Final Exam Prep (Chapters 1-10)

Accrual accounting attempts to measure revenues and expenses that occurred during accounting periods so they equal net operating cash flow.

False

After an unadjusted trial balance is prepared, the next step in the accounting processing cycle is the preparation of financial statements.

False

Assets classified as property, plant, and equipment include machinery, equipment, and inventory.

False

In a bank, reconciliation adjustment to the bank balance could Include adding deposits in transit and deducting bank service charges.

False

In a good system of internal control, the person who initiates a transaction should be allowed to effectively control the processing of the transaction through its final inclusion in the accounting record

False

Inventory ship f.o.b. destination is included in the buyer's inventory during transit.

False

No allocation of contract price is required if the transaction involves a performance obligation be satisfied over time.

False

The FASB is currently the public-sector organization responsible for setting accounting standards in the United States.

False

The adjusted trial balance contains only permanent accounts.

False

The fixed asset turnover ratio equals net property plant an equipment divided by net sales

False

The gross profit ratio is calculated by dividing gross profit by average inventory.

False

Understanding Ending inventory in the current year causes costs of goods sold in the current year to be understated.

False

Which of the following does not provide guidance about GAAP for companies that are publicly listed on a stock exchange?

GASB

Which of the following is true concerning goodwill?

Goodwill is recorded only when a company acquires control over another company and the fair value of the consideration given exceeds the fair value of the acquired companies Identifiable net assets.

Using the gross method purchase discounts lost are

Included an inventory purchase.

Which of the following profit amounts usually will be listed in both the single-step and multiple-step formats of the income statement?

Income before taxes

Restructuring costs most often refer to costs associated with management's plans to materially change the scope of business operations or the manner in which they are conducted.

True

The allowance method for estimating bad debts requires an adjusting entry at the end of the. to reduce receivables to their appropriate carrying value.

True

The balance of net receivables represents the amount expected to be collected.

True

The calculation of present value eliminates interest from future cash flows.

True

The closing process brings all temporary accounts to a zero balance and updates the balance in the retained earnings account.

True

The gross profit method for estimating ending inventory relies on the historical relationship between sales revenue and the cost of good sold.

True

The main difference between perpetual and.ic investment systems is the timing of the allocation of costs between inventory and the cost of goods sold.

True

The multiple-step format of the income statement reports a series of intermediate subtotals such as gross profit, operating income, and income before taxes.

True

The primary function of financial accounting is to provide relevant financial information to parties external to business enterprises.

True

The transaction price is only allocated to goods or services that are both capable of being distinct and that are separately identifiable

True

Unlike the balance sheet, the income statement measures activity over a period of time.

True

Using the balance sheet approach, bad debt expenses and intellect result of estimating the appropriate balance for the allowance of uncollectable accounts.

True

With an annuity due, a payment is made or received on the date the agreement begins.

True

Intangible assets such as brand names, internet domains and trade secrets are recorded at the respective fair values on the date of acquisition, but should not include any additional costs necessary to get those assets ready for use.

false

Rowdy's Restaurants Cash Flow ($ in millions) Cash received from: Customers $ 1,800 Interest on investments 200 Sale of land 100 Sale of Rowdy's common stock 800 Issuance of debt securities 2,000 Cash paid for: Interest on debt $ 300 Income tax 80 Debt principal reduction 1,500 Purchase of equipment 4,000 Purchase of inventory 1,000 Dividends on common stock 200 Operating expenses 500 Rowdy's would report net cash inflows (outflows) from financing activities in the amount of:

$1,100 million.

Listed below are year-end account balances ($ in millions) taken from the records of Symphony Stores. Debit Credit Accounts receivable $ 677 Building and equipment 1,033 Cash 40 Interest receivable 38 Inventory 26 Land 169 Notes receivable (long-term) 484 Prepaid rent 33 Supplies 12 Trademark 45 Accounts payable $ 613 Accumulated depreciation 78 Additional paid-in capital 483 Dividends payable 21 Common stock (at par) 13 Income tax payable 57 Notes payable (long-term) 933 Retained earnings 328 Deferred revenue 31 TOTALS $ 2,557 $ 2,557 What would Symphony report as total assets?

$2,479 million

Lucia Limited reported net income of $136,900 for the year ended December 31, 2024. January 1 balances in accounts receivable and accounts payable were $28,000 and $26,600, respectively. Year-end balances in these accounts were $25,400 and $23,000, respectively. Assuming that all relevant information has been presented, Lucia's cash flows from operating activities would be?

135.000

ABC Incorporated had salaries payable of $60,000 and $120,000 at the end of 2023 and 2024, respectively. During 2024, Schneider recorded $620,000 in salaries expense in its income statement. Cash outflows for salaries in 2024 were?

560,000

Jack and Jill Distillery is considering investing in a two-year project. The company's required rate of return is 10%. The present value of $1 for one period at 10% is .909 and .826 for two periods at 10%. The project is expected to create cash flows, net of taxes, of $300,000 in the first year, and $420,000 in the second year. The distillery should invest in the project if the project's cost is less than or equal to?

619,620

Oliver Kim invests $7,000 in an investment account earning 8% interest compounding annually. How much will he have in his account in four years? The future value of $1 at 8% for four years is 1.36049 per Table 1 (Future Value of $1). Round to the nearest dollar.

9,523

Which of the following accounting equation is correct?

A − L − OE = 0

Which of the following is an example of a contra account?

Accumulated depreciation

Which of the following potentially limit the usefulness of the balance sheet?

All of the other answers represent potential limitations.

Which one of the following is series of equal periodic payments in which the first payment is made one compounding period after the date of the contract?

An ordinary annuity

Accounting for quality assurance warranties includes a credit to warranty expense and a debt to contingent liability.

False

Compensating balances represent.

Cash in a bank account that can't be spent.

Using the bro's profit method to estimate ending inventory it is not necessary to know

Cost of good sold.

Which of the following statements regarding intangible assets is correct.

Customer related intangible assets may include customer lists, customer contracts and customer relationships. Technology-based intangible assets may include computer software and purchase research and development. Artistic base and tangible assets include copyrights to books, songs, advertising jingles, pictures and movies.

What should be Somerset Leasing company's journal entry to record the receipt of $60,000 for 12 months' rent in advance?

Debit Cash for $60,000, and Credit Deferred Rent Revenue for $60,000.

Which of the following is not one of the 5 steps for recognizing revenue?

Estimate variable consideration.

Which of the following must be known in order to compute the interest rate when financing an asset purchase with an annuity?

Fair value of the asset purchased, number and dollar amount of the annuity payments.

At the end of the reporting, a company determines that is ending inventory has a greater Cost Bennett's replacement cost. What would be the effects of the adjustment to write down inventory to market?

Increase expenses

Which of the following is a possible intangible asset acquired from another company?

Internet domain name royalty agreement and customer list.

Which one of the following often articulated one of the elements that many believe distinguishes a profession from other occupations regarding the acceptance of responsibility by its members for the interests of those it serves?

Its code of ethics.

On July first, Lucy and Bros receive an order for 500 Cupcakes. Lucy delivered a cupcake to the client on June 25th 8 deposit of $50 was received on June 5th and remaining 450 was paid on the 30th of June Lucy likely would recognize revenue on.

June 25th.

Revenue likely is recognized over time for all the following arrangements except for.

Manufacturing generally stopped items ordered by a favorite customer.

Which format do most real-world income statements are presented?

Multiple-step

In a period when costs are rising and inventory quantities are stable. The inventory method that will result in the highest ending inventory is.

None of the above, Not with weighted average, not LIFO not FIFO.

One difference between periodic and perpetual inventory systems is that cost of good sold is

Not recorded under a.ic system until the end of the period

Which of the following is not categorized as an Asset?

Paid-in capital.

An asset retirement obligation associated with a natural resource is recorded with a debit to the related asset and it credits to a liability for an equal amount to the undiscounted, some of expected Cash outflows

Pause

Which of the following is not an internal transaction?

Paying salaries to company employees.

What is the main difference between single-step and multiple-step income?

Presentation

Memorex disk's cells. Computer disk drives with right of return privileges. Return to material and reasonably predictable memorets should.

Record a refund liability in the year of the sale.

The amount of cash reported as a current asset may not include.

Restricted cash

What are Accrued liabilities?

Result from services received before payment is made.

What does Long-term solvency refer to?

The risk that a company will not be able to pay its long-term debt.

Which of the following best explains why the taxes on discontinued operations are reported separately from taxes on continuing operations?

The taxes on discontinued operations are not expected to recur in future years.

The lower of cost or net realizable value rule causes losses and the value of inventory to be recognized in the period when

The value of inventory declines below cost.

Which of the following does not pertain to accounting for asset retirement obligations?

They must be recognized according to GAAP. They acrete increase over time at the company's credit adjusted risk-free rate. Statement of financial accounting concepts number 7 is applied when adjusting cash flow obligations for uncertainty.

A change from FIFO to LIFO does not need to be accounted for retrospectively.

True

Accrued salaries and wages in a balance sheet represent salaries that have been earned by employees but not yet paid.

True

Adjusting journal entries are recorded at the end of any period when financial statements are prepared.

True

All current assets are either cash or assets that will be converted into cash or consumed within 12 months or the operating cycle, whichever is longer.

True

An annuity is a series of equal periodic payments.

True

Auditors play an important role in the resource allocation process by adding credibility to financial statements.

True

Balance sheets prepared under IFRS often report long-term items before current items.

True

Companies recognize revenue when goods or services are transferred to customers for the amount. The company expects to be entitled to receive an exchange for those good services

True

Debits increase asset accounts and decrease liability accounts.

True

Depending on the circumstances, the classification of a compensating balance may be either current or non current and the arrangement should be disclosed in the notes.

True

For companies that use a cost method other than LIFO or the retail inventory method, inventory is reported at the lower of cost. Or the net realizable value.

True

If an option to purchase an extended warranty at a special discount is included with a product when the product is purchased, a portion of the contract price needs to be allocated to the option.

True

In the future value of an ordinary annuity, the last cash payment will not earn any interest.

True

LIFO usually provides a better match of revenue and expense than does FIFO

True

One meaning of earnings quality is the ability of reported earnings to predict a company's future earnings

True