Intermediate acct exam 1
Accruals involve transactions where the cash outflow or inflow takes place in a period ____ expense or revenue recognition.
After
Which of the following provides the best explanation for why accounts receivable are normally classified as current assets in the balance sheet?
Bc these amounts typically will be collected within one year
Accrued liabilities are costs incurred in an accounting period:
Before a cash payment
Accrued receivables occurs when revenue is earned
Before the cash flow
Separate reporting as a(n) ________ operation is required when the disposal of a component represents a strategic shift that has, or will have, a major effect on a company's operations and financial results. (Enter only one word.)
Discontinued
What are increases or decreases in equity from peripheral or incidental transactions?
Gains and losses,
What items must be removed from continuing operations and reported separately for a discontinued operation? (Select all that apply.)
Gains, expenses, tax expense, loss, revenues
The guidance on discontinued operations defines a discontinued operation as a component that either/or (Select all that apply.)
Has been sold, is classified as held for sale
When a discontinued operation is sold before the end of the reporting period, the _________ or __________ from operations and the gain or loss on the disposal of assets is included in the reported income. (Enter one word per blank.)
Income or profit ; loss
to record the receipt of rent in advance
debit to cash and a credit to deferred rent revenue
to record the receipt of cash on account
debit to cash and credit to accounts receivable
to record the cost of a credit sale
debit to cost of goods sold and credit to inventory
to record the cost of cash sales
debit to cost of goods sold and credit to inventory
to record the payment of a cash dividend
debit to dividends and credit to cash
Carol Corp. has a component that is a discontinued operation. The component suffered a loss of $60,000. The component was sold for a gain of $200,000. The tax rate is 40%. What is the total income tax effect of the discontinued operations?
Income tax expense of $56,000
The closing process involves:
Transferring revenue and expenses balances to retained earnings
True or false: Net income is a portion of comprehensive income.
True
True or false: Reporting comprehensive income can be done with a single, continuous statement or in two separate, but consecutive statements.
True
Other comprehensive income is reported in the current reporting period on the income statement or as an addition to the income statement, and ______ other comprehensive income is reported on the balance sheet. (Enter only one word.)
accumulated
Which of the following is disclosed on the balance sheet?
accumulated other comprehensive income
Adjusting journal entries are necessary for three situations: deferrals, ____, and estimates.
Accruals, prepayments
What basis is used for estimated restructuring costs?
fair value
Margot Company prepares its financial statements consistent with IFRS. The company chose the revaluation method for valuing its equipment. The company will report revaluation surplus if the equipment's
fair value exceeds its book value
Comprehensive income includes net income as well as other ________ and _______ that change shareholders' equity but are not included in traditional net income. (Enter one word per blank.)
gains; losses
True or false: The operating cycle for most firms is 1 year or less.
True
The basis used to classify assets as current or long-term is:
Usually one year, bc the operating cycle typically is less than one year
The statement of comprehensive income reports the changes in shareholders' equity during the period that:
Were not a result of transactions with owners
Adjusting entries are recorded:
When the financial statements have been prepared
To Record the borrowing of cash and the signing of a note payable
a debit to cash and a credit to notes payable
to record the cash sales for the moth
a debit to cash and a credit to sales revenue
to record depreciation of office equipment for the month of july
a debit to depreciation expense and a credit to accumulated depreciation
To record the purchase of merchandise inventory
a debit to inventory and a credit to accounts payable
To record the purchase of office equipment
a debit to office equipment and a credit to cash
Prepaid expenses are:
a. Expensed in a later period than cash was paid
Current _____ include cash and other items that will be converted to cash or consumed within the coming year. (Enter only one word.)
assets
The financial statement that displays a firm's financial position on a particular date is the _____ ______.
balance sheet
to record the payment of accounts payable
debit to accounts payable and credit to cash
True or False: The balance sheet will directly measure the company's market value?
false
Which of the following are acceptable methods for reporting comprehensive income? (Select all that apply.)
in two consecutive statements - income statement and comprehensive income statement In one single statement of comprehensive income
Additional details about discontinued operations, whether sold or held for sale, are provided in the _______ to the financial statements.
notes or footnotes
Additional details about discontinued operations, whether sold or held for sale, are provided in the ________ to the financial statements.
notes; footnotes
The application of intraperiod income taxes requires that income taxes be apportioned to each of the following items except:
operating income
Balance sheets often include a catch-all classification of noncurrent assets called _____ long-term assets.
other
_____ costs include costs associated with shutdown or relocation of facilities.
restructuring
Accumulated other comprehensive income represents
the total of other comprehensive income to date.
A list of the general ledger accounts and their balances at a particular date is a:
trial balance
Companies must report comprehensive income in either a single statement of comprehensive income or in two separate statements under
Both US GAAP and IFRS
_____ long-lived assets should have their balance reduced if there has been a significant impairment of value.
Both tangible and intangible
True or false: Accounts receivable result from the sale of goods or services for cash.
False
True or false: Investments are assets used directly in the operations of the business.
False
In a statement of cash flows, cash received from the issuance of common stock would be classified as a:
Financing activity
An income statement prepared in accordance with IFRS allows expenses to be classified by (Select all that apply.)
Function, nature
If a company frequently uses restructuring charges in its income statement, an analyst should
Include them in the company's earning stream
Obligations to other entities are classified as _____ on the balance sheet.
Liabilities
True or false: The single-step and the multiple-step formats are most commonly used in income statement preparation; however, there are no specific standards on how income from continuing operations must be displayed.
True (although these two methods are the most common)
Expenses incurred in one accounting period and paid for in a future accounting period are ____ liabilities
Accrued
Which of the following adjusting entries causes an increase in liabilities?
Accruing unrecorded interest expense (The associated credit to accrue unpaid interest is to interest payable, a liability.)
The contra account used to record depreciation is ____ depreciation
Accumulated
The balance sheet account that depreciation is recorded to is
Accumulated depreciation
True or false: If a component of an entity is considered held for sale at the end of a quarter, the income effects of that component must be separately reported as discontinued operations.
True (discontinued operations should be reported both annually and quarterly)
If revenues exceed expenses for the accounting period, the retained earnings account:
Will have a higher balance after to closing (Revenue debit, expenses credit, net credit so higher)
To record the payment of one year's rent in advance
a debit to prepaid rent and a credit to cash
To record the purchase of supplies
a debit to supplies and a credit to cash
A chronological record of all economic events affecting a firm is provided by a:
a journal
The financial statement that provides information about liquidity and long-term solvency is the
balance sheet
A company's assets minus its liability shown on the balance sheet is referred to as its ____ value.
book
The potential tax expense or benefits of items reported as components of Other Comprehensive Income
can be shown separately for each item or aggregated and reported as one line item
Patents, copyrights, and franchises are examples of what?
intangibles
On December 31, 2021, the end of Adie, Miles, & Auer Used Cars' first year of operations, the accounts receivable was $107,200. The company estimates that $2,400 of the year-end receivables will not be collected. Accounts receivable in the 2021 balance sheet will be valued at:
$104,800 (Accounts receivable = $107,200 − $2,400 = $104,800)
Current assets include which of the following?
- cash - Short term investments
An item not generally classified as a current liability is:
Bonds payable
Accumulated other comprehensive income (AOCI) is found on what financial statement?
Balance sheet
Which of the following financial statements shows a firm's financial position on a particular date?
Balance sheet
Accrued receivables involve situations where the revenue is earned in a period ___ the cash receipt.
Before
The ending balance of accumulated other comprehensive income is calculated by adding this amount to the beginning balance of accumulated other comprehensive income.
Current year other comprehensive income
Prepayments occur when
Cash flow precedes expense or revenue recognition
Which of the following items are included in investments? (Select all that apply.)
Cash reserved to purchase land, Note receivable due in 5 years
Where on the income statement is income tax expense reported?
In a separate line
The adjusting journal entry required when deferred revenue is recognized includes a ____entry to a liability.
Debit
A sale of merchandise on account would be recorded by:
Debit accounts receivable, credit sales revenue
On October 1, Year 1, Swift Corporation received $1,200 from customers for services to be performed evenly over the next 12 months. Swift recorded the original transaction in a balance sheet account. The adjusting journal entry on December 31, Year 1, will include which of the following entries?
Debit deferred revenue $300
Prepaid expenses are:
Expenses in a later period than cash was paid
We can state the accounting equation as:
A - L - OE = 0
Close Expense Accounts
debit income summary (aka retained earnings), credit expenses
Costs that are planned and controlled by management that materially change the scope of the business undertaken or the manner in which the business is conducted are called _____ costs. (Enter only one word.)
restructuring costs
Which of the following financial statement elements are measured and reported as a result of providing goods and services to customers? (Select all that apply.)
revenues, expenses
The correct amount of prepaid insurance shown on a company's December 31, 2018, balance sheet was $900. On July 1, 2019, the company paid an additional insurance premium of $600. In the December 31, 2019, balance sheet, the amount of prepaid insurance was correctly shown as $500. The amount of insurance expense that should appear in the company's 2019 income statement is:
$1000 [$900 (beginning balance) + $600 (additional payment) − $500 (ending balance)]
A multi-step income statement includes which of the following?
Income before taxes, gross profit, operating income
Roger Corporation reports accumulated other comprehensive income of $10 million at 12/31/16. For the year ended 12/31/17, the company reports net income of $12 million and total comprehensive income of $15 million. On 12/31/17, Roger Corporation should report accumulated other comprehensive income of:
$13 million Reason: beginning AOCI + OCI for 2017 ($10 mill. + ($15 - 12 mill).
Crimson Corp. has a component that is a discontinued operation. The revenues and expenses of the component were $200,000 and $240,000, respectively. The component was sold with a resulting loss of $160,000. The tax rate is 30%. What is the total gain or loss on discontinued operations (net-of-tax effects) that will be reported on the income statement?
$140,000 loss Bc (-40,000-160,000)x (1-.3) = 140,000
On January 1, Noonan Company purchases equipment for $100,000. The equipment is expected to have a useful life of 5 years and will have no value at the end of that period. Noonan allocates the cost equally over the period of use so the depreciation expense that must be recognized for the year is
$20,000 (Bc 100,000/ 5 years = 20,000 per year)
On May 31, 20X1, the Arlene Corporation adopted a plan to sell its cosmetics line of business, considered a component of the entity. By the end of the year, the assets have not been sold. The book value of those assets equals $1,100,000, and the company estimates their fair value to be $850,000. The component generated operating income for the year of $450,000. In its income statement for the year ended December 31, 20X1, for what amount would the company report income from operations of a discontinued component (ignoring taxes).
$200,000 (The operating income of the component ($450,000) would be reported as part of discontinued operations. The amount by which the assets' fair value is less than their book value is included as an impairment loss (−$250,000). Income from discontinued operations = $450,000 − $250,000 = $200,000.)
1. Consider the following year-end information for a company: Cost of goods sold $420,000 Sales revenue $800,000 Nonoperating expenses $10,000 Operating expenses $170,000 Income tax expense$ 80,000 What amount will the company report for operating income?
$210,000 (i. Operating income = $800,000 − $420,000 − $170,000 = $210,000.)
The Compton Press Company reported income before taxes of $250,000. This amount included a $50,000 loss on discontinued operation. The amount reported as income from continuing operations, assuming a tax rate of 25%, is:
$225,000 [$250,000 (income before income taxes) + $50,000 (loss on discontinued operations)] × [1.0 − 0.25 (tax rate)] = $225,000.
On January 1, Poodle Company purchases equipment for $120,000. The equipment is expected to have a useful life of 4 years and will have no value a the end of that period. Poodle allocates the cost equally over the period of use so the depreciation expense that must be recognized for the year is
$30,000 (120,000/4 years = 30,000 per year)
The ending balance of retained earnings increased by $3.2 million from the beginning of the year. The company declared a dividend of $1.3 million during the year. What was the amount of net income during the year?
$4.5 mil$4.5 million
The Esquire Clothing Company borrowed a sum of cash on October 1, 2018, and signed a note payable. The annual interest rate was 12% and the company's year 2018 income statement reported interest expense of $1,260 related to this note. What was the amount borrowed?
$42,000 Amount borrowed × 12% × 3/12 = $1,260. Amount borrowed × 0.03 = $1,260. $1,260 ÷ 0.03 = $42,000.
On May 31, 20X1, the Arlene Corporation adopted a plan to sell its cosmetics line of business, considered a component of the entity. By the end of the year, the assets have not been sold. The book value of those assets equals $850,000, and the company estimates their fair value to be $1,100,000. The component generated operating income of $450,000 for the year. In its income statement for the year ended December 31, 20X1, for what amount would the company report income from operations of a discontinued component (ignoring taxes).
$450,000 (The operating income of the component ($450,000) would be reported as part of discontinued operations. The amount by which the assets' fair value exceeds their book value is not included)
1. The following items appeared in the year-end trial balance for the Brown Coffee Company: Revnues Credit $600,000 Operating expenses Debit $420,000 income on discont. oper. Credit $200,000 restructuring costs debit $100,000 interest expense debit $20,000 Gain on sale of investment credit $30,000 Income tax expense has not yet been accrued. The company's income tax rate is 25%. What amount should be reported in the company's income statement as income from continuing operations?
$67,500 [$600,000 (revenues) - $420,000 (operating expenses) - $100,000 (restructuring costs) - $20,000 (interest expense) + $30,000 (gain on sale of investments)] × [1.0 - 0.25 (income tax rate)] = $67,500.
On June 1, Year 1 Oxian Corp. receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the December 31 income statement for Year 1?
$7000 (Bc 24,000/ 24 months = 1,000 per month x 7 months = $7,000)
On May 31, 20X1, the Arlene Corporation adopted a plan to sell its cosmetics line of business, considered a component of the entity. The assets of the component were sold on October 13, 20X1, for $1,120,000. The component generated operating income of $300,000 from January 1, 20X1, through disposal. In its income statement for the year ended December 31, 20X1, the company reported before-tax income from operations of a discontinued component of $620,000. What was the book value of the assets of the cosmetics component?
$800,000 (Of the $620,000 pretax income from discontinued operations, $300,000 was from income from operations. The remaining $320,000 was therefore gain on sale of the assets. If the assets were sold for $1,120,000, their book value must have been $800,000.)
Carol Corp. has a component that is a discontinued operation. The revenues and expenses of the component were $100,000 and $160,000, respectively. The component was sold with a resulting gain of $200,000. The tax rate is 40%. What is the total gain or loss on discontinued operations (net-of-tax effects) that will be reported on the income statement?
$84,000 gain Bc( The loss from operating the component is $100,000 - 160,000 = -$60,000. The loss from operating the discontinued operation is then netted against the gain on sale of the discontinued operations -$60,000 + $200,000 = $140,000. The gain net of tax is $140,000 x (1 - 0.40) = $84,000.
A company purchased a building for $900,000 by obtaining a 30-year mortgage payable. Assume the lending arrangement specifies that the company will pay $20,000 of the principal over the first year, $30,000 in the second year, and the remainder evenly over the final 28 years. What amount of the $900,000 would be classified as a long-term liability at the time the mortgage payable is obtained?
$880,000
The Wazoo Times Newspaper Company reported an $11,200 liability in its 2018 balance sheet for subscription revenue received in advance. During 2019, $62,000 was received from customers for subscriptions and the 2019 income statement reported subscription revenue of $63,700. What is the liability amount
$9500 [$11,200 (beginning balance) + $62,000 (additional receipts) − $63,700 (subscription revenue recognized)]
To increase the accumulated depreciation account, you would ___ the account, and to increase depreciation expense you would, ____ the account.
- Credit - Debit
On October 1, Arcelia Corp. pays $24,000 for two years of rent. The transaction is appropriately recorded in a prepaid rent account. On December 31, of the same year Arcelia should make an adjusting entry for the rent expired, which includes (Select all that apply.)
- Credit to prepaid rent for $3,000 - Debit to rent expense for $3,000
Logan Corp. purchases supplies on account and appropriately records the transaction in an asset account. The adjusting journal entry at year-end when accounting for supplies used will require a (Select all that apply.)
- Credit to supplies - Debit to supplies expense
Operating items include
- Expenses form principle revenue- generating activities of companies - Revenues from principle revenue- generating activated of the companies
Adjusting journal entries are needed to record
- Expenses incurred, but not yet paid - Revenue earned, but not yet received
To record an adjusting entry when deferred revenue is recognized:
- Revenue is credited - Deferred revenue is debited
Prepayments are:
- Transactions in which cash flow precedes expense recognition - Transactions in which cash flow precedes revenue recognition
Which of the following are characteristics of plant, property, and equipment? (Select all that apply.)
- Used long-term in production - Tangible
Which of the following are classified as operating items on the income statement?
- Utility expense - Employee salary expense
Prepaid expenses are the cost of ___ acquired in one accounting period and ___ in a future period.
- assets - expensed
Prepaid expenses are the cost of ___ acquired in one accounting period and ______ in a future period.
- assets - expensed
On October 1, Hill Corporation signed a 6-month note with principal of $10,000 and interest of $600 due in six months. The stated rate of interest on the note is
12% ( 10,000 x 6/12 x I = 600, I = 12%)
On September 1, Year 1, Great Lakes Equipment receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Great Lakes Equipment should recognize on the income statement for the year ending December Year 1?
4,000 (24,000/ 24 months = 1,000 per month X 4 moths = 4,000)
On June 1, Year 1 Oxian Corp. receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the December 31 income statement for Year 1?
7,000 (24,000/ 24 months = 1,000 per month X 7 = 7,000)
Mann Corporation signed a note with principal and interest due in 6 months. The stated rate of interest on the note was 8%. If Mann accrues three months of interest at year-end, the formula Mann will use will be: Principal x ______% x 3/12. (Input the number used to compute interest.)
8 (Principal X Interest rate X time = interest)
Record the issuance of common stock.
A debit to Cash and a credit to Common Stock
When net income and comprehensive income are identical for all years presented in a company's income statement, which of the following is true?
A statement of comprehensive income is not required.
Which of the following would most likely affect earnings quality? (Select all that apply.)
Accelerating revenue recognition, losing a major customer
Accounts receivable represents which of the following
Amount owed by customers
Recognizing revenue before cash flow is an example of:
An accrual adjusting entry
A company paying rent in advance for the month of April records
An asset
How are discontinued operations reported? (Select all that apply.)
As a separate line item on the income statement, below income from continuing operations, with separate reporting of the tax effect on the item of discontinued operations
A company pay rent in advance for the month of April records:
Asset
When rent is paid in advance for 2 years, it is appropriately recorded as a(n) ____, whereas when rent is paid and used during one month, it is appropriately recorded as a(n) ____.
Asset Expense
The current versus noncurrent classification applies to what in the financial statements?
Assets and liabilities
If the required adjusting entry for depreciation expense is omitted:
Assets will be overstated and income overstated
When are adjusting entries recorded?
At the end of the period when preparing financial statements
The process in which temporary accounts are reduced to zero balances and transferred to retained earnings is the ___ process.
Closing
Net income is a part of
Comprehensive income
Which of the following may be recorded on the balance sheet as intangible assets? (Select all that apply.)
Copyrights, patents, trademarks
For a manufacturing company, each of the following items would be considered nonoperating income for income statement purposes except:
Cost of Goods Sold
The normal balance in a contra asset account is
Credit
Danielle Corporation received $2,000,000 from investors and issued them shares of its stock. Danielle's journal entry to record this transaction would include a:
Credit to common stock
Those liabilities that will be satisfied within 1 year or the operating cycle, whichever is longer are referred to as ___ liabilities.
Current
In a classified balance sheet, supplies would be classified among:
Current assets
_____ are those that are cash, will be converted into cash, or will be used up within 1 year or the operating cycle, whichever is longer.
Current assets
The two classifications used for assets and liabilities on the balance sheet are ______ and ______.
Current; noncurrent
The primary purpose of the FASB/IASB convergence project on discontinued operations was to (Select all that apply.)
Develop a common definition of discontinued operations, develop a common set of disclosures
The journal entry to record the borrowing of cash and the signing of a note payable involves:
Debit to cash, credit to notes payable
Supplies expense is ____ and supplies is _____ for the amount of supplies used during the period that were originally recorded as an asset when purchased.
Debited, credited
Incurring an expense on account would be recorded by:
Debiting an expense, credit accounts payable
An adjusting entry to record depreciation expense for the period will ___ total assets.
Decrease
An adjusting entry to record depreciation expense for the period will _____ total assets.
Decrease
Which of the following items represents cash received from customers for goods or services to be provided in a future period?
Deferred revenues
Consistent with IFRS, comprehensive income must be presented in
Either one or two statements
When a component that qualifies as a discontinued operation is held for sale, what are the two elements that may be reported in discontinued operations?
Estimated impairment loss expected from the sale of the component, Operating income or loss of the component during the reporting period.
Adjusting journal entries are necessary for three situations: deferrals, Accruals, and ____.
Estimates, prepayments
A gain from discontinued operations will result in an income tax _______, whereas a loss from discontinued operations will result in an income tax _______. (Enter one word per blank.)
Expense, benefit
The outflow of resources incurred while generating revenue are referred to as ____.
Expenses
Which of the following explains why a company's book value as reported in the balance sheet may not equal the company's market value? I. Many assets are measured at their historical cost rather than amounts for which the assets could be sold. II. II. Many valuable resources of the company are not directly reported as assets in the balance sheet. III. III. Investors do not use the balance sheet to judge a company's value.
I and II
Expenses reported on an income statement can be classified by nature or by function under these accounting standards.
IFRS
Revaluation surplus is reported as other comprehensive income under
IFRS
Which standards require certain minimum information to be reported on the face of the income statement?
IFRS
________ requires certain minimum information be reported on the face of the income statement, while _____ does not have minimum requirements.
IFRS; GAAP
Which of the following information must be included in the notes to the financial statements regarding discontinued operations? (Select all that apply.)
Identity, its major classes of assets and liabilities, the major revenues and expenses constituting pretax income or loss from operations, the reason for the discontinuance, and the expected manner of disposition if held for sale.
A multiple-step income statement and a single-step income statement would report the same subtotal for which of the following amounts?
Income before tax
Long-lived assets used in the operations of the business refer to property, plant, and equipment, and:
Intangible assets
Which of the following is most likely an accrued liability?
Interest, An accrued liability arises when all or part of an expense is recognized before the associated cash disbursement.
The process of associating income tax effects with the income statement components that create those effects is referred to as ______ tax allocation. (Enter as only one word.)
Intraperiod
________ consist of assets that a retail or wholesale company acquires for resale or goods that manufacturers produce for sale. (Enter only one word.)
Inventory
Cash set aside for future plant expansion and a 3 year note receivable are both examples of what on a company's balance sheet?
Investments
Which of the following items should be classified as short-term investment?
Investments to be sold in 12 months
Land held for speculation, noncurrent receivables, and cash set aside for future plant expansion are all examples of ______. (Enter only one word.)
Investments, or assets
The income tax expense or benefit associated with discontinued operations (Select all that apply.)
Is reported separately from the tax computation for continuing operations, is included in the computation of net income
The accounting processing cycle:
Is the process used to identify, analyze, record, and summarize transactions and prepare financial statements.
The advantages of a multiple-step income statement is (Select all that apply.)
It reports the relationships between various items, it reports expenses by function, it provides more information than a single-step income statement
Deferred revenue should be classified as a(n) ____ on the balance sheet.
Liability
Deferred revenue is a(n):
Liability on the balance sheet
On May 31, 20X1, the Arlene Corporation adopted a plan to sell its cosmetics line of business, considered a component of the entity. The assets of the component were sold on October 13, 20X1, for $1,200,000. The book value of those assets equaled $1,000,000 at the time of the sale. The component generated an operating loss of $300,000 from January 1, 20X1, through disposal. The company's tax rate is 25%. For what amount would the company report income from discontinued operations?
Loss of $75,000 (The gain on the sale of assets of $200,000 ($1,200,000 - $1,000,000) minus the operating loss of $300,000 equals pretax loss on discontinued operations of $100,000. Net of a 25% tax benefit ($25,000 = $100,000 × 25%), the loss reduces to $75,000.)
An income statement that classifies items and uses subtotals for gross profit, operating income, and income from continuing operations is called a(n) ______ -step income statement. (Enter only one word.)
Multi
Which of the following are used in the computation of comprehensive income?
Net Income
Discontinued operations should be reported on the income statement
Net of tax below income from continuing operations
The calculation of _______ income omits certain gains and losses that are instead included in the broader perspective of other _________ income. (Enter one word per blank.)
Net; comprehensive
The purples of the statement of comprehensive income is to report current changes in equity that arose from
Non-owner transactions
Which of the following items should be classified as investments on the balance sheet? (Select all that apply.)
Note receivable due in 3 years, investments in stock of another company, cash restricted to purchase building
What does a liability represent?
Obligations due to other entities
Included in the category of current liabilities would be:
Obligations expected to require the creation of other current liabilities
GAAP requires that restructuring costs are recognized when?
Only in the period incurred
The time period necessary to convert cash to raw materials, convert raw materials into finished products, sell the products, and collect on the account receivable is referred to as the ______ cycle.
Operating
How are items classified on the income statement?
Operating and nonoperating
Which of the following captions would more likely be found in a multiple-step income statement?
Operating income
When a component has been sold and qualifies for treatment as a discontinued operation, the reported income effects disclosed will include which of the following items? (Select all that apply.)
Operating income or loss of the component from the beginning of the reporting period to the disposal date, gain or loss on disposal of the component's asset
When a component has been sold and qualifies for treatment as a discontinued operation, the reported income effects disclosed will include which of the following items? (Select all that apply.)
Operating income or loss of the component from the beginning of the reporting period to the disposal date. Gain or loss on disposal of the component's assets.
Revenue and expenses on the income statements are classified as
Operating items Non- operating items
A prepaid expense is an expense:
Paid but not yet incurred
Gains and losses are increases or decreases in equity from which type of transactions? (Select all that apply.)
Peripheral or incidental
The more frequently a company incurs restructuring costs, the more appropriate it is for financial statement users to include those costs in estimates of ______ earnings when forecasting future performance.
Permanent
Which of the following are included in inventory? (Select all that apply.)
Raw materials, work in process, finished goods
One of the purposes of adjusting entries is to
Recognize all revenues earned during the period
If a causal relationship cannot be established between revenues and expenses, which of the following occurs?
Record the expenses as incurred, allocate the expense over several periods, relate the expense to a particular period
Which of the following adjusting entries causes a decrease in assets?
Recording depreciation expense, contra asset account
When adjusting entry is made to record depreciation expense, the affect on the balance sheet is to
Reduce total assets
The reason we post journal entries is to
Reflect the information in journal entries in ledger accounts
To adjust for rent used up during the year that was recorded to the prepaid rent account when paid for,
Rent expense is debited, prepaid rent is credited
An item typically included in the income from continuing operations section of the income statement is:
Restructuring costs
In the current year, a company has a gain of $50,000. The company's accountant is deciding whether to report this gain as part of nonoperating income in the income statement or as part of other comprehensive income. Which of the following is true?
Retained earning will be greater if the gain is reported as part of net income
The first step in the closing process is to reduce the balances in the temporary accounts to zero. The second step is to transfer the effects of step 1 to which account?
Retained earnings
The inflow of resources resulting from providing goods or services to customers is referred to as ____
Revenues
Which of the following items are included in calculating operating income? (Select all that apply.)
Revenues related to primary revenue-generating activities, expenses related to primary revenue-generating activities
Which of the following items are reported as components of operating income for most manufacturing and merchandising companies
Selling expenses, administrative expenses, revenues
Classifying items on the balance sheet as current and noncurrent assists financial statement users in assessing what aspects about a company?
Solvency and liquidity
Property, plant, and equipment is a(n) ______ asset. (Select all that apply.)
Tangible, long lived
Short-term investments are sometimes called which of the following?
Temporary investments, short-term marketable securities
Nonoperating items that are not expected to continue into the future are considered a ______ component of earnings and should be __________ when forecasting future performance
Temporary, excluded
The ending balance of retained earnings can best be described as:
The amount of net income over the life of the company not paid to owners in the form of dividends
The net amount of property, plant, and equipment reported in the balance sheet generally is equal to:
The assets' original costs minus their accumulated depreciation since purchased
Which of the following is not a characteristic of the balance sheet?
The balance sheet reports the change in financial position
Comprehensive income equals:
The change in equity from transactions with nonowners (Comprehensive income = net income + other comprehensive income.)
Which of the following best describes why losing a major customer at the end of the fiscal year can affect earnings quality?
The current year's revenue number may not be predictive of next year's revenue
Which of the following is an intangible asset reported in the balance sheet?
The exclusive right to use a franchisor's trademark or tradename
Which of the following is true regarding interim reporting requirements for a discontinued operation?
The income effects of the discontinued component must be separately reported in the quarterly income statement.
At what amount are the assets of a discontinued operation held for sale reported on the balance sheet?
The lower of the book value or fair value less costs to sell
At what amount are the assets of a discontinued operation held for sale reported on the balance sheet?
The lower of the book value or fair value less costs to sell.
At what amount are the liabilities of a discontinued operation held for sale reported in the balance sheet?
The lower of the book value or fair value less costs to sell.
Which statements reports the changes in shareholders' equity during the period that were not a result of transactions by owners.
The statement of comprehensive income.
If a component of the business qualifies for discontinued operations treatment, which of the following statements are true? (Select all that apply.)
The tax expense effect is removed from continuing operations, all related revenues, expenses, gains, and losses must be removed from continuing operations
Gains and losses from the sale of investments can affect earnings quality because
They are often nonrecurring
When are restructuring costs recognized on the income statement?
a. In the period the exit or disposal obligation is incurred
Under which of the following conditions is a statement of comprehensive income not required?
When a company has no other comprehensive income items for all years presented.
A prepaid expense represents a(n) ____ recorded when an expense is paid in advance.
asset
The accumulated depreciation account is a contra (valuation) account to:
asset account
to record the cost of expired rent for the month of july
debit rent expense and credit prepaid rent
Close Dividends
debit retained earnings, credit dividends
Close Revenue Accounts
debit revenue, credit income summary (aka retained earnings)
to record accrued salaries at the end of july
debit salaries expense and credit salaries payable
to record credit sale
debit accounts receivable, credit sales revenue
to record previously deferred rent revenue recognized during july
debit deferred rent revenue and credit rent revenue
to accrue interet expense for july on notes payable
debit interest expense and credit interest payable
to record the payment of salaries for the first half of the month
debit to salaries expense and a credit to cash
To record the cost of supplies used during the month of July
debit to supplies expense and credit to supplies
As part of convergence efforts, the FASB and IASB have developed a common definition and common set of financial statement ______ for discontinued operations.
disclosures
Any long-lived asset, whether tangible or intangible, should have its balance reduced if there has been a significant ______ of value. (Enter only one word.)
impairment
When are restructuring costs recognized on the income statement?
in the period the exit or disposal obligation is incurred
Assets not used directly in the operations of the business are referred to as . (Enter only one word.)
investments
A collection of storage areas, called accounts, used to keep track of increases and decreases in financial position elements is:
ledger
In the double-entry system, debit means:
left
On the balance sheet, current assets are listed in the order of their what?
liquidity
The balance sheet provides useful information about a company's _______ and long-term solvency.
liquidity
Which of the following is a decrease in equity due to an incidental transaction?
loss
If discontinued operations have a _____ effect on the income statement, they must be reported separately.
material
Under IFRS, if the revaluation option is chosen, the excess of the fair value of property, plant and equipment over its book value is reported as _______ ________ _______.
other comprehensive income
An item not generally classified as a current asset is a:
patent
The initial measurement of restructuring liabilities is at fair value, which often is estimated as the _____ _______ of estimated future cash outflows.
present value
The type of income statement that does not classify items as operating and nonoperating is the ______ income statement.
single-step
Which of the following are acceptable methods of presenting the income statement?
single-step format, multi-step format
The two approaches to income statements are:
single/multi-step
Net income using the multiple-step income statement presentation is ____ net income using the single-step income statement presentation.
the same as