:

Typically, is one business day before the date of record.

EDGAR, the electronic data gathering analysis, and retrival system, performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the

U.S. Securities and Exchange Commission

The income tax benefit of an operating loss carryforward reduces the tax expense reported in the income statement:

Unless it's more likely than not that the future tax savings will not be realized.

To incorporate the effect of outstanding stock options in the calculation of diluted EPS:

We would never increase or decrease the numerator of the EPS fraction.

The prospective approach usually is required for:

a change in estimate

Early in 2024, Brandon Transport discovered that a five-year insurance premium payment of $250,000 at the beginning of 2021 was debited to insurance expense. The correcting entry would include:

a credit to retained earnings of $100,000.

Restricted stock units (RSUs) are:

a grant valued in terms of a set number of shares of company stock.

Property dividends are reported in connection with a statement of cash flows as

a noncash activity

When reporting operating activities in a statement of cash flows, depreciation is:

added back to net income in the indirect method.

current issues in accounting that publicly-traded companies are experiencing involve specific reporting issues, such as

additional disclosures of government aid received

What does each ASU explain

all of the above

Interest paid to bondholders is reported in connection with a statement of cash flow as

an operating activity

Restricted stock units (RSUs):

are reported as part of shareholders' equity if payable in shares rather than cash.

Cash flows from financing activities do not include:

declaration of a cash dividend.

Amortizing a net loss for pensions and other post retirement benefit plans will:

decrease retained earnings and increase accumulated other comprehensive income.

the four parts of the ethics mindset framework are

desire, understand, avoid, commit

Earnings management has been defined as follows except for

illegal and ethical actions

Paid-in capital in excess of par is reported as a(n):

increase in shareholders' equity.

State Materials, Incorporated changed from the FIFO method of costing inventories to the weighted average method during 2024. When reported in the 2024 comparative financial statements, the 2023 inventory amount will be:

increased or decreased, depending on how prices changed during 2024.

The balance of the plan assets can change due to:

investment returns, employer contributions, and the payment of benefits.

A 401(k) plan:

is a type of defined contribution pension plan.

Does the SEC have more authority or less authority than the FASB with respect to standard setting

more

Convertible bonds that are dilutive generally affect the calculation of: Basic EPS and Diluted EPS

no yes

When calculating diluted EPS, which of the following, if dilutive, would cause the weighted average number of shares to increase? Dividends on preferred stock and stock options

no yes

What is the usual effect of a stock split (effected in the form of a stock dividend) on each of the following? Retained Earnings and Total paid in capital

no effect no effect

Stock dividends are reported in connection with a statement of cash flows as

not reported on the statement of cash flows

Which of the following creates a deferred tax asset?

rent collected in advance

Chapman Chairs, a family-owned corporation, declared and distributed a property dividend from its overstocked inventory in place of its usual cash dividend. The inventory's book value exceeded its fair value. The excess is:

reported as a loss

Which part below correctly describes FASB ASC 230-10-45-17d

section 45 Other Presentation matters

Current issues in accounting discussed in class that publicly-traded companies are experiencing do not include the following

standard for fair value accounting cryptoassets

What is the purpose of an Accounting standards update issued by the FASB

to communicate changes to the FASB codification

When calculating basic earnings per share, net income is reduced by dividends on nonconvertible cumulative preferred stock:

whether declared or not