ACCT 3023 Last Acc test 2

On January 1 of the current year, Lafferty signs a contract to rent a building for $1,000 per month for the next three years. On that date, Lafferty pays $36,000 for rent. On January 1 when payment is made, what is the amount of the prepaid rent that should be classified as a noncurrent asset? Multiple choice question. $12,000 $36,000 $0 $24,000

$24,000 Reason: The portion of rent that will be paid within the next 12 months is classified as current and the remainder is classified as noncurrent.

Barsky Corp. has the following items: Cash $5,000 Prepaid expenses 2,000 Building 40,000 Land 20,000 Inventory 15,000 Total noncurrent assets on the balance sheet is

$60,000

Discontinued operations are reported when

1. A component on a entitiy or group of componenets has been sold or disposed of 2. If the disposal represents a strategic shift that has or will have a major effect on a company's operations

When the component has been sold

1. Income or loss from operations (revenues, expenses, gains, and losses) of the component from the beginning of the reporting period to the disposal date. 2. Gains or loss on disposal of the component's assets

3 Major components of income

1. Operating Income: revenues, expenses, gains, and losses directly related to the primary revenue-generating activities 2. Non-operating Income: revenues, expenses, gains, and losses related to the peripheral or incidental activities 3. Income tax expense:

Cash flows: Operating Activities

1. inflows and outflows of cash related to transactions that help determine net operating income. like: -customers from the sale of goods and services - interest and dividends from investements - purchase of inventory - salaries, wages, and other operating expenses - interest on debt - income taxes

Cash flows: Investing Activities

1. the purchase of long-lived assets 2. The purchase of investment securities like stock and bonds 3. loans to other entities 4. the sale of long lived assets 5. the sale of investment securities 6. the collection of a non-trade receivable (excluding the collection of interest)

On January 1 of the current year, Lafferty signs a contract to rent a building for $1,000 per month for the next three years. On that date, Lafferty pays $36,000 for rent. On January 1 when payment is made, what is the amount of the prepaid rent that should be classified as a current asset? Multiple choice question.

12,000 Reason: The portion of rent that will be paid within the next 12 months is classified as current and the remainder is classified as noncurrent.

Which of the following is a category of accounting change? Multiple choice question. Accounting principle Asset classification Liability classification Accounting structure

Accounting principle There are three: acc principle, change in estimate, change in reporting entity

What is included in a company's paid in capital? (Select all that apply.) Multiple select question. Comprehensive income Additional paid-in capital Common stock Retained earnings

Additional paid-in capital Common stock

The full-disclosure principle requires that financial statements report which of the following? Multiple choice question. All calculations of each item on the balance sheet. All financial strategy and policies of the entity. All material relevant information. All calculations regardless of materiality.

All material relevant information.

What is the difference between an account payable and a note payable? Multiple choice question. A note payable is always long-term. An account payable is a signed promissory note. A note payable is owed to a bank. An account payable is usually due in 30-60 days.

An account payable is usually due in 30-60 days.

An accrued liability represents which of the following? Multiple choice question. An expense that has been incurred but will be paid in a future period. A revenue that was earned but payment will be received in a future period. An expense that has been incurred and was paid in a prior period.

An expense that has been incurred but will be paid in a future period.

Income tax expense is reported in what way on the income statement? Multiple choice question. As a separate line item. As part of general expenses. As part of other expenses.

As a separate line item.

Bear Corp. has $100,000 cash in the bank restricted to repay a note payable that matures in 2 years. How should this $100,000 be reported?

As restricted cash in the long-term asset section of the balance sheet.

The current versus noncurrent classification applies to what in the financial statements? Multiple choice question.

Assets and liabilities

Which of the following items is classified as cash? Multiple choice question. Treasury bills Investment in stock of another company Bank drafts Accounts receivable

Bank drafts

Which of the following are included in the summary of significant accounting policies included in the notes to the financial statements? (Select all that apply.) Multiple select question.

Choice between LIFO and FIFO. Method of depreciation. Items included in cash and cash equivalents.

Which of the following items are considered cash equivalents? (Select all that apply.) U.S. Treasury bills due in 2 months. Commercial paper due in 1 month. Cashier's checks and money orders. Reason: These are considered cash, not cash equivalents

Commercial paper due in less than 3 months. Money market funds quickly converted into cash. U.S. Treasury bills due in 2 months.

List of all items in stockholders equity

Common stock additional paid in capital retained earnings accumulated other comprehensive (loss) income

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.) Multiple select question. Losses Expenses Gains Revenues

Expenses Revenues Gains and losses is equity from peripheral or incidental transactions of an entity

True or false: Investments are assets used directly in the operations of the business. True false question.

False

Assets not used directly in the operations of the business are called what? Multiple choice question. Property Prepaid assets Investments Inventories

Investments

Cash Flows: Financing Activities

Involves cash flows from transactions with creditors (excluding trades payables) and owners 1. Owners when shares are sold to them 2. creditors when cash is borrowed through notes, loans, mortgages, and bonds 3. Owners in the form of dividends or other distributions 4. owners for the reacquisition of shares previously owned 5. creditors repayment of amount of debt(excluding trade payables because it's operating)

What refers to the riskiness of a company with regard to the amount of liabilities in its capital structure? Multiple choice question. Cash flow risk Long-term solvency Liquidity

Long-term solvency

An analysis provided by the company's management is included in the Multiple choice question. Management Discussion and Analysis. notes to the financial statements. summary of significant accounting policies.

Management Discussion and Analysis.

Who is responsible for the information in the annual report? Multiple choice question. Board of directors of the company. CPA firm that audits the company. Internal auditors of the company.

Management of the company.

If discontinued operations have a _____ effect on the income statement, they must be reported separately. Multiple choice question. material negative minimal positive

Material discontinued operations are things that a company has stopped selling. Whether it was a positive or negative operation, it is still separate.

Which of the following are included in the summary of significant accounting policies included in the notes to the financial statements? (Select all that apply.) Multiple select question. Method of depreciation. Items included in cash and cash equivalents. Choice between LIFO and FIFO. Supporting calculations for income taxes.

Method of depreciation. Items included in cash and cash equivalents. Choice between LIFO and FIFO.

Which of the following items are considered cash equivalents? (Select all that apply.) Multiple select question. Money market funds that are quickly converted to cash. Commercial paper due in 1 month. Cashier's checks and money orders.

Money market funds that are quickly converted to cash. Commercial paper due in 1 month. U.S. Treasury bills due in 2 months. Reason: These are considered cash, not cash equivalents U.S. Treasury bills due in 2 months. Still a cash equivalent but from a different problem.

Which of the following best describes the formula for the times interest earned ratio? Multiple choice question. Interest expense divided by net income. Net income plus interest expense divided by interest expense. Net income plus interest and tax expense divided by interest expense. Net income divided by interest expense.

Net income plus interest and tax expense divided by interest expense.

Management's assessment of permanent earnings are referred to as what? Multiple choice question. Perpetual income Net income Non-GAAP earnings Income from continuing operations

Non-GAAP earnings

When a component classified as a discontinued operation is sold, what two elements are included in calculating the total gain or loss from discontinued operations displayed on the income statement? Multiple choice question. Operating income or loss for the period and gain or loss on disposal. Extraordinary loss on the sale of the asset and the related tax benefit. Revenues and expenses of the component.

Operating income or loss for the period and gain or loss on disposal.

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? Multiple select question. Operating income or loss of the component during the reporting period. Estimated gain from sale of the component. Estimated impairment loss expected from the sale of the component. Revenues and expenses related to the component.

Operating income or loss of the component during the reporting period. Estimated impairment loss expected from the sale of the component.

The Management Discussion and Analysis section of the financial statements includes a perspective on which of the following? (Select all that apply.) Multiple select question. Operations Capital resources Liquidity Job costing Auditors' report

Operations Capital resources Liquidity

List all Long Term Assets

Property, plant and equipment identifiable intangible assets(net) goodwill deferred income and other assets

_____ costs include costs associated with shutdown or relocation of facilities. Multiple choice question. Closing Refunding Restructuring Moving

Restructuring

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

Restructuring costs costs associated with shutdown or relocation of facilities or downsizing of operations

Classifying items on the balance sheet as current and noncurrent assists financial statement users in assessing what aspects about a company?

Solvency and liquidity.

Short-term investments are sometimes called which of the following?

Temporary investments Short-term marketable securities

How are current liabilities satisfied? (Select all that apply.) Multiple select question. The use of current liabilities. The use of current assets. The creation of other current liabilities. The creation of other current assets.

The use of current assets. The creation of other current liabilities.

Why are inventories reported as current assets? Multiple choice question. They are directly related to revenues. They may become obsolete. They are matched with current liabilities. They are normally sold within the operating cycle.

They are normally sold within the operating cycle.

Which of the following describe long-term liabilities? (Select all that apply.) Multiple select question. They do not require the creation of current liabilities for payment. They require the creation of current liabilities for payment. They do not require the use of current assets. They require the use of current assets.

They do not require the creation of current liabilities for payment. They do not require the use of current assets.

What is the purpose of additional financial disclosures in an annual report? Multiple choice question. To explain management's strategies for the future. To assist in understanding the financial statements. To provide users with information regarding nonmaterial items. To describe the business plan of the firm.

To assist in understanding the financial statements.

What is the role of the auditor? Multiple choice question. To attest to the accuracy of information in the annual report. To attest to the accuracy of the financial statements. To attest to the solvency of the company. To attest to the fairness of the financial statements.

To attest to the fairness of the financial statements.

Is prepaid expenses on the balance sheet?

Yes

Other assets represents Multiple choice question. assets that are immaterial any asset other than cash or cash equivalents a catch-all category of noncurrent assets a catch-all category of current assets

a catch-all category of noncurrent assets

Which of the following items are reported as components of operating income for most manufacturing and merchandising companies? (Select all that apply.) Multiple select question. administrative expenses revenues selling expenses interest expense

administrative expenses revenues selling expenses

Zantron Corp. pays $100,000 for robotic equipment to be used in its production facility. Zantron should include this transaction as: an increase in inventory. equipment expense on the income statement. an increase in plant, property, and equipment.

an increase in plant, property, and equipment.

Which of the following financial statements shows a firm's financial position on a particular date?

balance sheet

Non-GAAP earnings are calculated Multiple choice question. based on assets that are expected to be converted to cash in the next operating cycle. based on statistical analysis of time series data. based on management's assumptions of permanent earnings. based on historical cost assumptions.

based on management's assumptions of permanent earnings. They calc. Non-GAAP by excluding certain expenses and sometimes certain revenues.

A company's assets minus its liabilities shown on the balance sheet is referred to as its ______ value.

book

Which of the following are noncurrent assets? (Select all that apply.) Multiple select question. inventory building land intangible assets

building land intangible assets

Money on hand and in banks that is available for use in the operations of the business is shown in the

cash

List of all current assets

cash and equalivalents short-term investments accounts receivable (net) inventory Prepaid expenses and other current assets

Which of the following items should be included in cash on the balance sheet? (Select all that apply.) Multiple select question. short-term investments cash on hand money orders cashier's checks

cash on hand money orders cashier's checks

Which of the following accounts represent amounts shareholders have invested in the company? (Select all that apply.) Multiple select question. common stock additional paid-in capital retained earnings accumulated other comprehensive income

common stock additional paid-in capital

How are accounts receivable classified on the balance sheet? Multiple choice question. current liability current asset noncurrent asset noncurrent liability

current asset

A ______ is satisfied within 1 year or the current operating cycle, whichever is longer. Multiple choice question. noncurrent liability noncurrent asset current liability current asset

current liability

List all current liabilities

current portion of longterm debt notes payable accounts payable accrued liabilities income taxes payable

Skylark has the following information in its financial statements: Cash 1,000 Accounts receivable 4,000 Short-term investments in trading securities 3,000 Inventory 2,000 Accounts payable 5,000 What is Skylark's current ratio?

current ratio= current assets/current liabilities 2.0 Reason: ($1,000 + 4,000 + 3,000 + 2,000)/$5,000

Which type of risk is the risk of a company not being able to pay its obligations when they come due? Multiple choice question. interest rate risk profitability risk default risk operational risk

default risk

List of other liabilites

deferred income taxes and other liabilities

Which of the following items are required disclosures in the notes to financial statements? (Select all that apply.) Multiple select question. description of subsequent events marketing strategies related third-party transactions significant accounting policies

description of subsequent events related third-party transactions significant accounting policies

The two sources of stockholders' equity are amounts ______. Multiple select question. borrowed from banks borrowed from related companies earned by the corporation paid in from shareholders

earned by the corporation paid in from shareholders

True or false: The times interest earned formula is net income divided by interest expense.

false Reason: The times interest earned formula is calculated as earnings before interest and taxes divided by interest expense.

Inventory for a wholesale or retail company includes which of the following? Multiple choice question. work in process raw materials finished goods

finished goods

Inventories include which of the following items? finished goods goods directly consumed in production goods in production all assets held for sale

finished goods goods directly consumed in production goods in production

What is the principle that requires that financial statements provide all material relevant information concerning the entity? Multiple choice question. full-disclosure realization going concern conservatism

full-disclosure

Which of the following items are included in property, plant, and equipment? (Select all that apply.) Multiple select question. inventory furniture mineral mines oil wells investments machines

furniture mineral mines oil wells machines

What items must be removed from continuing operations and reported separately for a discontinued operation? (Select all that apply.) Multiple select question. gains tax expense assets Revenues expenses liabilities

gains tax expense Revenues expenses

Operating Income

includes revenues and expenses, gain, and losses directly related to the primary revenue-generating activities of the company.

Which of the following items should be classified as investments on the balance sheet? (Select all that apply.) Multiple select question. investments in stock of another company accounts receivable from customers cash restricted to purchase building note receivable due in 3 years

investments in stock of another company cash restricted to purchase building note receivable due in 3 years

The criteria used to determine if a liability should be classified as long-term is Multiple choice question. it will not be satisfied within 12 months or the operating cycle, whichever is longer. it is due within 6 months. it is due within 3 months after year-end. it is due within 12 months or the current operating cycle, whichever is longer.

it will not be satisfied within 12 months or the operating cycle, whichever is longer.

Which of the following are noncurrent assets? (Select all that apply.) Multiple select question. inventory land building intangible assets

land building intangible assets

Which of the following items requires supplemental disclosures in the notes to the financial statements? (Select all that apply.) Multiple select question. leases long-term debt items that are immaterial pension plans

leases long-term debt pension plans

Common practice requires that current assets are presented on the balance sheet in the order of

liquidity

Which of the following are common characteristics of property, plant, and equipment? (Select all that apply.) Multiple select question. long-lived intangible tangible used within 1 year or the operating cycle, whichever is longer used in normal operations

long-lived tangible used in normal operations

Which of the following are noncurrent assets? (Select all that apply.) Multiple select question. inventory machines property accounts receivable investments with maturity of 18 months

machines property investments with maturity of 18 months

Responsibility for the financial statements and other information found in the annual report lies with...

management

U.S. GAAP uses a ___ approach to determine reportable operating segments.

management

Income smoothing describes the concept that Multiple choice question. managers manipulate the pattern of income to not vary much between years. income is not reported until approved by the board of directors. income is averaged over a 10-year moving average.

managers manipulate the pattern of income to not vary much between years.

A _____ firm will include finished goods, work in process, and raw materials as part of their inventory. Multiple choice question. service wholesale manufacturing retail

manufacturing

Assets minus liabilities, measured according to GAAP, is not likely to be representative of the __ value of the entity.

market

Discontinued operations should be reported on the income statement Multiple choice question. net of tax below income from continuing operations. net of tax in operating income. pre-tax before income from continuing operations. pre-tax with other income and other loss in operating income.

net of tax below income from continuing operations.

Rice Company purchases a building for $500,000, which will be used as a production facility. How should the building be classified on the balance sheet?

noncurrent asset

Which of the following is included with the annual report to help evaluate a firm's financial performance and financial health? Multiple choice question. press releases note disclosures proxy statements marketing data

note disclosures

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

The accounts common stock and paid-in capital in excess of par are classified as Multiple choice question. treasury stock. contra equity accounts. other comprehensive income. paid-in capital.

paid-in capital

Shareholders' equity is composed of which of the following accounts? (Select all that apply.) Multiple select question. long-term liabilities deferred revenues paid-in capital retained earnings

paid-in capital retained earnings

Which document is required to provide information on executive and director compensation? Multiple choice question. income statement proxy statement balance sheet tax return

proxy statement

A ratio used to measure liquidity is the Multiple choice question. debt to equity ratio. quick ratio. price to earnings. earnings per share ratio.

quick ratio. quick assets/current liabilities

A manufacturing firm will use which of the following accounts to record inventory? (Select all that apply.) Multiple select question. sales returns and allowances short-term investments raw material work in process finished goods

raw material work in process finished goods

Which of the following items are included in calculating operating income? (Select all that apply.) Multiple select question. expenses related to peripheral activities revenues related to peripheral activities revenues related to primary revenue-generating activities expenses related to primary revenue-generating activities

revenues related to primary revenue-generating activities expenses related to primary revenue-generating activities

The FASB requires that companies that engage in more than one significant business must provide supplemental information concerning individual operating__

segment

Companies that operate in more than one significant business must provide which of the following? Multiple choice question. multiple financial statements notes to financial statements subsidiary financial statements segment information

segment information

Analyzing earnings quality requires an analyst to Multiple choice question. separate a company's temporary and permanent earnings. determine whether the auditor was correct in calculating earnings. score a company based on its historical earnings. combine all earnings for analysis.

separate a company's temporary and permanent earnings. temporary earnings arise from transactions or events that are unlikely to happen again or have a different impact on earning later. permernant earnings arise from operations that are expected to generate similar profits in the future.

If a company has a large amount of long-term debt in its capital structure, this will affect the firm's ______. Multiple choice question. liquidity working capital solvency

solvency

SEC requirements provide for disclosures on executive and director compensation, particularly concerning___ options

stock

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

Earnings quality refers to Multiple choice question. the strength of the regression model used to analyze earnings. the ability of reported earnings to predict future earnings. the historical earnings of the company. the earnings score assigned by a financial analyst.

the ability of reported earnings to predict future earnings.

Paid in Capital

the amount stockholders have invested in the company. Often arises when the company issues stock

A summary of significant accounting policies includes information regarding Multiple choice question. the choice of accounting policies. the calculation of specific items. management's intentions in the future. achievement of performance targets.

the choice of accounting policies.

Gains and losses from the sale of investments can affect earnings quality because Multiple choice question. they are often recurring. they are often nonrecurring. the gains were included in revenues. they are netted against cost of goods sold.

they are often nonrecurring.

The _____ ratio is calculated as (net income + interest expense + income taxes) divided by interest expense. Multiple choice question. current working capital times interest earned debt to equity

times interest earned

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. This flexibility has resulted in variety of income statement presentations. There is the single- step and multiple- step formats that are the two extremes, with most income statements falling somewhere in between.

A customer pays in advance for services to be performed in a future period. In which account should the transaction be recorded? Multiple choice question. accounts payable unearned revenues notes payable accounts receivable

unearned revenues

Which of the following are accrued liabilities? (Select all that apply.) Multiple select question. utilities payable bonds payable taxes payable notes payable

utilities payable taxes payable

A liability is classified as current if it is due Multiple choice question. within 6 months of the close of the current year. within 1 year or the current operating cycle, whichever is shorter. within 3 months after the fiscal year-end. within 1 year or the current operating cycle, whichever is longer.

within 1 year or the current operating cycle, whichever is longer.