Intermediate Accounting Final Multiple Choice

Expense incurred but not yet paid; such as wages

Accrued liabilities

Deferred revenue

Advance payments from customers

Contra liability

Discount on notes payable

Cash dividends become a legal liability of the corporation as of the record date

False

If the common stock is authorized with no par value, all the proceeds of a stock sale must be credited to Paid in Capital in Excess of Par

False

The declaration and payment of stock dividends causes a reduction in retained earnings and the assets of the cooperation

False

A third party liability; i.e. the company collects cash and immediately owes this cash to a third party.

Finance/sales type lease

Accrues with passage of time as a result of owing money

Interest expense

A gross profit as well as interest revenue is recognized

Sales type lease with selling profit

The market value of common stock is the basis of recording the declaration of a small stock dividend

True

The retirement of common stock will always lead to debiting the Common Stock account.

True

Using the straight-line method, depreciation for 2017 would be: a. $13,200 b. $14,400 c. $72,000 d. None of the above is correct

a. $13,200

At what amount would Reagan record the right of use asset at inception of the agreement? a. $519,115 b. $429,115 c. $540,000 d. $576,000

a. $519,115

What is the effective annual interest rate charged to Reagan on this lease? a. 4% b. 6% c. 8% d. 17%

a. 4%

For a bond issue that sells for the bond face amount, the effective interest rate is: a. Equal to the rate printed on the face of the bond b. The Wall Street Journal prime rate c. More than the rate stated on the face of the bond d. Less than the rate stated on the face of the bond

a. Equal to the rate printed on the face of the bond

Interest cost on the PBO will: a. Increase the PBO and increase pension expense b. Increase the pension expense and reduce plan assets c. Increase the PBO and reduce the plan assets d. Increase the pension expense and reduce the return on plan assets

a. Increase the PBO and increase pension expense

An exclusive 20-year right to manufacture a product or use a process is: a. Patent b. Copyright c. Trademark d. Franchise

a. Patent

The par value of common stock represents: a. The arbitrary dollar amount assigned by the board of directors to a share of stock b. The liquidation value of a share c. The book value of a share of stock d. The amount received when the stock was issued

a. The arbitrary dollar amount assigned by the board of directors to a share of stock

Unrealized gains and losses on debt investments classified as trading securities are included in the current earnings because: a. They measure the success or failure of management taking advantage of short-term price changes b. The IRS mandates the inclusion c. The OSCPA mandates the inclusion d. They measure the book value of the securities in the balance sheet date

a. They measure the success or failure of management taking advantage of short-term price changes

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax liability? a. An unrealized loss form recording inventory at lower cost or net realizable value b. Accelerated depreciation in the tax return, straight line on the income statement c. Estimated warranty expense d. Subscriptions collected in advance

b. Accelerated depreciation in the tax return, straight line on the income statement

Depreciation: a. Accurately reflects the decline in fair market value of the asset being depreciated. b. Could be a product cost (recorded as overhead; therefore part of the inventory) or a period cost (recorded as depreciation expense) depending on the use of the asset being depreciated. c. Is usually based on the double declining-balance method. d. Is higher in the early years of an asset's life if straight line depreciation is used.

b. Could be a product cost (recorded as overhead; therefore part of the inventory) or a period cost (recorded as depreciation expense) depending on the use of the asset being depreciated.

In this situation, Reagan: a. is the lessee in an operating lease b. Is the lessee in a finance lease c. Is the lessor in an operating lease d. Is the lessor in a sales type lease

b. Is the lessee in a finance lease

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? a. Future employees turnover b. Number of employees who retired last year c. Future inflations rates d. Future compensation levels

b. Number of employees who retired last year

An asset financed using a multi-year note payable with a 0% stated rate of interest would be: a. Recorded on the balance sheet at its fair value on the date of the final payment. b. Recorded on the balance sheet at the present value of the payments required by the contract. c. Recorded on the balance sheet at the sum of the payments required by the contract d. none of the above

b. Recorded on the balance sheet at the present value of the payments required by the contract.

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset? a. Tax depreciation in excess of book depreciation b. Revenue collected in advance c. The installment sales method for tax purposes d. None of the above

b. Revenue collected in advance

When a property dividend is declared, the reduction in retained earnings is based on: a. The par value of the stick issued b. The fair value of the property distributed determined on the declaration date c. The fair value of the property distributed determined on the date of record d. The book value of the property distributed determined on the declaration date

b. The fair value of the property distributed determined on the declaration date

Using the double-decline balance method, depreciation for 2018 would be: a. $15,840 b. $28,800 c. $17,280 d. $26,400

c. $17,280

Roberto Corporations was organized on January 1, 2017. The firm was authorized to issue 100,000 share of $5 par common stock. During 2017, Roberto had the following transactions relating to shareholders' equity: Issued 10,000 shares of common stock at $7 per share Issued 20,000 shares of common stock at $8 per share Reported net income of $100,000 Paid dividends of $50,000 Purchased 3,000 shares of treasury stock at $10 What is the total shareholders; equity at the end of 2017? a. $270,000 b. $300,000 c. $250,000 d. $200,000

c. $250,000

When the bonds are sold at a discount and the effective interest method used, at each interest payment date, the interest expense: a. Remains constant b. Is equal to the change in book value c. Increases d. Decreases

c. Increases

A bond issue with a face amount of $500,000 bears interest at the face rate of 10%. The current market rate of interest is 11%. These bonds will sell at a price that is: a. Equal to $500,000 b. More than $500,000 c. Less than $500,000 d. The answer cannot be determined from the information provided

c. Less than $500,000

Using the sum of the years digits method 2017 deprecation would be: a. $23,000 b. $24,000 c. $4,400 d. $22,000

d. $22,000

Unrealized gains and losses for available for sale securities are recorded in "Other Comprehensive Income" because; a. the FASB requires it. b. management cannot control changes in the market price of the securities c. it prevents unexpected and perhaps wide fluctuations in net income d. All the above

d. All the above

Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately when: a. The interest is incurred during the construction period of the asset. b. The asset is a discrete construction project for sale or lease c. The asset is self-constructed, rather than acquired. d. All the above are correct.

d. All the above are correct.

The capitalized cost of equipment includes: a. Repairs and Maintenance b. Sales tax c. Shipping d. Both b and c, but not a

d. Both b and c, but not a

The valuation allowance account that is used in conjunction with deferred tax assets is a(n): a. Liability b. Component of shareholders' equity c. Asset d. Contra Asset

d. Contra Asset

Accumulated other comprehensive income is reported: a. In the balance sheet as an asset b. In the balance sheet as a liability c. In the statement of comprehensive income d. In the balance sheet as a component of shareholders' equity

d. In the balance sheet as a component of shareholders' equity

Which of the following statements typifies defined contribution plans? a. Investment risk is borne by the corporation sponsoring the plan b. The plans are more complex than defined benefits plans c. Present value factors are used to determine the annual contributions to the plan d. The employer's obligation is satisfied by making the periodic contribution to the plan; it creates no long term liability (PBO)

d. The employer's obligation is satisfied by making the periodic contribution to the plan; it creates no long term liability (PBO)