Accountancy 4356 Test 1

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166) The following data is for the Matt Company for 20X1: Loss on sale of equipment $ 4,000 Purchase of Ithaca Corp. bonds (face value $400,000) 375,000 Proceeds from sale of machinery 200,000 Dividends paid 25,000 Proceeds from sale of treasury stock 100,000 The amount reported as net cash from investing activities is: 166) ______ A) $(175,000). B) $(150,000). C) $87,500. D) $575,000

a $200,000 (sale of machinery) − $375,000 (purchase of bonds) = $(175,000)

178) The dividends actually paid during 20X2 are: 178) ______ A) $0. B) $270,000. C) $300,000. D) $400,000

a) increase in div payable - div declared

131) The Additional Paid-In Capital account is reported on the balance sheet at the 131) ______ A) current market value of the stock minus par value. B) original sales price of the stock minus the par value. C) net realizable value of the stock minus par value. D) discounted present value of the future dividends minus par value

15) Employees demand financial statement information because the firm's performance is often linked to all of the followingexcept: 15) ______ A) negotiated wage increases in union contracts. B) social security benefits. C) pension plan benefits. D) employee profit sharing.

150) The indirect method of presenting cash flow from operating activities: 150) ______ A) is strongly recommended by both U.S. GAAP and IFRS. B) focuses on how cash flows deviate from a natural benchmark - net income. C) presents cash transactions related to the determination of net income. D) is more difficult than the direct method to incorporate working capital changes into a financial model.

158) Peter Inc. currently holds cash denominated in Euros. In its consolidated balance sheet, Peter Inc. should report the cash 158) ______ A) in Euros. B) in Dollars. C) at its present value. D) at its future value.

169) A decrease in prepaid expenses of $8,000 for the year: 169) ______ A) decreases cash flow from operating activities by $8,000. B) increases cash flow from operating activities by $8,000. C) decreases cash flow from operating activities by $16,000. D) increases cash flow from operating activities by $16,000

171) Which of the following statements doesnot correctly describe an adjustment to net income in determining cash flows from operating activities when using the indirect method? 171) ______ A) A decrease in accounts receivable will be added to net income. B) An increase in inventory will be added to net income. C) An increase in accounts payable will be added to net income. D) Amortization of bond premium will be deducted from net income.

197) Yanita Company, an IFRS reporting firm, has three bank accounts. The respective account balances are as follows: Account 1: $50,000; Account 2: $70,000; Account 3: $(10,000). Consistent with IFRS, cash and cash equivalents are equal to: 197) ______ A) $55,000. B) $110,000. C) $120,000. D) $130,000.

32) Some countries' philosophy of financial reporting differs from U.S. GAAP because their financial reports are required to: 32) ______ A) be verifiable. B) conform to tax and/or commercial law. C) be reported and measured in a similar manner across companies. D) use the same accounting methods for similar events period to period.

82) Under ASC Topic 606 guidance for revenue recognition, all of the following conditions must be met to account for a contract with a customer,except: 82) ______ A) the contract has commercial substance. B) collection is likely. C) each party's rights are identified regarding goods or services to be exchanged. D) all parties to the contract have approved the contract.

9) Business enterprises enter into many different types of contracts. Examples of such contracts that often contain language that refers to verifiable financial statement numbers include all of the followingexcept: 9) ______ A) royalty contracts with inventors. B) sales contracts with customers. C) compensation contracts with managers. D) debt contracts with bankers

176) What is Watts Corporation's net cash flow from operating activities? 176) ______ A) $186,000 B) $175,200 C) $138,200 D) $210,200

b $175,300 (net income) + $18,500 (increase in accounts payable) − $17,500 (increase in inventory) − $9,700 (increase in accounts receivable) − $5,400 (amortization of bond premium) + $21,300 (depreciation expense) − $7,300 (decrease in income taxes payable) = $175,200

120) Elaine Company, a clothing store, sells clothing for a total selling price of $50,000 with a related cost of $35,000. Customers have a right of return within 30 days. Elaine Company estimates that 10% of the sales will be returned by customers. The entry to recognize the cost of inventory sold will include a credit to "inventory" and a debit to cost of goods sold for: 120) ______ A) $30,000. B) $31,500. C) $35,000. D) $38,500.

b 90% of cost of goods sold is matched against 90% of sales revenue recognized at time of sale

103) Payments to a customer for slotting fees: 103) ______ A) can never be recognized. B) must be expensed immediately. C) might be considered a reduction in the selling price of goods sold to the customer. D) are always expensed over the period benefited for the right to shelf space.

109) Which of the following isnot a necessary condition for a firm to account for a customer contract under the ASC Topic 606 guidance for revenue recognition? 109) ______ A) The contract has commercial substance. B) Collection is probable. C) Payment terms may not include a variable component. D) The rights of each party can be identified.

111) Which of the following statements isnot true regarding the treatment of warranties under the new revenue recognition guidance in ASC Topic 606? 111) ______ A) A warranty that assures the product is free of defects is not a distinct performance obligation. B) Warranties that provide services beyond assuring the product is defect-free at the time of sale are separate performance obligations. C) A warranty that covers services that are normally considered routine maintenance is an assurance warranty. D) The length of the warranty period should be considered

133) Common-size balance sheets may be used for all the following except: 133) ______ A) gaining insights into the nature of a company's operations. B) analyzing a company's asset and financial structure. C) determining how management assesses the risks a company faces. D) learning about the underlying economics of an industry.

21) When comparing U.S. GAAP and IFRS standards, which of the following isnot correct? 21) ______ A) IFRS is principles-based while U.S. GAAP is rules-based. B) U.S. GAAP standards provide too many scope exceptions. C) IFRS provides more detailed guidance than U.S. GAAP. D) U.S. GAAP provides more detailed guidance than IFRS.

22) Which of the following doesnot describe how FASB endeavors to draft pronouncements? 22) ______ A) Provide enough implementation guidance for consistent application. B) Explain the accounting principles being applied. C) Clearly define bright-line rules. D) Avoid bright line rules.

27) The Financial Accounting Standards Board has responsibility for the establishment of U.S. accounting standards and: 27) ______ A) full statutory power to enforce compliance with GAAP. B) authority from the SEC to enforce compliance with GAAP. C) no authority or responsibility to enforce compliance with GAAP. D) responsibility imposed by AICPA to enforce compliance with GAAP.

33) Differences between IFRS and U.S. GAAP include all of the followingexcept: 33) ______ A) Reversal of inventory write-downs. B) Carrying value of investment property. C) Revenue recognition. D) Research and development costs.

35) Companies needing to access new and ever larger sources of capital in response to increased international competitiveness face a severe disadvantage if their financial reporting: 35) ______ A) is in accordance with IFRS. B) is in accordance with U.S. GAAP. C) is based on a commercial and tax law approach. D) is based on an economic performance approach.

7) Which of the following statements is correct with respect to economic incentives to release financial information? 7) ______ A) Because companies have an economic incentive to supply information investors want, regulatory groups have little influence over the amount and type of financial information that companies disclose. B) Because financial disclosures are regulated, owners and managers have little economic incentive to supply the amount and type of financial information that will enable them to raise capital most cheaply. C) Companies have an economic incentive to supply the information investors want in order to raise capital at the lowest possible cost. D) Owners and managers do not have an economic incentive to supply the amount and type of financial information because it has no effect on the company's ability to raise capital at the lowest cost.

73) Accumulated other comprehensive income increases or decreases 73) ______ A) Net income. B) Income from continuing operations. C) Shareholders' Equity. D) Earnings per share.

74) Other Comprehensive Income (OCI) is used both in U.S. GAAP and IFRS. Which of the following statements is correct? 74) ______ A) As a general rule, U.S. GAAP allows more opportunities for managers to change balance sheet valuations of certain assets even when management has no intention to sell these assets. B) Changes in the valuation of property, plant, and equipment create a Revaluation Surplus used in both IFRS and U.S. GAAP. C) Both IFRS and U.S. GAAP require companies to report in other comprehensive income each period the valuation changes from changes in actuarial estimates affecting defined benefit pension plans. D) U.S. GAAP requires a separate statement of OCI to immediately follow the income statement in the financial reporting statement.

8) If a company fails to disclose information about a lawsuit because it might be embarrassing to the company, it is violating: 8) ______ A) relevance. B) verifiability. C) neutrality. D) timeliness.

91) Muenster Company sells its network servers with a warranty than includes preventive maintenance. Muenster should account for the warranty as a(n): 91) ______ A) integral part of the equipment sales. B) separate contract. C) separate performance obligation. D) accrued expense.

96) Under ASC Topic 606 for revenue recognition, which of the following statements isnot accurate regarding performance obligations? 96) ______ A) Firms must disclose qualitative information about their performance obligations. B) Firms must disclose warranties provided. C) Firms are not required to disclose any judgments used to apply the standard. D) Firms must disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations.

143) What would Barden report as total stockholders' equity on its balance sheet? 143) ______ A) $300,000 B) $387,500 C) $637,500 D) $87,500

c $300,000 Common stock + $87,500 Additional paid-in capital + $250,000 Retained earnings = $637,500

179) The cash flow from financing activities for 20X2 is a: 179) ______ A) $200,000 outflow. B) $400,000 inflow. C) $600,000 inflow. D) $700,000 inflow.

c - add notes payable short and long term, common stock, and additional paid in capital ( no dividends were paid because dividends declared were 400k and dividends payable was 400k

10) What type of trends and relationships can be gleaned from a company's financial statements? 10) ______ A) Rates of sales and accounts receivable growth. B) Rates of expense growth and expenses as a percentage of sales. C) How the company's growth rates compare to their competitors. D) All of these answer choices are correct.

100) Which of the following statements isnot applicable to contract acquisition costs under ASC Topic 606 guidance for revenue recognition? 100) ______ A) Incremental costs of acquiring a contract must be capitalized and amortized over the life of the contract. B) Costs that would be incurred regardless of whether a contract is obtained are not capitalized. C) The capitalization requirement is subject to a practical expedient. D) Costs must be capitalized even if the amortization period is one year or less.

49) Which of the following may cause fully diluted EPS to differ from basic EPS? 49) ______ A) Convertible preferred stock. B) Warrants. C) Management stock options. D) All of these answer choices are correct.

66) For a disposal group to be considered held for sale, which of the following conditions are required to be met? 66) ______ A) Management has committed to a plan to see the component. B) The sale is probable and is expected to be completed within one year. C) The component is available for immediate sale in its present condition subject only to usual and customary terms for such sales. D) All of these conditions must be met.

80) Earnings management can occur through a variety of manipulations including: 80) ______ A) Manipulating accrual estimates to impact expenses. B) Misapplications of GAAP deemed immaterial on an account by account basis. C) Big bath restructuring charges. D) All of these answer choices are correct.

81) If consideration is received before a contract is identified and the consideration is nonrefundable, revenue may be recognized if: 81) ______ A) the contract has been terminated. B) goods have been delivered. C) there is no remaining obligation to transfer goods. D) any of these answer choices is correct.

97) Examples of variable consideration include all of the following except: 97) ______ A) penalties for not completing performing on a contract on time. B) bonuses for completing performance on a contract early. C) discounts on transaction prices. D) all of the answer choices are correct.

167) Bruce Company reported net income for 20X1 of $100,000. The company reported depreciation expense of $17,500 and amortization of $5,000. The company also reported a loss on the sale of equipment of $2,500. Based only on this information, the company would report cash flow from operating activities of: 167) ______ A) $117,500. B) $120,000. C) $127,500. D) $125,000.

d $100,000 (net income) + $17,500 (depreciation expense) + $5,000 (amortization) + $2,500 (loss) = $125,000

69) Which statement below isnot correct with respect to earnings management? 69) ______ A) It is increasingly common because of the pressure to meet analysts' expectations. B) More firms just beat rather than just miss the analyst expectations. C) In a recent survey, more than 65% of CFOs surveyed indicated that reporting a profit is an important benchmark. D) In a recent survey, more than 80% of CFOs surveyed indicated that meeting or beating consensus EPS is an important benchmark.

d The survey results indicate that approximately 78% indicated that meeting or beating consensus EPS is an important benchmark.

6) In designing audit procedures, the auditor will include all of the following except 6) ______ A) Industry conditions. B) Global economic trends. C) Assessing the reasonableness of the numbers in relation to the company's activities. D) Fraud risk factors that may be present

106) The new ASC Topic 606 for revenue recognition: 106) ______ A) addresses when and how revenue should be recognized in contracts that provide both goods and services to customers. B) eliminates both the percentage-of-completion method and the installment sales method of revenue recognition. C) will require companies to recognize a net liability contract position on all new contracts; revenue will then arise from increases in the net contract position over the life of the contract. D) is more rules based than are existing standards.

107) Which of the following methods can be used to recognize revenue when a performance obligation is satisfied over time? 107) ______ A) The output method. B) The present value method. C) The future value method. D) The fair value method.

114) Under ASC Topic 606, which of the following statements isnot true regarding the use of practical expedients in applying the revenue recognition model? 114) ______ A) A firm can file an application to use a practical expedient on a large contract if it is under severe time pressure. B) One expedient is to use a portfolio approach to numerous contracts with similar characteristics. C) Determining the use of an expedient is dependent on whether there would not be a material difference in the financial statements from a more vigorous application of the standard. D) A firm is not required to adjust the transaction price for a significant financing component if at the contract inception, the period between the payment and the transfer of goods or services is expected to be a year or less.

118) For long-term construction projects, the amount of "billings" is reported in the balance sheet by: 118) ______ A) netting it against "construction in progress." B) adding it to "construction in progress." C) adding it to "accounts receivable." D) netting it against "accounts receivable."

13) Which item below doesnot describe a politically vulnerable firm? 13) ______ A) The firm has contracts controlled by the government. B) The firm may face antitrust litigation or loss of protective import quotas. C) The firm is in a highly visible industry such as oil & gas or pharmaceuticals. D) The firm may be attacked in the financial and popular press for generating high earnings.

134) Under U.S. GAAP, assets are presented in decreasing order of liquidity. Under IFRS, 134) ______ A) tangible assets may be presented first followed by the current assets displayed in increasing order of liquidity. B) the current assets are displayed in increasing order of liquidity. C) investments are listed first in descending order of maturity. D) a company may present its assets in alphabetical order if it so desires.

140) the change in the balance of the common stock account would be recorded on the statement of cash flows as: 140) ______ A) an increase of $100,000 under financing activities. B) an increase of $100,000 under investing activities. C) an increase of $100,000 under operating activities. D) an increase of $300,000 under financing activities

141) The change in the equipment balance would be recorded on the statement of cash flows as: 141) ______ A) a decrease of $50,000 under investing activities. B) an increase of $50,000 under investing activities. C) a decrease of $150,000 under investing activities. D) an increase of $150,000 under operating activities.

145) When adjusting accrual earnings to obtain cash flows from operations, 145) ______ A) an increase in Accounts Payable is added to determine cash flow from operations. B) a decrease in Accounts Payable is added to determine cash flow from operations. C) an increase in Accounts Payable is deducted to determine cash flows from operations. D) it is not necessary to consider any changes to Accounts Payable.

152) On a balance sheet prepared under U.S. GAAP: 152) ______ A) accounts receivable is presented at net realizable value. B) inventories are presented at current market price. C) any cash denominated in a foreign currency is disclosed in a footnote. D) most short-term investments are presented at historical cost.

155) Which of the following regarding the recognition of contingencies is a correct statement? 155) ______ A) IFRS uses the term contingent liability to include possible but unrecognized contingent obligations. B) U.S. GAAP discloses contingent liabilities in the notes to the financial statements only for recognized contingent loss obligations. C) The threshold for recognition of a contingent obligation is the same under both GAAP and IFRS. D) If the estimated liability is a range in which no value is deemed more reliable than another - both IFRS and GAAP will record the mid-point of the range as the value.

57) The rationale behind the rules for multiple-step income statements is to subdivide the income in a manner that facilitates: 57) ______ A) cash flows. B) forecasting. C) tax return preparation. D) audits.

161) Accrual accounting net income can differ from operating cash flows for all of the following reasons except: 161) ______ A) dividend declaration and payment dates. B) useful lives of assets. C) future pension and healthcare benefits. D) estimates of uncollectible accounts.

182) Which of the following transactions would be reported within the investing activities section of the cash flow statement? 182) ______ A) The cash sale of a building at a loss. B) The sale of a building in exchange for a parcel of land. C) The exchange of a stock investment in order to retire a long-term debt. D) The acquisition of treasury stock in exchange for cash

184) During 20X1, Lang Corporation reported cost of goods sold of $775,000. During the year inventory decreased $25,000 and accounts payable increased $12,500. How much cash was paid to suppliers during 20X1? 184) ______ A) $737,500 B) $787,500 C) $762,500 D) $812,500

19) Companies offering higher risk securities have incentives to mask their true condition by: 19) ______ A) supplying overly optimistic financial information. B) not having their financial statements audited. C) listing on foreign exchanges where reporting requirements are less stringent than those in the U.S. D) including testimonials from well-known executives in their financial statements.

190) The analyst would most likely understand that the change in the balance sheet account for property, plant, and equipment does not reconcile with the account change included in the statement of cash flows because of a write-off due to impairments which the analyst discovered when examining the: 190) ______ A) notes to the financial statements. B) balance sheet. C) capital stock account. D) investments account.

195) For nonfinancial firms reporting using IFRS rules, which of the following is correct? 195) ______ A) In most cases, cash flows from income taxes must be reported separately as an operating activity. B) Interest and dividends paid may be reported as either operating or investing activities. C) Bank overdrafts repayable on demand used as part of normal cash management activities must include those overdrafts as part of financing activities. D) Firms using the direct method must provide a schedule reconciling net income to cash flows from operating activities

196) Which of the following properly represents the preparation of the statement of cash flows prepared using IFRS rules? 196) ______ A) Firms using the direct method are not required to provide a reconciliation of net income to cash flows from operations. B) The presentation of the statement of cash flows differs to those following U.S. GAAP as a result of prescribed classification differences under IFRS. C) The presentation of the statement of cash flows is the same for all companies preparing statements under IFRS. D) The flexibility provided under IFRS guidance for the preparation of the statement of cash flows increases the comparability of results between companies

24) GAAP's flexibility in its reporting standards allows companies to: 24) ______ A) smooth reported earnings over several reporting periods. B) change accounting estimates to meet target sales or earnings. C) change accounting principles to improve reported earnings. D) avoid adopting specific accounting techniques and reporting procedures.

34) Financial reporting philosophies differ across countries. These philosophies evolve from and reflect several factors including all of the followingexcept: 34) ______ A) the language(s) spoken in the country. B) the specific political institutions within the country. C) the specific financial institutions within the country. D) the country's social customs.

43) The Canon Corporation sells ten copiers to the Title Company on October 15 for $40,000. Canon delivers the copiers to Title on October 20 and Title pays $16,000, agreeing to pay the balance on November 10. Under the accrual basis, how much revenue should Canon recognize in November? 43) ______ A) $0 B) $16,000 C) $24,000 D) $40,000

48) Michel Company owns 75% of the outstanding common stock of Aber Corp. On its current consolidated income statement, Michel Company should report: 48) ______ A) 100% of Aber's revenue and expenses. B) 75% of Aber's revenue and expenses. C) 75% of Aber's net income. D) none of Aber's revenue, expenses, and income.

5) The market analysis known as fundamental analysis: A) predicts future trends in the financial drivers of a company's economic success or failure. B) relies on price and volume movement of stock. C) has no insights about company value beyond current market price. D) uses microeconomic data to forecast stock values.

58) The best measure of a firm's sustainable income is: 58) ______ A) income from continuing operations. B) income before income tax. C) income before unusual items and change in accounting principle. D) net income

60) Vogel Inc. reports income related to discontinued operations in its current-year multiplestep income statement. Financial statement users should expect that the line item "income tax expense": 60) ______ A) relates only to income from continuing operations. B) includes all income tax from continuing as well as discontinued operations. C) related only to income derived from gross profit. D) relates only to income from discontinued operations

62) Margot reviews the financial statements of a potential investment target. She notices that in the company's multiple-step income statement a separately listed gain is reported as part of "income from continuing operations." Based on this information, Margot should: 62) ______ A) not assume that the gain will recur regularly. B) assume that the gain will recur regularly. C) assume that the gain will never recur. D) make no assumption regarding the validity of the information.

64) Which of the following statements is correct regarding reporting of "Extraordinary gains and losses" as a separate category on the income statement? 64) ______ A) It is no longer permitted under U.S. GAAP. B) It is permitted under U.S. GAAP, if the related event is both unusual in nature and infrequent in occurrence. C) Is permitted under IFRS, but not U.S. GAAP. D) It is permitted under U.S. GAAP, but not IFRS

65) Which of the following best describes the reporting for discontinued operations? 65) ______ A) Discontinued operations will not generate future cash flows and thus the results of transactions related to operations the firm intends to discontinue, or has already discontinued, must be reported separately from other income items on the income statement. B) Discontinued operations presentation is used only when a component of an entity has been sold. C) There are 4 criteria that must be met to classify a disposal group as held for sale. D) Discontinued operations may generate future cash flows and thus there will be results of transactions related to operations the firm intends to discontinue. If the firm does generate future transactions before disposing of the disposal group, it will report that revenue in continuing operations revenue.

70) GAAP requires that each set of EPS numbers includes separately reported numbers for all of the following except: 70) ______ A) special or unusual items. B) income from continuing operations. C) discontinued operations. D) net income.

76) Which of the following statements is correct regarding revenue and expense accounts? 76) ______ A) These are really owners' equity accounts. B) These are really contributed capital accounts. C) They have no impact on the balance sheet. D) These are balance sheet accounts.

79) When actuarial estimates related to defined benefit pension plans are adjusted: 79) ______ A) Both U.S. GAAP and IFRS require companies to report these valuation changes in OCI each period. B) Only U.S. GAAP requires companies to report these valuation changes in OCI each period. C) Only IFRS requires companies to report these valuation changes in OCI each period. D) Neither U.S. GAAP nor IFRS requires companies to report these valuation changes in the financial statements.

84) Assuming the requirements for recognizing revenue over time are met, the profit to be recognized in any year is based on the completion ratio of: 84) ______ A) incurred contract costs divided by estimated total contract costs. B) incurred contract costs multiplied by estimated total contract costs. C) estimated total contract costs divided by incurred contract costs. D) estimated total contract costs multiplied by incurred contract costs.

87) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Estimated completion costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Which one of the following entries would be made in Year 1 to record the costs incurred assuming revenue is recognized over time? 87) ______ A) DR Inventory: Construction in progress $1,000,000 CR Accounts payable, cash, etc. $1,000,000 B) DR Inventory: Construction in progress $1,000,000 CR Income on long-term construction contract $1,000,000 C) DR Inventory: Construction in progress $1,000,000 CR Billings $1,000,000 D) DR Income on long-term construction contract $1,000,000 CR Accounts payable, cash, etc. $1,000,000

88) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Estimated completion costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Which one of the following entries would be made in Year 1 to record the income recognized assuming that revenue is recognized over time? 88) ______ A) DR Inventory: Construction in progress $250,000DR Construction expense $1,000,000 CR Construction revenue $1,250,000 B) DR Inventory: Construction in progress $375,000 CR Billings on construction in progress $375,000 C) DR Inventory: Construction in progress $675,000 CR Billings on construction in progress $675,000 D) DR Income on long-term construction contract $3,125,000 CR Accounts payable, cash, etc. $3,125,000

175) The following information has been provided to you by your controller: Net income $ 100,000 Decrease in accounts payable $ 38,000 Decrease in inventory $ 7,500 Increase in accounts receivable $ 8,000 Decrease in bonds payable $ 75,000 Amortization of bond discount $ 9,400 Depreciation expense $ 20,000 Increase in income taxes payable $ 6,000 What is the net cash flow from operating activities? 175) ______ A) $96,900 B) $97,900 C) $112,900 D) $94,100

a $100,000 (net income) − $38,000 (decrease in accounts payable) + $7,500 (decrease in inventory) − $8,000 (increase in accounts receivable) + 9,400 (amortization of bond discount) + $20,000 (depreciation expense) + $6,000 (increase in income taxes payable) = $96,900

170) The following data is for the Kris Company for 20X1: Gain on sale of equipment $ 8,000 Purchase of First Corp. bonds (face value $250,000) 275,000 Proceeds from sale of machinery 300,000 Dividends paid 50,000 Proceeds from sale of treasury stock 200,000 The amount reported as net cash provided by investing activities is: 170) ______ A) $25,000. B) $50,000. C) $275,000. D) $300,000.

a $300,000 (sale of machinery) − $275,000 (purchase of bonds) = $25,000

95) In 2017, Borden Construction was contracted to build an apartment complex for its client, Deer Park Realty Management. The project was estimated to cost $15 million; however, on December 31, 2017, when the project was 75% complete, Borden estimated that the project costs would be much less, and agreed to adjust the contract price to $10 million. Prior to December 31, 2017, Borden Construction had recognized revenue of $10 million. At year end, Borden should: 95) ______ A) make a correction for $2.5 million in over-recognized revenue. B) record nothing. C) record additional $5 million in revenue. D) make a correction for $5 million in over-recognized revenue

a - Make the correction for the new contract price as opposed to the initial

110) Which of the following statements isnot true regarding the software developer example provided in ASC Topic 606 guidance for revenue recognition? 110) ______ A) The example deals with the license of software. B) Software installation, software updates, and technical support are not addressed. C) The example covers four distinct performance obligations. D) All the performance obligations can be separately identified.

12) Which statement is not true regarding the conservatism convention in accounting? 12) ______ A) Conservatism guides us to choose the approach that leads to lower assets or higher liabilities. B) Conservatism means we only record that of which we are 100% certain. C) Conservatism is sometimes used to defend poor accounting judgments. D) Conservatism strives to ensure that business risks and uncertainties are adequately reflected in the financial statements.

126) Current assets are assets expected to: 126) ______ A) be converted to cash within twelve months. B) be converted to cash within twelve months or one operating cycle if the operating cycle is longer than twelve months. C) remain on the books for at least twelve months. D) remain on the books for at least twelve months or one operating cycle if the operating cycle is longer than twelve months.

128) Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. An increase in the Computer Equipment account would: 128) ______ A) decrease cash flow from financing activities. B) decrease cash flow from investing activities. C) increase cash flow from operating activities. D) increase cash flow from investing activities.

14) Which of the following areprimary qualitative characteristics of accounting information? 14) ______ A) Relevance and Timeliness. B) Relevance and Faithful Representation. C) Comparability and Timeliness. D) Verifiability and Understandability.

146) The cash flow from operating activities: 146) ______ A) is required to be presented using the direct method by U.S. GAAP and IFRS. B) can be presented by using either the direct method or the indirect method. C) comprises only the increase in cash arising from the firm's profit-making activities. D) can vary depending on whether the presentation is done under the direct method or the indirect method.

147) The following information is available from Moran Industries' accounting system for the year ended December 31, 20X1. Cash received from customers $ 750,000 Cash paid to suppliers $ 300,000 Cash paid to employees $ 150,000 Taxes paid $ 25,000 Cash dividends paid $ 50,000 What would the company's statement of cash flows report as cash flow from operations? 147) ______ A) $225,000 B) $275,000 C) $300,000 D) $250,000

149) A balance sheet prepared in accordance with U.S. GAAP typically: 149) ______ A) reports common stock at the current market price of the stock. B) provides critical information for understanding a firm's capital structure. C) helps to determine the proper mix of debt and equity financing. D) provides critical information for understanding a firm's profitability.

153) A contingent liability that is probable and can be reasonably estimated will immediately result in: 153) ______ A) an increase in both liabilities and stockholders' equity. B) an increase in liabilities and a decrease in net income. C) an increase in liabilities without any need for financial statement disclosure. D) an increase in liabilities and a decrease in assets.

156) Which one of the following contingencies must be accrued on the balance sheet? 156) ______ A) The likely loss on a lawsuit that the firm's attorneys believe will be dropped. B) The probable loss on a lawsuit that the firm's attorneys believe will be settled for $50,000. C) The reasonably possible loss on a lawsuit that the firm's attorneys believe will be dropped. D) The reasonably possible loss on a lawsuit that the firm's attorneys believe will be settled for $50,000.

162) Which of the following is not correct with respect to the difference between accrual accounting and cash flow reporting? 162) ______ A) Accrual accounting uses subjective judgment which can introduce measurement errors. B) Cash flow reporting uses subjective judgment which can introduce errors and uncertainty. C) Accrual accounting uses subjective judgment which can introduce uncertainty into reported earnings. D) Accrual income can be manipulated by postponing discretionary expenses

163) Which of the following would be reported in the cash flow from operating activities section of the cash flow statement under the direct method? 163) ______ A) Increase in taxes payable. B) Interest and dividends received. C) Issuance of common stock. D) Cash payments made on short-term notes.

192) Which of the following does not accurately describe the presentation of software development costs on the statement of cash flows? 192) ______ A) The presentation of software development costs is based upon the determination of technological feasibility. B) GAAP contains bright-line criteria for determining technological feasibility which provides an opportunity for management to distort or manipulate results. C) Reclassifying software development costs from the investing to the operating section of the cash flow statement improves interfirm comparability. D) Reclassifying software development costs undoes the misleading effects for any firm that attempts to improve operating cash flows by low-ering the technological feasibility threshold in the current period relative to prior periods

193) Which of the following does not reflect the accounting and impact on the statement of cash flows for the sale or transfer of accounts receivable? 193) ______ A) Receivable transfers that are secured borrowings have no effect on operating cash flows. B) Receivable sales are not reported in the statement of cash flows as they do not represent collections from the end customers and therefore are not part of operating cash flows. C) Receivable sales create an operating cash inflow on the cash flow statement. D) Receivable sales transfer future operating cash flows into the current period.

31) Which of the following most accurately describes the SEC's current role in sustainability reporting? The SEC: 31) ______ A) requires that all public companies report on their impact on climate change. B) has outlined how climate change could affect Regulation S-K disclosures. C) requires that Fortune 500 companies issue formal sustainability reports. D) is working closely with the GRI on uniform sustainability-related disclosure requirements.

36) Which of the following accounting standards permit(s) companies to apply short-term lease accounting rules to low-value assets? 36) ______ A) U.S. GAAP only. B) IFRS only. C) Both U.S. GAAP and IFRS. D) Neither U.S. GAAP nor IFRS

38) Which of the following statements regarding IFRS isincorrect? 38) ______ A) All companies listed on the London Stock Exchange must use IFRS. B) The SEC-required Form 20-F must be filed with the SEC by foreign issuers within 30 days. C) The European Commission must "endorse" IFRS for required use by EU companies. D) The SEC has expressed concern that transitioning to IFRS might be prohibitively expensive and might lessen U.S. influence over standard setting.

42) The Canon Corporation sells ten copiers to the Title Company on October 15 for $40,000. Canon delivers the copiers to Title on October 20 and Title pays $16,000, agreeing to pay the balance on November 10. Under the cash basis, how much revenue should Canon recognize in October? 42) ______ A) $0 B) $16,000 C) $24,000 D) $40,000

51) Revenue is recognized when: 51) ______ A) a contract is signed by both parties. B) the seller completes performance required by an agreement. C) the buyer completes payment required under an agreement. D) the buyer accepts delivery and completes required payment

54) The matching principle requires that expenses be recognized: 54) ______ A) in the same period in which all the assets are used up. B) in the same period in which the revenue generated by these expenses is recognized. C) when the costs are paid by the entity. D) in the same period in which the revenue generated by these expenses is received.

55) Income statements are classified into sections to: 55) ______ A) separate revenue recognized from deferred revenue. B) distinguish between sustainable and transitory income. C) separate real income from book income. D) distinguish between book income and taxable income.

61) Smidt Company reports a loss related to a recent warehouse flood. Financial statement users should expect to find the related loss reported on the Smidt's multiple-step income statement as part of: 61) ______ A) income from discontinued operations. B) income from continuing operations. C) income from extraordinary events. D) other comprehensive income

63) When reporting unusual or infrequent items in the income statement which of the following isnot correct? 63) ______ A) If a material event is either unusual in nature or an infrequent occurrence it is classified on the income statement as a special or unusual item in continuing operations. B) If a material event is either unusual in nature or an infrequent occurrence—such as a one-time charge resulting from a major restructuring—it may be classified on the income statement as a special or unusual item in continuing operations or treated as an extraordinary item if it has been a number of years since the company's last major restructuring. C) Firms that use early debt retirement will report the associated gains and losses as part of income from continuing operations with separate line-item disclosure. D) The write-off of obsolete inventory would be reported on the income statement as a special item in continuing operations.

67) Which one of the following events would be considered an unusual or infrequent event? 67) ______ A) a tornado in Kansas. B) an earthquake in New York. C) a flood in St. Louis near the Mississippi River. D) an earthquake in southern California.

68) A special one-time charge resulting from corporate restructurings would be reported on the income statement as a/an: 68) ______ A) operating item before gross profit. B) special item in continuing operations. C) special item in continuing operations, shown net of tax. D) special item in discontinued operations, shown net of tax.

71) When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e., nonrecurring) gains or losses and certain other non-cash charges, such earnings are frequently referred to as: A) normal earnings. B) pro forma earnings. C) sustainable earnings. D) real earnings.

75) Any increase in an asset may be offset by:75) ______ A) a corresponding decrease in a liability. B) a decrease in some other asset account. C) a corresponding decrease in owner' equity. D) an increase in another asset account.

77) T-account analysis can be used to gain insights into why accrual basis earnings and cash basis earnings differ and to: 77) ______ A) journalize future transactions. B) reconstruct transactions that have occurred during a given reporting period. C) post transactions that have occurred during a given reporting period. D) determine the current market price of common stock.

78) _______ accounting standards require companies to group items within OCI based on __________: 78) ______ A) U.S. GAAP; whether they will be reclassified subsequently into net income or whether they will be subsequently reclassified into income when specific conditions are met. B) IFRS; whether they will be reclassified subsequently into net income or whether they will be subsequently reclassified into income when specific conditions are met. C) U.S. GAAP; their expected future categorization on the income statement into income from continuing operations and discontinued operations. D) IFRS; their expected future categorization on the income statement into income from continuing operations and discontinued operations.

83) Assuming the requirements for recognizing revenue over time are met, the measure of completion is computed by dividing 83) ______ A) profits earned to date by estimated total profits. B) costs incurred to date by estimated total costs. C) costs incurred to date by the contract price. D) profits earned to date by the contract price

90) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Estimated completion costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Assuming that the conditions for revenue recognition over time were not met, which of the following entries would be made in Year 3 to record the completion and acceptance of the project? 90) ______ A) DR Inventory: Construction in progress $5,000,000 CR Billings $5,000,000 B) DR Billings $5,000,000 CR Inventory: Construction in progress $3,750,000 CR Income on long-term construction contract $1,250,000 C) DR Inventory: Construction in progress $3,750,000DR Income on long-term construction contract $1,250,000 CR Billings $5,000,000 D) DR Billings $1,250,000 CR Inventory: Construction in progress $1,250,000

92) Donald Company, which operates in the life sciences industry, routinely fulfills services subject to ongoing negotiations that determine reimbursement of regulated rates. Donald properly applies the "variable revenue" guidance under ASC 606. Donald should: 92) ______ A) defer revenue until the reimbursement rate is fixed. B) recognize revenue over time. C) recognize revenue at the inception of the related contract. D) defer revenue until the reimbursement rate can be estimated with 90% certainty.

93) Burgers and More operates a chain of fast-food restaurants across the United States. The restaurants are franchised operations. Under the franchise agreement, restaurant owners have the right to use the Burgers and More trade name, financing arrangements for franchisees, and management training at the corporate headquarters as well as the right to use training videos for their employees. The Burgers and More franchise contracts contain the following separate performance obligations: 93) ______ A) intellectual property, training B) intellectual property, financing, and training C) intellectual property D) financing and training

52) Net income recognition always increases: 52) ______ A) assets. B) net assets. C) liabilities. D) net liabilities.

b Net income recognition can occur by reducing Deferred Revenue and increasing Service Revenue. In this case, there is no change in assets, but net assets have increased.

85) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Estimated completion costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Assuming revenue is recognized over time, how much income is recognized in Year 2? 85) ______ A) $250,000 B) $375,000 C) $625,000 D) $3,125,000

b Year 1 = ($1,000,000 ÷ $4,000,000) × $1,000,000 estimated profit = $250,000 Year 2 = ($2,500,000 ÷ $4,000,000) × $1,000,000 estimated profit = $625,000 − $250,000 recognized in Year 1 = $375,000 recognized in Year 2.

86) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Estimated completion costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Assuming that revenue is recognized over time, how much income is recognized in Year 3? 86) ______ A) $375,000 B) $625,000 C) $1,000,000 D) $1,250,000

b Year 3 = ($3,750,000 ÷ $3,750,000) × $1,250,000 actual profit = $1,250,000 − $625,000 recognized in prior years = $625,000

177) The net cash flow from operating activities for 20X2 is a: 177) ______ A) $200,000 outflow. B) $280,000 inflow. C) $280,000 outflow. D) $400,000 inflow

b) NI + (equipment cost - BV + accumulated dep.) - (Sales Price - BV) - increase in AR - Inventory increase - AP decrease = CF from Operating Activities

1) A firm's financial statements contain trends that give users insight into the firm's: A) future market share. B) position within its industry. C) profitability, productivity, and liquidity. D) current market price for common and preferred stock.

102) In the case of sales where the customer is billed before delivery of the goods, 102) ______ A) the seller should always recognize revenue before the products are delivered to the customer. B) the goods belong to the customer and revenue recognition is deferred until delivery. C) the seller may recognize revenue if control of the goods has been transferred to the customer even though physical delivery has not taken place. D) revenue will not be recognized until the goods are shipped to the customer.

112) Under the new revenue recognition guidelines in ASC Topic 606, which of the following statements isnot true regarding performance obligations satisfied over time? 112) ______ A) The firm must determine at each reporting date the extent to which the performance obligation has been satisfied. B) Output and input methods may be used for measurement purposes. C) To obtain quality measurement, input methods must always be closely related to the transfer of the goods or services to the customer. D) Usable input measures include labor hours, costs incurred, and time elapsed.

117) According to ASC Topic 606 guidance for revenue recognition, which of the following statements is true regarding customer options when identifying performance obligations in a contract? 117) ______ A) There is an additional performance obligation for additional goods or services if the customer could obtain the same rights to additional goods or services without entering into the current contract agreement. B) There is an additional performance obligation for additional goods or services if the option in the contract provides for the additional goods or services at their stand-alone selling price. C) There is an additional performance obligation for additional goods or services if the customer could obtain the same rights to additional goods or services elsewhere but the additional good or services are provided for free or at a discount in the current contract. D) There is no additional performance obligation for additional goods or services if they will be received for free or at a discount, as long as the goods or services are similar to the other goods in the current contract.

119) Elaine Company, a clothing store, sells clothing for a total selling price of $50,000 with a related cost of $35,000. Customers have a right of return within 30 days. Elaine Company estimates that 10% of the sales will be returned by customers. The journal entry to recognize the sales will include: 119) ______ A) Sales revenue of $50,000. B) Sales revenue of $35,000. C) Sales revenue of $45,000. D) No sales revenue until the return period has lapsed.

122) Contributed capital might be a negative dollar amount because: 122) ______ A) net losses exceeded net income over the years. B) excess liabilities reduced contributed capital. C) treasury stock was in excess of stock originally issued. D) dividends paid were in excess of net income accumulated in retained earnings.

123) Accrued liabilities represent: 123) ______ A) income that has not yet been recognized on the income statement. B) expenses that have not yet been recognized on the income statement. C) expenses that have been recognized on the income statement but not yet been paid. D) income that has been recognized on the income statement but not yet collected.

127) Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. He notices that the Retained Earnings account increased from the beginning of the year. This information is used to: 127) ______ A) increase cash flow from financing as it indicates receipt of payments from customers. B) decrease cash flow from investing as it indicates payment of debt. C) increase cash flow from operations as it signifies a net income. D) decrease cash flow from operations as it indicates a net loss.

129) Net property, plant and equipment are reported on the balance sheet at: 129) ______ A) current market value. B) historical cost. C) historical cost minus accumulated depreciation. D) net realizable value.

130) Long-term debt is reported on the balance sheet at: 130) ______ A) current market value. B) net realizable value. C) present value. D) future value.

135) Which one of the following equations explains why successive balance sheets can be used to prepare a firm's cash flow statement? 135) ______ A) Assets = Liabilities − Equity B) Cash - Noncash assets = Liabilities − Equity C) Δ Cash = Δ Liabilities − Δ Noncash assets + Δ Stockholders' equity D) Δ Cash = Δ Liabilities + Δ Stockholders' equity

136) The change in a firm's cash position between successive balance sheet dates will not equal the reported net income for that period for all the following reasonsexcept: 136) ______ A) Reported net income usually will not equal cash flow from operating activities because noncash revenues and expenses are often recognized as part of accrual income. B) Reported net income usually will not equal cash flow from operating activities because certain operating cash inflows and outflows are not recorded as revenues or expenses under accrual accounting in the same period the cash flows occur. C) Changes in cash are also caused by nonoperating-related investing activities like the purchase of treasury stock. D) Additional changes in cash are caused by financing activities like the repayment of a bank loan.

142) The change in the balance of the Bonds Payable account would be recorded on the statement of cash flows as: 142) ______ A) an increase of $20,000 under financing activities. B) an increase of $80,000 under investing activities. C) a decrease of $20,000 under financing activities. D) a decrease of $80,000 under operating activities

144) The U.K. Equity account "Share premium" is reported on U.S. GAAP balance sheets as: 144) ______ A) capital reserve. B) revaluation reserve. C) capital in excess of par. D) an accumulated other comprehensive income account.

151) Properly prepared statements of cash flows: 151) ______ A) include stock issued for cash as an investing activity. B) present depreciation as a subtraction from net income to arrive at a firm's cash flow from operations under the indirect method. C) are frequently used by investment analysts to cash flows from operations across two or more companies. D) will show the change in cash during a period to be equal to the net income for the period

154) Which of the following statements isnot correct with respect to accounting for Guarantees? 154) ______ A) When one company guarantees the debt of another company, that contingency must be disclosed even if the contingency is only remotely possible. B) The Guarantee liability account represents deferred revenue associated with the stand ready fee. C) Both the "stand ready obligation" and the contingent future obligation are recorded at fair value. D) The Guarantee liability account decreases over the life of the loan as revenue is earned

157) Goodwill: 157) ______ A) is a tangible asset recognized as part of a business combination. B) is not subject to impairment. C) is initially measured as the difference between the consideration given in an acquisition and the fair value of the separately identifiable net assets acquired on the acquisition date. D) is classified on the balance sheet as a current asset

160) Which of the following statements is not true regarding cash flow from operating activities? 160) ______ A) Most firms use the indirect method for presentation. B) Each line item in a direct method Statement of Cash Flows is actually a cash flow. C) The direct method begins with net income and then shows the differences between operating cash flow and net income. D) There are two methods for presenting cash flow from operating activities.

164) Some analysts prefer the indirect method for the preparation of the cash flow statement because the size and direction of the items reconciling net income to net operating cash flow provide a yardstick for measuring the: 164) ______ A) current ratio. B) return on assets. C) quality of earnings. D) rate of dividends.

18) Which one of the following types of disclosure costs is the cost of disclosing the company's pricing strategies? 18) ______ A) Political cost B) Litigation cost C) Competitive disadvantage cost D) Information collection, processing, and dissemination cost

181) Which of the following transactions would not be reported within the financing activities section of the cash flow statement? 181) ______ A) The payment of a cash dividend. B) An issue of preferred stock in exchange for cash. C) An issue of common stock in order to retire a bond liability. D) The payment of cash to acquire shares of common stock to be held as treasury stock.

186) Treasury stock costing $89,050 was sold for $94,375 cash. Which of the following statements accurately describes the reporting of this transaction within the cash flow statement assuming that the indirect method is used to determine net cash flows from operating activities? 186) ______ A) A gain of $5,325 is deducted from net income and a $94,375 cash inflow is reported within the investing activities section of the cash flow statement. B) A gain of $5,325 is deducted from net income and a $94,375 cash inflow is reported within the financing activities section of the cash flow statement. C) There is no adjustment necessary to net income but a $94,375 cash inflow is reported within the financing activities section of the cash flow statement. D) There is no adjustment necessary to net income but a $94,375 cash inflow is reported within the investing activities section of the cash flow statement.

187) Which of the following statements does not accurately describe issues pertaining to preparation of the cash flow statement? 187) ______ A) The retirement of a fixed asset that is not fully depreciated resulting in a loss equal to the retired asset's book value creates a discrepancy with respect to changes in the balance sheet relative to what is reported in the investing activities section of the cash flow statement. B) Simultaneous non-cash financing and investing activities such as the purchase of a building by incurring a mortgage do not need to be reported within the investing and financing activities sections of the cash flow statement. C) Changes in working capital accounts and fixed asset accounts will always have to correspond with the changes in these accounts within the statement of cash flows. D) The increase in the fixed asset accounts due only to a translation adjustment resulting from the fall of the dollar will not create an investing cash flow within the investing activities section of the cash flow statement.

188) Which of the following is not a reason why balance sheet changes do not map directly into the corresponding account changes in the statement of cash flows? 188) ______ A) Acquisitions of other companies. B) Simultaneous noncash financing and investing activities. C) The effect of "playing the float" on accounts payable balances. D) Asset write-offs and impairments

198) Smith Company elected to use the cumulative earnings approach for distributions from its equity-method investment purchased at the beginning of 20X1. During 20X1, Smith earned $244,000 on the investment and received $110,000 in dividends. In its statement of cash flows— direct method, Smith should report the dividends as a(n): 198) ______ A) investing activity. B) financing activity. C) operating activity. D) noncash investing and financing activity

20) One financial disclosure cost is the possibility that competitors may use the information to harm the company providing the disclosure. All of the following disclosures might create a competitive disadvantageexcept: 20) ______ A) detailed information about company operations, such as sales and cost figures for individual product lines. B) information about the company's technological and managerial innovations. C) information showing the company's amount of spending on research and development. D) details about the company's strategies, plans and tactics

200) Strafford Inc. elected to use the nature of distribution approach for distributions from its equity-method investment purchased at the beginning of 20X1. In the statement of cash flows, Strafford should classify dividends received from its investment: 200) ______ A) as operating activity. B) as investing activity. C) based on the nature of the earnings generated by the investee company. D) as part operating activity and part investing activity.

23) ASC content is organized: 23) ______ A) alphabetically by topic. B) in chronological order based on the issue date of the major pronouncement on which the content is based. C) without numerical reference to the original standard from which the content was derived. D) in the manner prescribed by the IASB.

25) A company manages a large portfolio of marketable securities and sells only stocks with substantial gains in poor income years or sells only stocks with substantial losses in good income years. This strategy is an indication of: 25) ______ A) securities fraud. B) unstable portfolio management. C) income smoothing. D) violating security trading laws

4) Investors who compare a firm's discounted future cash flows to the current market price of a stock are using the: A) efficient market hypothesis. B) market-to-market approach. C) fundamental analysis approach. D) technical analysis approach.

40) When is it permissible to issue financial statements that contain a material departure from GAAP? 40) ______ A) It is never permitted. B) When it is a non-US corporation. C) When the auditor can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading. D) When management does not like the GAAP results

41) The expense matching principle states that: 41) ______ A) Expenses are recognized when paid. B) All expenses are recognized when the corresponding revenue is recorded. C) Some expenses are recognized when the corresponding revenue is recognized and some are spread over time. D) Expenses are recognized when the invoice is received.

44) The Canon Corporation sells ten copiers to the Title Company on October 15 for $40,000. Canon delivers the copiers to Title on October 20 and Title pays $16,000, agreeing to pay the balance on November 10. Using the accrual basis, which one of the following entries would properly record Canon's revenue recognition for October? 44) ______ A) DR Cash 40,000 CR Copier sales 40,000 B) DR Cash 16,000 CR Copier sales 16,000 C) DR Cash 16,000DR Accounts receivable 24,000 CR Copier sales 40,000 D) DR Accounts receivable 40,000 CR Copier sales 40,000

46) Which statement below best describes when to record an expense? 46) ______ A) When the expense is paid. B) When the resource is consumed or a benefit is derived. C) Always taken in one period only. D) Never is recognized before revenue is recognized

53) The real accounting issue in net income recognition is the: 53) ______ A) quantity of income recognized. B) type of income recognized. C) timing of the recognition. D) basis of net income recognition.

59) When transitory earnings are present, which of the following correctly depicts the order used on the income statement? 59) ______ A) Income from continuing operations, unusual items, income tax expense, discontinued operations, net income. B) Income from continuing operations, discontinued operations, income tax expense, net income. C) Income tax expense, income from continuing operations, discontinued operations, net income. D) Income tax expense, income from continuing operations, unusual items, discontinued operations, net income.

98) Under ASC Topic 606 for revenue recognition, which of the following factors isnot an indicator of the principal/agent determination? 98) ______ A) Inventory risk. B) Credit risk. C) Shipping terms. D) Control of prices of the goods or services

174) The cash flow statement of the United Company is in process for 20X2. The United Company is reporting the following balances: 12/31/X1 12/31/X2 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated depreciation—equipment 75,000 95,000 During 20X2, United sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash. Equipment purchases in 20X2 were: 174) ______ A) $30,000. B) $70,000. C) $100,000. D) $120,000.

c $100,000 (beginning balance) − $30,000 (equipment sold) + X (equipment purchases) = $170,000 X = $100,000

180) The Keweenaw Sunshine Development Corporation reported the following for the year ended December 31, 20X1: 1/1/X1 12/31/X1 Discount on Bonds Payable $ 17,500 $ 15,750 Interest Payable $ 19,500 $ 17,350 Interest Expense $47,750 How much cash did Keweenaw pay for interest during 20X1? 180) ______ A) $51,650 B) $43,850 C) $48,150 D) $46,350

c - $47,750 (interest expense) − $1,750 (discount on bonds payable amortization) + $2,150 (decrease in interest payable) = $48,150

185) Madrid Incorporated's 20X1 income statement reported income tax expense of $635,375. During 20X1, Madrid's income taxes payable account increased $19,735 while the deferred tax asset account increased $39,365. How much cash was paid for taxes during 20X1? 185) ______ A) $615,745 B) $694,475 C) $655,005 D) $576,275

c - $635,375 (income tax expense) − $19,735 (the increase in income taxes payable) + $39,365 (the increase in the deferred tax asset account) = $655,005

199) Jones Company elected to use the cumulative earnings approach for distributions from its equity-method investment purchased at the beginning of 20X1. During 20X1, Jones earned $200,000 on the investment and received $210,000 in dividends. In the investing activities section of the statement of cash flows prepared under the direct method, Jones reports dividends of: 199) ______ A) $210,000. B) $200,000. C) $10,000. D) $0

c - The excess distribution of $10,000 above cumulative earnings represents a return on investment and is reported as an investing activity cash flow.

183) A building costing $550,000 with accumulated depreciation of $225,000 was sold for $275,000 cash. Which of the following statements is correct with respect to preparing the cash flow statement if the indirect method is being used? 183) ______ A) $50,000 will be added to net income to determine cash flow from operating activities and $325,000 will be reported as a cash outflow in the investing activities section. B) $50,000 will be deducted from net income to determine cash flow from operating activities and $275,000 will be reported as a cash inflow in the investing activities section. C) $50,000 will be added to net income to determine cash flow from operating activities and $275,000 will be reported as a cash inflow in the investing activities section. D) $275,000 will be added to net income to determine cash flow from operating activities and $325,000 will be reported as a cash outflow in the investing activities section

c -Building carrying value = $550,000 − $225,000 (cost − accumulated depreciation) = 325,000; proceeds are $275,000 and loss will be $50,000.

45) Hickory Furniture Company paid for the following costs during the month of May: Inventory purchases $ 40,000 Advertising costs 8,000 Delivery costs 2,000 Hickory sold $32,000 of the inventory and has agreed to pay warranty expenses for its customers. These are expected to be $1,600 and occur evenly over the next four months (i.e., starting in June). What is the amount of Hickory's May expenses when applying the matching principle? 45) ______ A) $33,600 B) $42,400 C) $43,600 D) $50,000

c Accrual expenses = Cost of Goods Sold $32,000, Advertising $8,000, Delivery Costs $2,000, and Warranty Costs $1,600

56) Which item is not correct with respect to the treatment of sustainable and transitory items and a company's income statement? 56) ______ A) Financial reporting assists statement users in forecasting future cash flows by providing an income statement format that segregates components of net income. B) Income statements prepared in accordance with GAAP differentiate between income components that are believed to be sustainable and those that are transitory. C) The income statement isolates a key figure called "income from sustainable operations." D) Transitory items are disclosed separately on the income statement so that statement users can place less weight on these earnings components when forecasting future profitability.

c The key figure is referred to as "income from continuing operations."

101) Under ASC Topic 606, which of the following isnot a criteria for revenue recognition? 101) ______ A) Rights regarding goods or services have been identified. B) Delivery has occurred or services have been rendered. C) Collectability is probable. D) The shipping terms are clearly stated in the contract.

104) Which of the following statements doesnot apply to the principal/agent relationship under ASC Topic 606 guidance for revenue recognition? 104) ______ A) An agent reports revenue only for the net amount retained. B) An agent may recognize revenue when its performance obligation to the principal is satisfied. C) A principal recognizes revenue for the gross amount paid by the customer. D) Inventory risk is not an important factor in determining the relationship.

105) The cost-plus approach: 105) ______ A) refers to contracts that are modified from their original terms during the course of the contract. B) refers to contracts where the contractor is not expected to recover all costs incurred in completing the project. C) is not allowed under ASC Topic 606 guidance for revenue recognition. D) uses an assumed reasonable profit margin to determine the stand-alone price.

108) Which of the following statements is true regarding the new ASC Topic 606 for revenue recognition? 108) ______ A) The focus is on when the firm has earned the consideration to which it is entitled. B) Early adoption is not allowed. C) The new rules are more rules-based than principle-oriented. D) Under IFRS, both public and non-public firms must adopt by 2018.

11) When financial statements are used by shareholders and investors to evaluate the performance of a company's top executives it is referred to as the _____________ function of financial reports. 11) ______ A) proxy. B) fundamental. C) technical. D) stewardship.

113) Which of the following statements isnot true regarding transactions involving intellectual property? 113) ______ A) A transaction involving intellectual property can represent a sale or a license. B) The revenue recognition approach depends on whether the transaction is considered a sale or a license. C) If a contract is considered a license, the firm must determine if the license is a distinct performance obligation. D) If the customer's right to use the intellectual property is not limited, the contract is considered a license.

115) Under IFRS in accounting for revenue recognition, for collection to be probable in order for revenue to be recognized on a contract, "probable" means: 115) ______ A) Likely to occur. B) More likely to occur. C) Most likely than not to occur. D) More likely than not to occur.

116) In accounting for revenue recognition under ASC Topic 606, when there is a modification of a contract, which of the following is correct? 116) ______ A) If the modification adds distinct goods or services to the original contract, then a new contract must be created. B) If the new contract price does not reflect the stand-alone selling price of the additional goods or services to be exchanged, then a new contract must be created. C) If the modification adds distinct goods or services to the original contract and the change in the original contract price reflects the stand-alone price of the additional goods or services to be exchanged, then a new contract need not be created. D) If the modification adds distinct goods or services to the original contract and the change in the original contract price reflects the stand-alone price of the additional goods or services to be exchanged, then a new, separate contract must be created.

121) The balance sheet provides information on all of the followingexcept: 121) ______ A) how management invested its money. B) where the money came from. C) assessing rates of return. D) the market price of the company's stock.

124) Goodwill arising from a business combination is reported on the balance sheet as a(n): 124) ______ A) current asset. B) fair value asset. C) impaired asset. D) intangible asset.

125) Balance sheets prepared in compliance with U.S. GAAP reflect a mixture of: 125) ______ A) historical cost and future cash values. B) current value and discounted future cash flows. C) discounted cash flows and future values. D) historical cost, fair value, net realizable value, and discounted present values.

132) Retained earnings are reported on the balance sheet at: 132) ______ A) historical cost. B) current market value. C) net realizable value. D) a mixture of different measurement bases.

137) Financing activities include the cash effects of: 137) ______ A) producing and delivering goods and services. B) purchasing and disposing of productive assets used in production of revenue. C) purchasing and disposing of debt securities of other companies. D) selling stocks and bonds to raise capital used to produce revenue.

138) Cash flows from operating activities include: 138) ______ A) cash payments received from customers. B) increases in Accumulated Depreciation. C) deferred income taxes. D) All of these would be included in cash flows from operating activities

139) Using the indirect method to create the operating activities section of the statement of cash flows, the cash flow recorded based on the change in inventory would be: 139) ______ A) a decrease of $400,000 B) an increase of $400,000 C) an increase of $150,000 D) a decrease of $150,000

148) A balance sheet prepared in accordance with U.S. GAAP typically: 148) ______ A) includes both "noncurrent liability" and "long-term obligation" sections. B) reports inventory at historical costs. C) reports cash at its current market value. D) reports retained earnings comprised of the cumulative earnings less dividends since the inception of the entity.

159) Under U.S. GAAP, contingent gains are not recognized until certain. This is most consistent with the principle or concept of: 159) ______ A) Matching B) Relevance C) Consistency D) Conservatism

16) Investors and analysts must have certain capabilities regarding financial reporting which include: 16) ______ A) an understanding of current financial reporting standards. B) recognition that management selects the financial reporting standards used. C) an ability to recognize that financial statement information reported is grounded in judgment as well as facts. D) all of these answer choices are correct.

165) Under U.S. GAAP, which of the following is not included in net cash flow from operating activities under the direct method? 165) ______ A) Cash collected from customers (including lessees and licensees) B) Interest and dividends received C) Cash paid for cost of goods sold D) Cash dividends paid

168) A decrease in accounts receivable of $16,000 for the year: 168) ______ A) decreases cash flow from operating activities by $8,000. B) increases cash flow from operating activities by $8,000. C) decreases cash flow from operating activities by $16,000. D) increases cash flow from operating activities by $16,000.

17) The goal of generally accepted accounting principles is to ensure that a company's financial statements: 17) ______ A) do not contain any representation that could jeopardize management. B) provide stockholders all of the information they need to assess management's performance. C) are accurate and free from fraud. D) clearly represent its economic condition and performance of the company.

172) For a firm using the indirect method, which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities? 172) ______ A) An increase in wages payable will be added to net income. B) A decrease in accrued interest payable will be deducted from net income. C) Amortization of bond discount will be added to net income. D) Patent amortization expense will be deducted from net income.

189) Changes in balance sheet accounts from one year to the next may not map directly into the corresponding account changes in the statement of cash flows. Which of the following items is not a cause of such mapping differences? 189) ______ A) Impairment charges B) Retirement of fixed assets C) Reclassification of assets held for sale D) Translation of all company subsidiaries using the temporal method

191) Which of the following is not an indicator that operating activities cash flows might be increased through distortion or manipulation? 191) ______ A) A significantly large increase in accounts payable. B) A significantly large decrease in accounts receivable. C) A significantly large increase in accrued liabilities. D) Increasing the credit period for a customer with an excellent credit history.

2) Professional analysts need information on a company's future earnings and cash flow to evaluate audit vulnerabilities, to assess debt repayment prospects and to: A) certify good values in the stock market. B) indemnify creditors against losses. C) certify that no fraud exists in the company. D) value its equity securities.

26) Identify the correct order of the three steps constituting the FASB's "due process" procedure. 26) ______ A) Public-hearing stage, exposure-draft stage, and voting stage. B) Discussion-memorandum stage, public-hearing stage, and voting stage. C) Exposure-draft stage, discussion-memorandum stage, and voting stage. D) Discussion-memorandum stage, exposure-draft stage, and voting stage.

28) Omissions or misstatements within a financial statement which could influence the decisions of the user of the statement violates: 28) ______ A) neutrality. B) consistency. C) conservatism. D) materiality.

29) In the U.S., disclosure of climate change risks and performance is: 29) ______ A) Required by law. B) Required by FASB. C) Required by the SASB. D) Voluntary.

3) Which of the following are correct with respect to information contained in financial statements? A) Information asymmetry occurs when management has access to more and better information than is presented in the financial statements. B) Financial statements cannot solve the issue of information asymmetry. C) Financial statements eliminate the issue of and any concern over information asymmetry. D) Financial statements help solve the issue of information asymmetry which is when management has access to more and better information than do people outside the company.

30) Munster Inc, a U.S.-based multinational company, voluntarily issues a sustainability report consistent with the guidelines of the Global Reporting Initiative (GRI). The company's report is audited by one of the Big 4 accounting firms. Munster reports significant detail related to the company's environmental impact, use of renewable energy, and programs that benefit the community. Consistent with GRI guidelines, Munster Inc. also should report information on the following issues: 30) ______ A) Corporate strategies. B) Governance. C) Stakeholder engagement. D) All of the these must be reported consistent with GRI guidelines.

37) IFRS frequently: 37) ______ A) are automatically approved for any foreign listed company, as soon as a new standard is issued. B) permit only one accounting treatment for similar business transactions and events to promote comparability. C) allow firms less latitude when compared to U.S. GAAP. D) follow a more generalized overview approach than do U.S. GAAP counterpart standards

39) Accounting information is heavily regulated: 39) ______ A) To increase reporting efficiency. B) With the intention of preventing market failure. C) To prevent abuse given that the incentives of information producers are not necessarily aligned with those of users. D) All of these answer choices are correct

47) Exeter Company reports all revenues and expenses of Gregg Company on its consolidated income statement. Which of the following conditions must have been met? 47) ______ A) Exeter owns 100% of Gregg Company's common stock. B) Exeter owns 90% or more of Gregg Company's common stock. C) Exeter owns 50% of Gregg Company's common stock. D) Exeter owns more than 50% of Gregg Company's common stock.

50) Which of the following isnot correct with respect to accrual accounting? 50) ______ A) Accrual accounting can produce large discrepancies between the firm's reported profit performance and the amount of cash generated from operations. B) The principles that govern revenue and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cash-basis accounting. C) Reported accrual accounting net income for a period always provides an accurate picture of underlying economic performance. D) Accrual accounting does not decouple measured earnings from operating cash inflows and outflows.

72) GAAP requires firms to report comprehensive income: 72) ______ A) at the end of the income statement. B) as one separate statement of comprehensive income. C) in the statement of changes in stockholders' equity. D) in a statement that is displayed with the same prominence as other financial

89) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Estimated completion costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Which one of the following entries would be made in Year 2 to record customer billing assuming revenue recognition over time? 89) ______ A) DR Accounts receivable $1,500,000 CR Cash $1,500,000 B) DR Accounts receivable $1,500,000 CR Billings $1,500,000 C) DR Accounts receivable $1,750,000 CR Income on long-term construction contract $1,750,000 D) DR Accounts receivable $1,750,000 CR Billings $1,750,000

94) Yashito Corporation sells cameras and accessories. The company's newest model, popular with preteens, takes wallet-sized instant photos. The wholesale price for this camera is $50. In addition, the company sells carrying cases ($25), film cartridges ($15), and selfie lenses ($10) made especially for this camera. During the holiday season, Yashito offers the camera, film, carrying case, and selfie lens as a package for $75. For each package sold, the transaction price allocated to the camera is: 94) ______ A) $100. B) $75. C) $50. D) $37.50

99) Under the new revenue recognition guidance in ASC Topic 606, a performance obligation is satisfied over time if: 99) ______ A) the customer simultaneously receives and consumes the goods and services provided by the firm. B) the firm's performance creates or enhances an asset under the customer's control. C) the firm's performance does not create an asset with an alternative use and the firm has a right to receive payment for its performance to date. D) any of these answer choices is correct.

194) Autumn Company uses IFRS to prepare its external financial reporting. During 20X1, Autumn Company had the following transactions related to cash flows: Dividends received 16,000 Interest paid 20,000 Interest received 42,000 With regard to the above information, which of the following is an acceptable classification as part of preparation of the statement of cash flows? Cash from operating activities Cash from/(used by) investing activities A. $0 $42,000 B. $58,000 ($20,000) C. $0 $38,000 D. ($20,000) $58,000 194) ______ A) Option A B) Option B C) Option C D) Option D

d - Under IFRS dividends and interest received can be reported as either operating or investing; interest paid can be reported as either operating or financing. In answer "d" interest paid is included as part of operating, while dividends and interest received are reported as part of investing.

173) The cash flow statement of the United Company is in process for 20X2. The United Company is reporting the following balances: 12/31/X1 12/31/X2 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated depreciation—equipment 75,000 95,000 During 20X2, United sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash. Depreciation expense for 20X2 is: 173) ______ A) $8,000. B) $20,000. C) $18,000. D) $28,000

d Accumulated depreciation of sold equipment: $30,000 − 12,000 − 10,000 = $8,000 (cost-proceeds-loss); $95,000 (accumulated depreciation at the end of the year) − $75,000 (accumulated depreciation beginning of year) + $8,000 (accumulated depreciation of equipment sold) = $28,000

Accountancy 4356 Test 1

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