ACCTG 641 Final

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Which Reniassance artist helped drawings for Pacioli's work in 1497, Divinia Proportoine?

Leonardo Da Vinci

Which of the following statements is FALSE? (theory)

Academic research is based on deduction in which logic is used to form specific conclusions

The major players in financial reporting in the U.S. are FASB and the SEC. On the international side, the major players are:

IASB and IOSCO

Allocating a transaction price to multiple performance obligations includes which of the following steps: Correct!

Identify distinct goods and/or services as separate performance obligations

Which of the following is FALSE regarding capitalization of interest?

Interest can be capitalized for both self-constructed inventories and self-constructed assets.

The type of measurement in which assets are valued at the net realizable amount that the enterprise could expect to obtain from them in an orderly sale is known as:

exit value

A company charges its sales commission costs to expense is an example of:

expense recognition or matching principle

Under which of the following circumstances should rigid uniformity be used?

if the event is a complex event in which finite uniformity cannot be instituted in a cost-effective manner

Which of the following statements concerning intangible assets is correct?

intangible assets derive their value from the rights and privileges granted to the company using them

The objective of pervasive criterion of the conceptual framework is:

decision usefulness

Northstar Co. acquired a registered trademark for $600,000. The trademark has a remaining legal life of five years, but can be renewed every 10 years for a nominal fee. Northstar expects to renew the trademark indefinitely. What amount of amortization expense should Northstar record for the trademark in the current year?

Sally collects a nonrefundable up-front fee of $192 when a new customer signs up for a 24-month contract for services. A monthly fee of $32 is also assessed for each customer. How much revenue does Sally record on the date the contract is signed?

The following information relates to Moran Co. for the year ended December 31, 2017: net income $1,245.7 million; unrealized holding loss of $10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, what should Moran report for "comprehensive income" for 2017?

$1,234.8 million

Tiburon Corporation purchased a patent for $1,850,000 on November 30, 2018. It has a remaining legal life of 18 years. Tiburon estimates that the remaining useful life of the patent is a useful life of 15 years. What balance will be reported on the December 31, 2020 balance sheet for the patent (if necessary, round your answer to the nearest dollar)? Hint: This problem requires partial year depreciation for 2018.

$1,593,056

Martinez Corporation purchases a patent from Carla Vista Company on January 1, 2020, for $71,000. The patent has a remaining legal life of 16 years. Martinez fells the patent will be useful for 10 years. Assume that at January 1, 2022, the carrying amount of the patent on Martinez's books is $56,800. In January , Martinez spends $30,400 successfully defending a patent suit. Martinez still feels the patent will be useful until the end of 2029. Which of the following is the correct amount of 2022 amortization?

$10,900

$10.9 million

On December 31, 2017, Travis Tritt Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows: Machine $1,300,000 less Accumulated Depreciation of $360,000 Depreciation is computed at $60,000 per year on a straight-line basis. On April 1, 2018, Tritt sold the machine for $1,040,000 to Dwight Yoakam Company. What is the amount of Gain on Sale of the Equipment? Don't forget to update depreciation!

$115,000 gain

On September 1, 2020, Flint Corporation acquired Tamarisk Enterprises for a cash payment of $710,000. At the time of purchase, Tamarisk's balance sheet showed assets of $560,000, liabilities of $240,000, and owners' equity of $320,000. The fair value of Tamarisk's assets is estimated to be $790,000. Compute the amount of goodwill acquired by Flint.

$160,000

On July 31, 2017, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory equipment. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Amsterdam issued a $300,000, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $200,000 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Amsterdam made a final $100,000 payment to Minsk. Other than the note to Netherlands, Amsterdam's only outstanding liability at December 31, 2017 is a $30,000, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31. What is interest revenue from the investment in short-term marketable securities earned during 2017?

$2,500

Holt Company enters into a contract to build a new plant facility for Segal Company for $2,500,000. In the contract, Segal will pay a performance bonus of $100,000 if Holt is able to complete the facility by October 1, 20X6. The performance bonus is reduced by 50% for each of the first two weeks after October 1, 20X6. If the completion is delayed more than two weeks, then Holt forfeits the entire performance bonus. Holt's prior experience with performance bonuses on similar contracts indicates the following probabilities of completion outcomes: October 1, 20X6 80% October 8, 20X6 10% October 15, 20X6 5% After October 15, 20X6 5% How much should Holt record as the transaction price of the contract and why?

$2,586,250 because hold should use the expected value method ($2.6m * 80%) + ($2.55m * 10%) + ($2.525m * 5%) + ($2.5m * 5%)

Peggy Fleming, Inc. has a fiscal year ending April 30. On May 2, 2017, Peggy Fleming Inc. borrowed $10,000,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2018, expenditures for the partially completed structure totaled $7,000,000. These expenditures were incurred evenly throughout the year. Interest earned on the unexpended portion of the loan amounted to $650,000 for the year. How much should be shown as capitalized interest on Peggy Fleming's financial statements at April 30, 2018?

$385,000

During 2017, Midori Ito Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities. Warehouse constructed for Ito's own use........$30,000 Special-order machine for sale to unrelated customer, produced according to customer's specifications.......$9,000 Inventories routinely manufactured, produced on a repetitive basis.....$8,000 All of these assets required an extended period of time for completion. Assuming the effect of interest capitalization is material, what is the total amount of interest cost to be capitalized?

$39,000

On January 1, 2017, Fullbright Company sold goods to Blue Dirt Company for $400,000 in exchange for a 4-year, zero-interest bearing note with a face amount of $629,406. The goods have an inventory cost on Fullbright's books of $240,000. What amount of Sales Revenue should Fullbright recognize in 2017?

$400,000

$46.3 million

On July 31, 2017, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory equipment. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Amsterdam issued a $300,000, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $200,000 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Amsterdam made a final $100,000 payment to Minsk. Other than the note to Netherlands, Amsterdam's only outstanding liability at December 31, 2017 is a $30,000, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31. What is the weighted-average accumulated expenditures to be used in the capitalization of interest calculation?

$50,000

Blue Corporation incurred the following costs in 2020: Cost of laboratory research aimed at discovery of new knowledge $185,000 Cost of testing in search for product alternatives $100,000 Cost of engineering activity required to advance the design of a product to the manufacturing stage $222,000 What is the amount that was debited to Research & Development Expense during the year?

$507,000

On July 31, 2017, Amsterdam Company engaged Minsk Tooling Company to construct a special-purpose piece of factory equipment. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Amsterdam issued a $300,000, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $200,000 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Amsterdam made a final $100,000 payment to Minsk. Other than the note to Netherlands, Amsterdam's only outstanding liability at December 31, 2017 is a $30,000, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31. How much interest may be capitalized as cost of the factory equipment?

$6,000

On January 1, 2017, Oksana Baiul, Inc. signed a fixed-price contract to have Builder Associateds construct a major plant facility at a cost of $4,000,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2017, to finance the construction cost, Oksana Baiul borrowed $4,000,000 payable in 10 annual installments of $400,000, plus interest at the rate of 10%. During 2017, Oksana Baiul made deposit and progress payments totaling $1,500,000 under the contract; the weighted average amount of accumulated expenditures was $800,000 for the year. The excess borrowed funds were invested in short-term securities, from which Oksana Baiul realized investment income of $250,000. What amount should Oksana Baiul report as capitalized interest at December 31, 2017?

$80,000

A shoe retailer allows customers to return shoes within 90 days of purchase. The company estimates that 5% of sales will be returned within the 90-day period. During the month, the company has sales of $200,000 and returns of sales made in prior months of $5,000. What amount should the company record as net sales revenue for new sales made during the month?

($200,000 * 5%) = $190,000

On January 1, 20X2, Dot Company sold a three-year, service type extended warranty to Matrix Company for $36,000. The warranty took effect on the date of purchase (January 1, 20X2). What amount of Unearned Warranty Revenue should be reported on Dot's December 31, 20X3 Balance Sheet?

($36,000/3 years) = $12,000

Sara consigns goods to Lee Company who charges a 10% commission on consignment sales. Lee sells $750 worth of goods on Sara's behalf. Assuming no other costs of selling, what amount of Accounts Receivable should Sara record from Lee Company for the consignment sales?

($750 * 10%) = $675

Bookkeeping or double entry accounting was started during which time period?

14th-16th centuries

which of the following statements is FALSE? (ancient accounting)

300 tokens in different shapes and sizes was immediately recognizable to archaeologists as the remains of an ancient accounting system

The following information is available about a signed agreement between two entities: The entities have agreed to specific performance obligations. The entities have agreed on a price related to the performance obligations. No work has begun on the performance obligations, and the contract is cancelable without payment of penalty or other consideration. It is probable that the company completing the work will collect the agreed-upon consideration. Does a valid contract exist between the entities to which the revenue recognition criteria may be applied?

A valid contact does not exist because it is cancelable without penalty and no work on the performance obligation has begun

For a good or service to be considered distinct and identified as a separate performance obligation, it must be:

Able to be used by the customer on its own or with resources readily available to the customer and able to be separately identified from other promises in the contract.

A conceptual framework is necessary for which of the following reasons?

All of these answer choices are correct

Fundamental considerations the FASB must keep in mind in the rule-making activities include: simplification of the accounting literature, international convergence, and improvement in financial reporting

All the options are correct

What was the significance of Arabic numerals in the development of accounting?

An improvement over Roman numerals, they allowed for easy and systematic calculations

Garfield Company purchased on January 1, 2017, as a held-to-maturity (HTM) investment, $80,000 of the 9%, 5-year bonds of Chaster Corporation for $74,086 which provides an 11% return. Which of the following is TRUE of the journal entry to record the purchase of the investment?

Investment in Chaster Corp bonds is debited $74,086

Garfield Company purchased on January 1, 2017, as a available for sale (AFS) security, $80,000 of the 9%, 5-year bonds of Chaster Corporation for $74,086 which provides an 11% return. Which of the following statements is FALSE regarding the required journal entries for the above bonds if they are considered to be AFS securities as opposed to HTM securities?

Both types of securities are reported at year end at amortized cost

What brought professional accountancy to the US?

British and Scottish accountants came over to account for large investments in industry; they stayed and opened their own shops

Which of the following is true of depreciation?

It is the arbitrary matching of asset cost against revenue.

All of the following statements are FALSE EXCEPT:

Comparability pertains to the reporting of information in a similar manner for different companies as well as a company reporting under the same accounting policies over time.

On January 1, 2017, Purdy Company enters into a contract to transfer Blue and Rain to Georgia Co. for $300,000. The contract specifies that payment for Blue will not occur until Rain is also delivered. In other words, payment will not occur until both Blue and Rain are transferred to Georgia. Purdy determines that standalone prices are $110,000 for Blue and $190,000 for Rain. Purdy delivers Blue to Georgia on February 10, 2017. On March 15, 2017, Purdy delivers Rain to Georgia. Purdy should record:

Contract Asset of $110,000 on February 10

All of the following are examples of measurements which possess social reality EXCEPT:

Corporate allocations for which a division manager is NOT held accountable

Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below: Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of Common Stock in Clarkson Corporation. The stock has a par value of $10 and a market price of $13 per share. The journal entry to record this purchase includes all of the following EXCEPT:

Credit Common Stock for $14,000

Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below: Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Clarkson carries in inventory. The computer system cost $12,000 and is normally sold by Clarkson for $15,200. Clarkson uses a perpetual inventory system. The journal entry to record this purchase includes all of the following EXCEPT:

Credit to Sales Revenue of $16,000

Navajo Corporation traded a used truck (cost of $20,000, accumulated depreciation $18,000) for a small computer with a fair value of $3,300. Navajo also paid $500 in the transaction. Assume the exchange has NO commercial substance. Which of the following is the correct journal entry to record this transaction?

Debit Equipment $2,500; Debit Accumulated Depreciation $18,000; Credit Trucks $20,000; Credit Cash $500

Navajo Corporation traded a used truck (cost of $20,000, accumulated depreciation $18,000) for a small computer with a fair value of $3,300. Navajo also paid $500 in the transaction. Assume the exchange has commercial substance. Which of the following is the correct journal entry to record this transaction?

Debit Equipment $3,300; Debit Accumulated Depreciation $18,000; Credit Trucks $20,000; Credit Cash $500; Credit Gain on Disposal $800

Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below: Truck #2 has a list price of $16,000 and is acquired for a down payment of $2,000 cash and a zero-interest-bearing note with a face amount of $14,000. The note is due April 1, 2018. Clarkson would normally have to pay interest at a rate of 10% for such a borrowing and the dealership has an incremental borrowing rate of 8%. The journal entry to record this purchase includes all of the following EXCEPT:

Debit Trucks for $14,962.96

On December 31, 2017, Travis Tritt Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows: Machine $1,300,000 less Accumulated Depreciation of $360,000 Depreciation is computed at $60,000 per year on a straight-line basis. A fire completely destroys the machine on August 31, 2018. An insurance settlement of $430,000 was received for this casualty. Assume the settlement was received immediately. The journal entry to record this transaction would include all of the following EXCEPT: Don't forget to update depreciation!

Debit to Accumulated Depreciation $360,000

Foghorn Company entered into a sales transaction in which it agreed to receive common stock from Leghorn Corporation as payment for services provided to Leghorn Corporation. The journal entry to record the receipt of payment for the sales transaction will include a:

Debit to Leghorn Investment

Debit to Patents of $30,400 and credit to Cash of $30,400

Debit to Truck of $15,000

Garfield Company purchased on January 1, 2017, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chaster Corporation for $74,086 which provides an 11% return. If effective-interest amortization is used, which of the following is the correct journal entry to record the receipt of annual interest and discount amortization on January 1, 2018?

Dr Cash $7200; Dr Investment in Chaster Bonds $949; Cr. Interest Revenue $8149

Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of $180,000 and paid dividends of $60,000. Which of the following journal entries would be made by Zoop to record Murphy's net income for the year?

Dr Equity Investments - Murphy $54,000; Cr Investment Income $54,000

Cleveland Company has a stock portfolio value at $4,000. Its cost was $3,300. If the Fair Value Adjustment account has a debit balance of $200, which of the following correctly describes the required year-end journal entry?

Dr FVA $500; Cr Unrealized holding gain/loss - Income $500

Garfield Company purchased on January 1, 2017, as a available for sale (AFS) security, $80,000 of the 9%, 5-year bonds of Chaster Corporation for $74,086 which provides an 11% return. Assume the bonds have a year-end fair value of $75,500. Also assume a zero beginning balance in the Fair Value Adjustment account. Which of the following is the correct journal entry to be made at Dec. 31, 2017, for the year-end fair value adjustment?

Dr Fair Value Adjustment $465; Cr Unrealized Holding Gain/Loss - Equity $465

Dr. Cash $18,000; Cr. Equity Investments $18,000

Carow Corporation purchased on January 1, 2017, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison for $65,118, which provides a 6% return. The bonds pay interest semiannually. If effective-interest amortization is used, which of the following is the correct journal entry to record the receipt of semi-annual interest and premium amortization?

Dr. Cash $2400; Cr Debt Investments $446; Cr Interest Revenue $1954

Hillsborough Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of $70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $60,000. It is determined that this loss in value is uncollectible. Which of the following would be the correct journal entry to reflect this loss in value?

Dr. Loss on Impairment $10,000; Cr Debt Investment$10,000

Bramble owns a patent that has a carrying value of $340,000. Bramble expects future net cash flows from this patent to total $260,000. The fair value of the patent is $185,000. What is the correct journal entry to record the impairment loss?

Dr. Loss on Impairment $155,000, Cr. Patents $155,000

The authoritative status of FASB's conceptual framework is as follows:

It is used when there is no standard or interpretation related to the reporting issues under consideration.

Wolf Company produces large pieces of machinery for use in the manufacturing industry. Blue Jay Manufacturing Company purchases a large piece of machinery from Wolf for use in Blue Jay's new production plant. Although Blue Jay could install the equipment on its own, management decides to include installation of the machinery in its contract with Wolf. Blue Jay agrees to a total contract price of $850,000 for both the equipment and the installation. Wolf does not offer a discount on the machinery if it completes the installation. The fair value of the equipment is $850,000, and its cost is $760,000. The fair value of the installation is $50,000 and the cost of the labor to Wolf is $40,000. How much of the contract price should Wolf allocate to the equipment and installation respectively? If a proportion is necessary, round to the nearest one hundredth of a percent (e.g. .####) and round all answers to the nearest dollar.

Equipment $802,740; Installation $47,260

All of the following should be capitalized EXCEPT

Expenditures that maintain the efficiency and effectiveness of a productive asset

Why is a company's highly-skilled workforce not listed on the balance sheet?

FASB has not determined a reliable way to measure the value of human resources

Luca Pacioli is remembered as the "Father of Accounting" because:

He was the first person to write a book explaining the double-entry method

Which of the following correctly describes how investments in equity securities are accounted for?

Holdings of less than 20% are accounted for at fair value

Mott Company purchases a machine from Janelle Company. Installation of the machine requires specialized knowledge that Mott does not possess. Janelle Company regularly includes installation as part of its sales contracts. The machine has a stand-alone price of $50,000, and the value of the installation is estimated to be $5,000. Mott agrees to purchase the machine for $50,000. How much of the contract price should be allocated to the machine and installation respectively?

Machine $50,000; Installation $0

What subject was Pacioli traveling to Italy to teach?

Mathematics

Which one of the following is NOT one of the 7 key ingredients necessary for the development and wide-spread use of double-entry accounting?

Measurement

Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock for $13,200 (Fairbanks does NOT have significant influence and the stock is nonmarketable, although a similar company's stock is selling for $34.50 per share at year-end). Which of the following statements is true regarding any year-end adjustment?

No adjustment to fair value is reported because the equity security is nonmarketable

What is the relationship between relevant circumstances and rule making?

One of the principle tasks of a rule-making body is to identify appropriate relevant circumstances and set up criteria for how they govern the recording of events.

Which of the following is not a formal definition of assets that has been used by the accounting profession in the US?

Only those economic resources that can be severed from the firm and sold.

A company incurred costs to fulfill a contract that has a four-year life. The costs are a direct result of the contract and would not have been incurred had the contract not existed. How should the costs to fulfill the contract be accounted for?

Recorded as an asset and amortized over four years.

Which of the following research and development costs may be capitalized?

Research and development equipment with alternative future uses in other R&D projects or otherwise

Which of the following is a true statement? (Rev-Exp or A-L)

Revenue-expense proponents are prepared to introduce deferred charges and deferred credits in order to smooth income measurement.

In what country was the Chartered Accountant designation developed?

Scotland

How have bookkeeping methods changed since Pacioli's original teaching?

Somewhat, but modern accountants still follow his teachings

According to the reading "History of Accounting", Pacioli stated that their were three things you needed to be a successful merchant. Which of the following is NOT one of those three things?

Sufficient levels of inventory

What was the title fo Luca Pacioli's most famous book?

Summa de Arithmetica, Geometia, Proportioniet Proportionalita

Which of the following statements is false regarding the SEC?

The SEC established PCAOB

Which of the following statements is FALSE? (disclosure)

The SEC rarely examines disclosure issues as it has already regulated appropriate disclosures

Kinnamont Company manufactures farming equipment that includes navigational systems as part of the standard equipment package and offers optional training on any navigational systems for an additional fee. Smith Company enters into a contract with Kinnamont that includes a combine, a navigational system, and training. Identify the performance obligations to which Smith should allocate the transaction price: Correct!

The combine including the navigational system and the training as two separate performance obligations

What is the relationship between uniformity and comparability?

The degree of comparability that users can rely on is directly dependent on level of uniformity present in the financials

Which of the following describes information overload?

The inability of users to process and intelligently use all the information provided in financial reports

Which of the following statements is TRUE?

The objective of financing reporting uses an entity (A=L+OE) approach rather than a proprietary approach (A-L = OE) in determining what information to report.

All of the following are true of "relevant circumstances" EXCEPT:

They are complex in nature but rarely influence cash flows

Which of the following correctly describes how the three classifications of debt securities are accounted for?

Trading a fair value; Available for sale at fair value; Held-to-maturity at amortized cost

What is the end of Pacioli's accounting cycle?

Trial Balance

In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities

True

All of the following statements regarding IFRS accounting treatments for intangibles are true EXCEPT:

Under IFRS, costs in the development phase of R&D costs are expensed once technologically feasibility is achieved

Which of the following is a true statement? (articulated approach)

Under the articulated approach, contributed capital, retained earnings, and unrealized capital adjustments are subclassifications of owners' equity.

Hendricks Corporation purchased trading investment bonds for $50,000 at par. At December 31, Hendricks received annual interest of $2,000 and the fair value of the bonds was $47,400. Which of the following is true with respect to the journal entry to be made at year-end?

Unrealized Holding Gain/Loss - Income is debited for $2,600

When should a debt security be classified as held-to-maturity?

When the company has the intent and ability to hold those securities to maturity

Hendrix Inc., an equipment dealer, sells equipment on January 1, 2016, to Jimi Company for $200,000. Also, on January 1, 2016, Hendrix agrees to repurchase this equipment from Jimi Company on December 31, 2017 for a price of $233,280. At 1/1/16, Hendrix should record:

a liability of $200,000

The presentation of intangible assets in the financial statements: include reporting R&D costs as an epense in the income statement Involves crediting amortization directly to the intangible asset account includes the disclosure of the amortization expense for the next 5 years

all of the answers are correct

Since the completion of the codification project, GAAP can be described as consisting of:

any authoritative guidance included in the FASB codification

Which of the following three inputs to the accounting policy-making function is most important?

economic conditions

Preparation of merged financial statements when a parent-subsidiary relationship exists does NOT violate the:

economic entity assumption

Rubin Company is the only company in its industry to depreciate its plant assets on a straight-line basis. What qualitative characteristic of accounting information is NOT being followed?

comparability

The change in equity (net assets) of an entity during a period from transactions and other events and circumstances from non-owner sources is called:

comprehensive income

Which of the following is NOT an intangible asset? Unrecovered cost of a successful legal suit to protect the patent Cost of developing a patent Legal incurred in securing a patent Cost of purchasing a patent from an investor

cost of developing a patent

One criteria that indicates that a company should disregard revenue guidance for contracts (i.e., a valid contract does not exist) is when:

each party can unilaterally terminate the contract without compensation

Which of the following statements about the fair value principle is true?

fair value is a market-based measure

Capitalizing goodwill only when it is purchased in an arm's-length transaction, and not capitalizing any goodwill generated internally, is an example of

faithful representation and reliability winning out over relevance

Which type of uniformity is best from the standpoint of decision-making?

finite uniformity

Which of the following statements is true? (uniformity)

finite uniformity should be more representationally faithful than rigid uniforimty

Accounting for inventory and cost of good sold and for depreciation is an example of:

flexibility

An increase in equity (net assets) arising from a peripheral or incidental transactions is called a:

gain

Depreciation and amortization policies are justifiable and appropriate only if we assume some permanence to the company because of the:

going concern assumption

interest revenue is credited for $2,000

A purchased limited-life intangible asset ________ amortized and is impairment tested using _____________.

is; the recoverability test and then the fair value test

Grayson Co. incurred significant costs in defending its patent rights. Which of the following is the appropriate treatment of the related litigation costs?

litigation costs would be capitalized if the patent right is successfully defended

Which type of revenue or gain is generally recognized with the passage of time

long-term construction contracts

In the US, inflation/deflation is ignored in accounting under which of the following assumptions?

monetary unit assumption

The failure of financial reports to provide information on customer satisfaction indexes, reject rates, and company sustainability efforts describes the financial reporting challenge of:

nonfinancial measurements

Which of the following statements is FALSE? (intangibles)

on the income statement, a company reports impairment losses related to intangible assets as an extraordinary item due to their infrequent occurrence

Which of the following is an intangible asset? Purchase cost of a franchise Investment in a subsidiary company Operating loss incurred in start-up Goodwill generated internally

purchase cost of a franchise

All of the following subsequent expenditures should be capitalized EXCEPT:

replacement of a minor broken part of a machine

The objective of financial reporting places most emphasis on:

reporting to capital providers (i.e., investors and creditors)

Accounting standard setters use the following process in establishing accounting standards:

research, discussion paper, exposure draft, standard

Prescribing one method for generally similar transactions even though relevant circumstances may be present is referred to as:

rigid uniformity

All of the following are necessary aspects of a profession EXCEPT:

the ability to collaborate with others

On December 31, 2017, Travis Tritt Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows: Machine $1,300,000 less Accumulated Depreciation of $360,000 Depreciation is computed at $60,000 per year on a straight-line basis. On July 31, 2018, the company donated this machine to the Mountain King City Council. The fair value of the machine at the time of the donation was estimated to be $1,100,000. Which of the following statements is True with respect to the journal entry? Don't forget to update depreciation!

the company will record Contribution Expense of $1,100,000

An indication that the customer has NOT taken control of the good or service is:

the customer has not take on the significant risk or rewards of ownership

Stave Company invests $10,000,000 in 5% fixed rate corporate bonds on January 1, 2017. All the bonds are classified as available for sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $10,600,000. How does the journal entry at year end vary, if Stave elects the fair value option to account for these bonds?

the increase in value is credited to Unrealized Holding Gain/Loss - Income

Which of the following is NOT a characteristic of intangible assets?

they are all subject to amortization

What is meant by "political factors influencing accounting policy making?"

those who are affected by the rule will usually try to influence what those rules will be

the controversy surrounding the policy to expense all research & development costs associated with internally created intangible assets results in:

understating assets and overstating expenses

In determining the transaction price, the company must consider:

variable consideration, non-cash consideration, time value of money, and consideration payable

Murray Company has attempted to determine the replacement cost of its inventory. Three different appraisers arrive at substantially different amounts for this value. The president, nevertheless, decides to report the middle value for external reporting purposes. Which qualitative characteristic of information is lacking in these data?

verifiability

The expectation gap is:

what the public thinks accountants should do and what accountants think they can do

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