ACCT 5312 - Chap 9

The "other income and expense" category is normally reported after income from operations and includes which items? More than one answer may be correct. A. Gains B. Interest expense C. Discontinued operations D. Depreciation

A & B A. Gains B. Interest expense

Which of these are true, in regard to investing activities in the statement of cash flows? More than one answer may be correct. A. They relate primarily to the purchase and sale of noncurrent assets. They include the use of cash to acquire land, buildings, and equipment. B. They are a reconciliation of net income and net cash provided (used) by investing activities. C. They relate to changes during the year in nonoperating liabilities (such as bonds payable) and stockholders' equity accounts other than net income or loss.

A & B A. They relate primarily to the purchase and sale of noncurrent assets. They include the use of cash to acquire land, buildings, and equipment. B. They are a reconciliation of net income and net cash provided (used) by investing activities.

By reporting discontinued operations on the income statement as a separate item, net of taxes, all the effects of the discontinued business segment are excluded from the _____ of continuing operations. More than one answer may be correct. A. Revenues B. Liabilities C. Expenses D. Dividends

A & C A. Revenues C. Expenses

When revenues are earned, the effects on the financial statements typically include: Multiple select question. A. an increase to current assets B. a decrease to total assets C. an increase to net income D. an increase to total paid-in capital

A & C A. an increase to current assets C. an increase to net income

What key interpretations are typically made from the statement of cash flows? More than one answer may be correct. A. Whether net cash flows provided by operations exceed the company's cash used for investing activities B. How operating, investing, and financing activities affected the company's cash balance during the year C. How much cash was generated by the depreciation process during the year D. Whether the company's cash balance increased or decreased during the year

A & D A. Whether net cash flows provided by operations exceed the company's cash used for investing activities D. Whether the company's cash balance increased or decreased during the year

The "other income and expense" category is normally reported after income from operations and includes which items? Multiple select question. A. Losses B. Interest income C. Income tax expense D. Utility expense

A, B & C A. Losses B. Interest income C. Income tax expense

Identify the correct statements about the matching principle. Multiple select question. A. Some expenses (administrative salaries, for example) are recognized in the period in which they are incurred. B. Expenses are measured by the cash or other asset used up to obtain the economic benefit they represent. C. Expenses such as depreciation result from an allocation of the cost of an asset to the periods that are expected to benefit from its use. D. Revenues are matched to expenses in the period during which the expenses were incurred.

A, B & C A. Some expenses (administrative salaries, for example) are recognized in the period in which they are incurred. B. Expenses are measured by the cash or other asset used up to obtain the economic benefit they represent. C. Expenses such as depreciation result from an allocation of the cost of an asset to the periods that are expected to benefit from its use.

Financing activities in the statement of cash flows: select all A. include the issuance of bonds and common stock. B. include the purchase and sale of treasury stock. C. relate primarily to changes during the year in nonoperating liabilities and stockholders' equity accounts. D. are a reconciliation of net income and net cash provided (used) by financing activities.

A, B & C A. include the issuance of bonds and common stock. B. include the purchase and sale of treasury stock. C. relate primarily to changes during the year in nonoperating liabilities and stockholders' equity accounts.

Identify the correct statements about the matching principle. Multiple select question. A. Expenses such as administrative salaries are recognized in the period in which they are incurred, because the benefit of the expense is used up simultaneously or soon after incurrence. B. Some expenses (cost of goods sold, for example) are recognized concurrently with the revenues to which they relate. C. Expenses are matched to revenues so long as there are sufficient revenues to absorb the expenses and the company reports a net income. D. Some expenses (depreciation, for example) are an allocation of the cost of an asset to the periods expected to benefit from its use.

A, B & D A. Expenses such as administrative salaries are recognized in the period in which they are incurred, because the benefit of the expense is used up simultaneously or soon after incurrence. B. Some expenses (cost of goods sold, for example) are recognized concurrently with the revenues to which they relate. D. Some expenses (depreciation, for example) are an allocation of the cost of an asset to the periods expected to benefit from its use.

Income from operations normally excludes the effects of which transactions? More than one answer may be correct. A. Losses B. Interest income C. Administrative expenses D. Income taxes E. Research and development expenses

A, B & D A. Losses B. Interest income D. Income taxes

Concerning the direct method presentation of the statement of cash flows, which of the following statements are true? select all A. The operating activity transactions include cash received from customers and cash paid to suppliers. B. Each of the captions reported on the statement explains how much cash was received or paid during the year for that item. C. The operating activities section is a reconciliation of net income and the net cash provided (used) by operating activities. D. The direct method lists each major class of cash receipts and cash disbursements transactions for each of the three activity areas.

A, B & D A. The operating activity transactions include cash received from customers and cash paid to suppliers. B. Each of the captions reported on the statement explains how much cash was received or paid during the year for that item. D. The direct method lists each major class of cash receipts and cash disbursements transactions for each of the three activity areas.

Which of these are true, regarding financing activities in the statement of cash flows? More than one answer may be correct. A. They include the use of cash to pay dividends. B. They include the use of cash to retire bonds. C. They relate primarily to the purchase and sale of noncurrent assets. D. They relate primarily to changes during the year in nonoperating liabilities (such as bonds payable) and in stockholders' equity accounts other than net income or loss.

A, B & D A. They include the use of cash to pay dividends. B. They include the use of cash to retire bonds. D. They relate primarily to changes during the year in nonoperating liabilities (such as bonds payable) and in stockholders' equity accounts other than net income or loss.

Identify the correct statements about a periodic inventory system. Multiple select question. A. The cost of ending inventory is subtracted from the cost of beginning inventory and net purchases. B. Inventory on hand is counted physically at specific intervals, often at the end of each fiscal year. C. Computers keep a running total of the company's inventory, making daily adjustments for goods being bought and sold. D. The Cost of Goods Sold account is debited each time a sales transaction is recorded. E. Inventory on hand must be counted physically to determine cost of goods sold.

A, B & E A. The cost of ending inventory is subtracted from the cost of beginning inventory and net purchases. B. Inventory on hand is counted physically at specific intervals, often at the end of each fiscal year. E. Inventory on hand must be counted physically to determine cost of goods sold.

Regarding shipping terms, which of the following statements are true? Multiple select question. A. FOB shipping point means that the buyer accepts ownership of the product at the seller's shipping location. B. The buyer incurs the cost of shipments made FOB shipping point. C. Ordinarily, items shipped FOB destination will have freight prepaid. D. When a shipment arrives freight collect, the buyer pays the freight cost. E. When an item is shipped FOB shipping point, the seller owns the product until it is accepted by the buyer at the buyer's designated location.

A, B, C & D A. FOB shipping point means that the buyer accepts ownership of the product at the seller's shipping location. B. The buyer incurs the cost of shipments made FOB shipping point. C. Ordinarily, items shipped FOB destination will have freight prepaid. D. When a shipment arrives freight collect, the buyer pays the freight cost.

A firm has a 20 percent gross profit ratio, Net sales = $100,000, and Cost of goods available for sale = $88,000. Based on this information, which of the following statements are correct? Multiple select question. A. Gross profit = $20,000 B. Net purchases = $70,000 C. Ending inventory = $8,000 D. Cost of goods sold = $80,000

A, C & D A. Gross profit = $20,000 --> 100K*20% = 20K C. Ending inventory = $8,000 --> 88K-80K = 8K D. Cost of goods sold = $80,000 --> 100K*80% = 80K

Some of the key interpretations to be made from the statement of cash flows include the determination of: (select all) A. whether the company has generated positive net cash flows from operations. B. how significantly the interest receivable and wages payable account balances changed during the year. C. whether the relative totals of operating, investing, and financing cash flows were similar to those observed in the prior year. D. whether net cash flows provided by operations are sufficient to pay adequate dividends to the company's shareholders.

A, C & D A. whether the company has generated positive net cash flows from operations. C. whether the relative totals of operating, investing, and financing cash flows were similar to those observed in the prior year. D. whether net cash flows provided by operations are sufficient to pay adequate dividends to the company's shareholders.

Under the cost of goods sold model, which of the following representations are correct? Multiple select question. A. Cost of goods sold + Ending inventory = Cost of goods available for sale B. Beginning inventory - Ending inventory = Cost of goods sold C. Beginning inventory + Net purchases = Cost of goods sold D. Cost of goods available for sale - Ending inventory = Cost of goods sold E. Beginning inventory + Net purchases = Cost of goods available for sale

A, D & E A. Cost of goods sold + Ending inventory = Cost of goods available for sale D. Cost of goods available for sale - Ending inventory = Cost of goods sold E. Beginning inventory + Net purchases = Cost of goods available for sale

If Interest expense = $800, Cost of goods sold = $7,000, Depreciation expense = $1,200, Net sales = $10,000, and Operating income = $600, calculate gross margin. A. $10,000 - $7,000 = $3,000 B. $600 + $1,200 = $1,800 C. $10,000 - $7,000 - $500 - $1,200 = $1,300 D. $10,000 - $7,000 - $500 = $2,500

A. $10,000 - $7,000 = $3,000

Based on the following information (amounts in thousands), calculate income from operations: Income tax expense = $10 General and administrative expenses = $30 Loss on sale of equipment = $5 Selling expenses = $20 Gross profit = $110 Interest expense = $15 A. $110 - $20 - $30 = $60 = $60,000 B. $110 - $20 - $30 -$15 - $10 = $35 = $35,000 C. $110 - $20 - $30 - $15 = $45 = $45,000 D. $110 - $20 - $30 - $5 = $55 = $55,000

A. $110 - $20 - $30 = $60 = $60,000

If Net sales = $12,000, Interest income = $500, Cost of goods sold = $9,000, Wages expense = $1,000, and Operating income = $2,000, calculate the gross margin ratio. A. $12,000 - $9,000 = $3,000 / $12,000 = 25% B. $12,000 - $9,000 - $1,000 = $2,000 / $12,000 = 16.7% C. $12,000 + 500 - $9,000 = $3,500 / $12,500 = 28% D. $12,000 - $9,000 = $3,000 / $12,500 = 24%

A. $12,000 - $9,000 = $3,000 / $12,000 = 25%

A shoe store's cost for a particular pair of boots is $50.00, and the store owners have a 60 percent desired gross profit ratio. What selling price should be established for a pair of these boots? ​​ A. $125.00 B. $110.00 C. $80.00 D. $150.00

A. $125.00 --> $50/(1-60%)

If a firm's net income for the year was $60,000, the weighted-average number of common shares outstanding was 20,000, authorized shares were 100,000, and the preferred dividend requirement for the year was $10,000, then basic earnings per share was: A. $2.50 B. $0.50 C. $3.00 D. $3.50

A. $2.50

On January 1, the beginning of its fiscal year, Wiggins Inc. had 100,000 shares of common stock outstanding. On April 1, 30,000 additional shares were issued for cash. On October 1, 20,000 shares of common stock were acquired as treasury stock (and are no longer outstanding). Calculate the weighted average number of shares outstanding for the year. A. (100,000 x 2/12) + (130,000 x 7/12) + (110,000 x 3/12) = 120,000 B. (100,000 x 3/12) + (130,000 x 6/12) + (110,000 x 3/12) = 117,500 C. (100,000 + 110,000) / 2 = 105,000, based on the weighted average (beginning and ending) number of shares outstanding. D. (100,000 + 30,000 - 20,000) = 110,000, based on the number of shares outstanding at year end

A. (100,000 x 2/12) + (130,000 x 7/12) + (110,000 x 3/12) = 120,000

Under the current accounting standard, how are extraordinary items to be reported? A. As a separate component of income from continuing operations B. As a component of paid-in capital C. Only in the notes to accounts D. On the face of the balance sheet

A. As a separate component of income from continuing operations

Which of the following accounts or captions are not included in the calculation of Gross Profit? A. General and Selling Expenses. B. Cost of Goods Sold. C. All of these accounts or captions are included in the calculation of Gross Profit. D. Net Sales.

A. General and Selling Expenses.

If Purchases = $3,500, Freight-in = $400, Purchase discounts = $100, and Purchase returns and allowances = $200, calculate the Net purchases A. Net purchases = $3,500 + $400 - $100 - $200 = $3,600 B. Net purchases = $3,500 + $400 - $100 + $200 = $4,000 C. Net purchases = $3,500 + $400 + $100 - $200 = $3,800 D. Net purchases = $3,500 - $400 - $100 - $200 = $2,800

A. Net purchases = $3,500 + $400 - $100 - $200 = $3,600

What document explains the change in the firm's cash from the beginning to the end of the fiscal period by summarizing the cash effects of the firm's operating, investing, and financing activities during the period? A. Statement of cash flows B. Balance sheet C. Income statement D. Statement of cost of goods manufactured

A. Statement of cash flows

The concept of matching revenue and expense refers to the fact that: A. all costs incurred in the process of earning revenues during a period are recorded as expenses in that period. B. all cash disbursements during a period are subtracted from all cash receipts during the period. C. all costs incurred in the process of earning revenues during a period are deferred and expensed in a future period. D. expenses incurred during a period equal the revenues earned during the period.

A. all costs incurred in the process of earning revenues during a period are recorded as expenses in that period.

Most firms report the statement of cash flows using the indirect method because ______ A. operating activities information reported under the direct method is not so readily determinable B. each of the captions reported on the statement explains how much cash is paid during the year for that item C. operating activities information reported under the direct method lacks mathematical accuracy D. it explains how much cash is received from the collection of accounts receivable during a fiscal year

A. operating activities information reported under the direct method is not so readily determinable

The primary purpose of the statement of cash flows is to ______. A. provide relevant information about the cash receipts and cash payments of an enterprise during a period B. predict the future cash flows from nonoperating activities C. show the market value of a company's assets and liabilities D. measure a company's revenues, expenses, gains, or losses at a single point in time

A. provide relevant information about the cash receipts and cash payments of an enterprise during a period

The statement of cash flows _______ A. shows why cash changed during a period by reporting net cash provided or used by operating, investing, and financing activities B. accurately predicts a company's future cash flows from operating, investing, and financing activities C. primarily aims at assessing a company's profitability D. reports net income or net loss of a company at a particular point in time

A. shows why cash changed during a period by reporting net cash provided or used by operating, investing, and financing activities

The income or loss from discontinued operations is reported ______ (before/after) income taxes and shown separately after a subtotal amount labeled income from ______ (continuing/extraordinary) operations.

After Continuing

The new contract-based model of revenue recognition (IASB 15) employs an ______ (asset/gain/liability/loss) and _______ (asset/gain/liability/loss) approach rather than using the old realization and earned criteria.

Asset Liability

Net income attributable to noncontrolling interest: (select all) A. is presented for subsidiaries but is not included in the parent company's financial statements. B. must be clearly identified and presented on the face of the income statement. C. is normally subtracted from net income to arrive at net income attributable to the parent company. D. must be presented on a per share basis and disclosed in the notes.

B & C B. must be clearly identified and presented on the face of the income statement. C. is normally subtracted from net income to arrive at net income attributable to the parent company.

A firm has a 40 percent gross profit ratio, Net sales = $200,000, and Cost of goods available for sale = $170,000. Based on this information, which of the following statements are correct? Select all: A. Beginning inventory = $370,000 B. Ending inventory = $50,000 C. Cost of goods sold = $102,000 D. Gross profit = $80,000

B & D B. Ending inventory = $50,000 D. Gross profit = $80,000

What subtotals are commonly reported in multiple-step income statements? More than one answer may be correct. A. Net income B. Gross profit C. Cost of goods sold D. Income from operations

B & D B. Gross profit D. Income from operations

Which of these would be included as investing activities in the statement of cash flows? More than one answer may be correct. A. Lending of money and collection of loans B. Purchase and sale of long-term investments in debt and equity securities of other companies C. Nonoperating liabilities and stockholders' equity accounts D. Payment of cash for the purchase of land, buildings, and equipment

B & D B. Purchase and sale of long-term investments in debt and equity securities of other companies D. Payment of cash for the purchase of land, buildings, and equipment

Starting with gross sales and arriving at net sales, which of the following statements are true? Multiple select question. A. Cost of goods sold is subtracted. B. Sales discounts are subtracted. C. Gross profit is added. D. Freight-in is added. E. Sales returns and allowances are subtracted.

B & E B. Sales discounts are subtracted. E. Sales returns and allowances are subtracted.

What questions are answered by the income statement? More than one answer may be correct. A. What will total revenues be in the next fiscal period? B. Are sales increasing relative to cost of goods sold and other operating expenses? C. How much profit or loss did the firm have? D. What were the financial results of the firm's operations for the fiscal period?

B, C & D B. Are sales increasing relative to cost of goods sold and other operating expenses? C. How much profit or loss did the firm have? D. What were the financial results of the firm's operations for the fiscal period?

What are some common causes of inventory shrinkage? Multiple select question. A. Gifts B. Errors C. Obsolescence D. Theft

B, C & D B. Errors C. Obsolescence D. Theft

Identify the correct statements about a perpetual inventory system. Multiple select question. A. The Purchase Returns and Allowances and Freight-In accounts are used. B. Inventory counts are still required on a periodic basis. C. Much data processing is required, which gives management a great deal of information. D. Cost is determined when the item is sold.

B, C & D B. Inventory counts are still required on a periodic basis. C. Much data processing is required, which gives management a great deal of information. D. Cost is determined when the item is sold.

A company's income statement is prepared to provide essential information to which groups of people? More than one answer may be correct. A. Suppliers B. Managers C. Potential investors D. Stockholders

B, C & D B. Managers C. Potential investors D. Stockholders

Which activities are summarized in the statement of cash flow? Multiple select question. A. Public relations B. Operating activities C. Investments D. Financing activities

B, C & D B. Operating activities C. Investments D. Financing activities

Concerning the direct method presentation of the statement of cash flows, which of the following statements are true? More than one answer may be correct. A. The operating activities section starts with net income and adds back depreciation expense. B. The direct method involves listing each major class of cash receipts transactions and cash disbursements transactions for each side of three activity areas. C. The FASB encourages companies to use the direct method. D. The operating activity transactions include cash paid to employees, cash payments of interest, and cash payments for taxes.

B, C & D B. The direct method involves listing each major class of cash receipts transactions and cash disbursements transactions for each side of three activity areas. C. The FASB encourages companies to use the direct method. D. The operating activity transactions include cash paid to employees, cash payments of interest, and cash payments for taxes.

The financial statement effects of recognizing cost of goods sold include: Multiple select question. A. a decrease in paid-in capital. B. a decrease to current assets. C. a decrease to net income. D. an increase to retained earnings. E. an increase to expenses.

B, C & E B. a decrease to current assets. C. a decrease to net income. E. an increase to expenses.

In calculating diluted earnings per share, adjustments may need to be made to basic earnings per share with respect to: Select all A. convertible common stock. B. convertible preferred stock. C. stock options. D. callable common stock. E. convertible bonds.

B, C & E B. convertible preferred stock. C. stock options. E. convertible bonds.

What principal categories of other operating expenses are frequently reported on the income statement? Multiple select question. A. Depreciation and amortization expenses B. General and administrative expenses C. Interest and income tax expenses D. Selling expenses E. Research and development expenses

B, D & E B. General and administrative expenses D. Selling expenses E. Research and development expenses

A retail store's cost for a particular toy is $15.00, and the store owners have a 25 percent desired gross profit ratio. What selling price should be established for this toy? ​​ A. $16.00 B. $20.00 C. $15.00 D. $18.75

B. $20.00 --> $15 / (1-25%)

The entry to record the recognition of cost of goods sold is: A. Dr. Cost of Goods Sold Cr. Cash B. Dr. Cost of Goods Sold Cr. Inventory C. Dr. Loss on Inventory Obsolescence Cr. Inventory D. Dr. Cost of Goods Sold Cr. Accounts Receivable

B. Dr. Cost of Goods Sold Cr. Inventory

If Beginning inventory = $300, Cost of goods sold = $1,800, and Net purchases = $2,000, calculate the Cost of goods available for sale (GAS) and the Ending inventory (EI). A. GAS = $300 + $2,000 = $2,300 EI = $2,300 - $300 = $1,800 B. GAS = $300 + $2,000 = $2,300 EI = $2,300 - $1,800 = $500 C. GAS = $300 + $1,800 = $2,100 EI = $2,100 - $1,800 = $300 D. GAS = $300 + $2,000 = $2,300 Ending inventory is indeterminable.

B. GAS = $300 + $2,000 = $2,300 EI = $2,300 - $1,800 = $500

The following accounting data is obtained from the financial statements of Excellent Company: Net income $560,000 Depreciation expense 340,000 Cash dividends paid 409,000 Gain on sale of machinery 1,200 Decrease in accounts receivable 14,000 Increase in inventories 9,000 Decrease in accounts payable 3,500 Proceeds from sale of land 40,000. Using the indirect method of cash flow presentation, calculate the net cash flow provided (used) by operations for Excellent Company for the period. A. Net cash used by operating activities amounts to $900,300. B. Net cash provided by operating activities amounts to $900,300. C. Net cash provided by operating activities amounts to $927,700. D. Net cash used by operating activities amounts to $927,700.

B. Net cash provided by operating activities amounts to $900,300.

Advertising expenditures and research and development (R&D) costs are recorded as expenses in the period incurred under U.S. GAAP. What concepts justify this approach? A. Consistency and materiality B. Objectivity and conservatism C. Full disclosure and conservatism D. Going concern and full disclosure

B. Objectivity and conservatism

The term, "realization," in revenue recognition refers to which of the following? A. The entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits. B. The product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash. C. The entity has received an irrevocable order for goods or services. D. Cash has been received with an irrevocable order for goods or services.

B. The product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash.

Gains differ from revenues because gains: A. do not involve any offsetting costs or expenses. B. are not a result of the entity's ongoing, central operations. C. are reported as income from operating activities. D. do not have to be realized.

B. are not a result of the entity's ongoing, central operations.

Income from operations is: A. usually used instead of net income in the ROE calculation. B. sometimes used instead of net income in the ROI calculation. C. the same thing as net income and sometimes called the "bottom line." D. usually calculated after income tax expense.

B. sometimes used instead of net income in the ROI calculation.

When revenues are earned, how are the financial statement affected? More than one answer may be correct. Multiple select question. A. An increase to Accounts Payable B. An increase to Common Stock and Additional Paid-in Capital C. An increase to net income D. An increase to Sales or Service Revenues

C & D C. An increase to net income D. An increase to Sales or Service Revenues

Income from operations normally excludes the effects of which transactions? Multiple select question. A. Marketing and selling expenses B. Cost of goods sold C. Gains D. Interest expense

C & D C. Gains D. Interest expense

Identify the correct statements about a periodic inventory system. Multiple select question. A. The Cost of Goods Sold account is debited each time a sales transaction is recorded. B. Computers keep a running total of the company's inventory, making daily adjustments for goods being bought and sold. C. Inventory on hand is counted physically at specific intervals, often at the end of each fiscal year. D. The cost of ending inventory is subtracted from the cost of beginning inventory and net purchases.

C & D C. Inventory on hand is counted physically at specific intervals, often at the end of each fiscal year. D. The cost of ending inventory is subtracted from the cost of beginning inventory and net purchases.

If Net sales = $12,000, Interest income = $500, Cost of goods sold = $8,000, Wages expense = $2,500, and Operating income = $1,000, calculate gross margin. A. $12,000 + $500 - $8,000 = $4,500 B. $1,000 + $2,500 = $3,500 C. $12,000 - $8,000 = $4,000 D. $12,000 - $8,000 - $2,500 = $1,500

C. $12,000 - $8,000 = $4,000

If Interest expense = $1,000, Cost of goods sold = $14,000, Depreciation expense = $3,000, Net sales = $20,000, and Operating income = $1,000, calculate the gross margin ratio. A. $1,000 / $20,000 = 5% B. $20,000 - $14,000 -$1,000 = $5,000 / $20,000 = 25% C. $20,000 - $14,000 = $6,000 / $20,000 = 30% D. $20,000 - $14,000 - $3,000 = $3,000 / $20,000 = 15%

C. $20,000 - $14,000 = $6,000 / $20,000 = 30%

Based on the following information (amounts in thousands), calculate income from operations: Cost of goods sold = $120 Marketing and selling expenses = $20 Gain on sale of land = $30 Administrative expenses = $15 Net sales = $200 Interest expense = $5 Research and development expenses = $10 A. $200 + $30 - $120 - $20 - $15 - $10 - $5 = $60 = $65,000 B. $200 + $30 - $120 - $20 - $15 - $10 = $65 = $65,000 C. $200 - $120 - $20 - $15 - $10 = $35 = $35,000 D. $200 - $120 - $20 - $15 = $45 = $45,000

C. $200 - $120 - $20 - $15 - $10 = $35 = $35,000

Which of the following is not a principal category of "Other operating expenses" frequently reported on the income statement? A. General and administrative expenses B. Selling expenses C. Cost of goods sold D. Research and development expenses

C. Cost of goods sold

If Ending inventory = $600, Cost of goods sold = $1,400, and Net purchases = $1,500, calculate the Cost of goods available for sale (GAS) and the Beginning inventory (BI). A. GAS = $600 + $1,400 = $2,000 BI = $1,500 - $1,400 = $100 B. GAS = $600 + $1,500 = $2,100 BI = $2,100 - $1,400 = $700 C. GAS = $600 + $1,400 = $2,000 BI = $2,000 - $1,500 = $500 D. GAS = $600 + $1,400 = $2,000 Beginning inventory is indeterminable.

C. GAS = $600 + $1,400 = $2,000 BI = $2,000 - $1,500 = $500

Identify a subtotal that is reported in a multiple-step income statement. A. Net sales B. Provision for income taxes C. Income before taxes D. Other income, net

C. Income before taxes

Identify a true statement about extraordinary items. A. Financial effects of natural disasters such as hurricanes, earthquakes, floods, and fires are not valid examples of extraordinary items. B. The financial effects of extraordinary items should not be disclosed in the notes to the financial statements. C. The current accounting standard requires firms to report extraordinary items as a separate component from continuing operations. D. To be included in this category, an item must occur often and have an unusually large effect on the company's finances.

C. The current accounting standard requires firms to report extraordinary items as a separate component from continuing operations.

If a firm's net income for the year was $180,000, the weighted-average number of common shares outstanding was 50,000, treasury shares were 10,000, and the preferred dividend requirement for the year was $30,000, then basic earnings per share was: A. $4.20 B. $3.75 C. $3.60 D. $3.00

D. $3.00

The following accounting data is obtained from the financial statements of Synergy Company for the year ended December 31, Year 1: Net income $560,000 Depreciation and amortization expense 340,000 Income tax expense 150,000 Loss on sale of machinery 1,200 Increase in accounts receivable 14,000 Decrease in inventories 9,000 Increase in accounts payable 3,500 Proceeds from sale of land 40,000. Using the indirect method of cash flow presentation, calculate the net cash flow provided by (used in) operations for Synergy Company for the year ended December 31, Year 1. A. $1,052,300 B. $927,700 C. $1,078,100 D. $899,700

D. $899,700

On January 1, the beginning of its fiscal year, Wiggins Inc. had 100,000 shares of common stock outstanding. On April 1, 30,000 additional shares were issued for cash. On October 1, 20,000 additional shares were issued. Calculate the weighted average number of shares outstanding for the year. A. (100,000 + 30,000 + 20,000) = 150,000, based on the number of shares outstanding at year end B. (100,000 x 3/12) + (130,000 x 5/12) + (150,000 x 4/12) = 129,167 C. (100,000 + 150,000) / 2 = 125,000, based on the weighted average (beginning and ending) number of shares outstanding D. (100,000 x 3/12) + (130,000 x 6/12) + (150,000 x 3/12) = 127,500

D. (100,000 x 3/12) + (130,000 x 6/12) + (150,000 x 3/12) = 127,500

Identify the reason for which indirect method is preferred to direct method for cash flow presentation by most firms. A. FASB encourages enterprises to use the indirect method of cash flow presentation. B. Each operating activity item under the indirect method conveys independent meaning unlike operating activity items shown under the direct method. C. The adjustments in the operating activities section under the indirect method explain how much cash was actually paid or received during the period. D. Companies do not need any separate accounting procedures to accumulate cash flow data when the indirect method is used.

D. Companies do not need any separate accounting procedures to accumulate cash flow data when the indirect method is used.

Which of the following captions would not be reported on a single step income statement? A. Net sales B. Income before taxes C. Net income D. Income from operations

D. Income from operations

If Freight-in = $600, Purchase discounts = $300, Purchase returns and allowances = $200, and Net purchases = $5,000, calculate the Purchases. A. Purchases = $600 - $300 - $200 = $100 B. Purchases = $600 - $300 - $200 - $5,000 = ($4,900) C. Purchases = $5,000 - $200 - $300 + $600 = $5,100 D. Purchases = $5,000 + $200 + $300 - $600 = $4,900

D. Purchases = $5,000 + $200 + $300 - $600 = $4,900

The major difference between the indirect and the direct method of a statement of cash flows appears in which of the following activities section(s)? A. The investing activities section only. B. The operating activities and financing activities sections. C. The investing activities and financing activities sections. D. The operating activities section only.

D. The operating activities section only.

Advertising expenditures and research and development costs are recorded: A. as assets in the period incurred and then allocated to expenses in the periods benefited. B. as losses in the periods incurred. C. as expenses in the period incurred if immaterial in amount and as assets if material in amount. D. as expenses in the period incurred.

D. as expenses in the period incurred.

The gross profit ratio is useful to the manager for each of the following purposes except that: A. it can be used to determine the selling price to set for an item. B. it can be used to determine the amount available from a given amount of revenue to cover operating expenses. C. it can be used to estimate the amount of inventory lost in a fire. D. it can be used to estimate the amount of operating expenses for a period.

D. it can be used to estimate the amount of operating expenses for a period.

The amount of an expense is measured by: A. the amount by which assets are increased or decreased as a result of the transaction. B. the future cash flow that the company expects to receive from the transaction. C. the cash or other asset obtained in the transaction. D. the cash or other asset used up to obtain the economic benefit it represents.

D. the cash or other asset used up to obtain the economic benefit it represents.

To be recognized, revenues must meet both the ______ (realization/measurable/earned/materiaity) and ______ (realization/measurable/earned/materiaity) criteria.

Realization Earned

Net income attributable to noncontrolling interests is reported separately from net income (or net earnings) attributable to the reporting entity; the latter amount is reported in total and on a per share of outstanding common stock basis. True or False?

True

The principal categories of other operating expenses frequently reported on the income statement can be combined in a variety of ways for financial reporting purposes, such as, "Marketing and selling expenses," "Administrative expenses," and "Research and development expenses." True or False?

True

Revenues generally are measured by the amount of _______ (stock/inventory/cash) received or expected to be received from the transaction.

cash

Ordinarily, items shipped FOB ______ (shipping point/destination) will have freight prepaid, and items shipped FOB _______ (shipping point/destination) will be shipped freight collect.

destination shipping point

A firm may be required to report ______ (basic/diluted) earnings per share if it is possible that the conversion of its long-term debt (bonds) or preferred stock into common stock could reduce _______ (basic/diluted) earnings per share of common stock outstanding.

diluted basic

When a segment, or major portion of a business, is disposed of, it is appropriate to disclose separately the impact that the _______ (extraordinary/discontinued) operation has had on the current operations of the firm, as well as its impact on any previous year results that are shown for comparative purposes.

discontinued

Gains are reported as other ______ (assets/income/equity) after a firm's operating expenses have been shown and income from operations has been reported.

income

Gains are ______ (increases/decreases) in an entity's net assets resulting from incidental transactions or nonoperating activities.

increases

Under the new model of revenue recognition (IASB 15), revenue is recognized based on the satisfaction of ________ (service/performance/market) obligations.

performance

Advances in point-of-sale technologies (such as standard bar code scanners used by retail stores) have allowed even small merchandising firms to achieve _______ (periodic/perpetual) inventories.

perpetual

If cash is not expected to be received within a year, revenue usually is measured by the ________ (present/future/market) value of the amount expected to be received.

present

When the outflow of cash related to the expense will not occur within a year, it is appropriate to recognize the _______ (future/present/market) value of the future cash flow as the amount of the expense.

present

When a product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash, the ________ (realization/earned/measurable) criterion has been met.

realization

Inventory _______ (shortage/shrinkage/salvage) is the term used to describe inventory losses from obsolescence, errors, and theft and usually is included in cost of goods sold unless the amount involved is material.

shrinkage

Starting with gross sales, the sales returns and allowances and sales discounts are _______ (added/subtracted) to arrive at _______ (net/total) sales for reporting purposes.

subtracted net