ACCT 321
if plant assets of a manufacturing company are sold at a gain of 1,800,000 with related taxes of 540,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose these effects as
A gain of 1,800,000 and an increase in income tax expense of 540,000
Which of the following pronouncements were issued by the Accounting Principles Board?
APB Opinions
Which of the following is not a major challenge facing the accounting profession?
Accounting for hard assets
Which of the following publications is not considered a GAAP document?
Accounting research studies issued by the AICPA
Stine Corp.'s trial balance reflected the following account balances at December 31, 2017: Accounts receivable (net) $38,000 Trading securities 12,000 Accumulated depreciation on equipment and furniture 30,000 Cash 31,000 Inventory 6,000 Equipment 50,000 Patent 8,000 Prepaid expenses 4,000 Land held for future business site 36,000 In Stine's December 31, 2017 balance sheet, the current assets total is
Accounts Receivable Trading Securities Cash Inventory Prepaid Expenses 92,000
Which of the following generally provides a better indication of an enterprise's present and continuing ability to generate favorable cash flows?
Accrual basis accounting
Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2017, included the following expense accounts: Accounting and legal fees $420,000 Advertising 360,000 Freight-out 225,000 Interest 180,000 Loss on sale of long-term investments 90,000 Officers' salaries 540,000 Rent for office space 540,000 Sales salaries and commissions 405,000 One-half of the rented premises is occupied by the sales department. How much of the expenses listed above should be included in Perry's general and administrative expenses for 2017?
Advertising Freight Out Rent for office space Sales salaries and commissions 1,260,000
Balance sheet information is useful for all of the following except to
Analyze cash inflows and outflows for the period
When a company transfers an amount of restricted retained earnings into a different account, that account is titled
Appropriated Retained Earnings.
A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to:
Beginning retained earnings of the earliest period presented.
Barger Enterprises has an unusual loss of $300,000, an infrequent gain of $700,000, and a tax rate of 30%. At what amount should Barger report each item?
Both the gain and the loss should be reported in Income before income taxes, at their gross amounts.
How does accounting help the capital allocation process attract investment capital?
By providing timely, relevant information
Financial information that is better provided, or can only be provided, by means of financial reporting other than formal financial statements include all of the following except:
Cash Flow information
The correct order to present current assets is
Cash, accounts receivable, inventories, prepaid items.
Companies are required to highlight certain items in the financial statements so that users can better determine the long-run earning power of the company. Which of the following is not one of those items? Unusual gains and losses Noncontrolling assets Changes in accounting principle Discontinued
Changes in accounting principle
Which of the following is true of accounting for changes in estimates?
Changes in estimates are not carried back to adjust prior years
Which of the following is not an acceptable way of displaying the components of other comprehensive income?
Combined statement of retained earnings
Balance Sheet Assets
Current Assets Long-Term Investments Property, plant, and equipment Intangible assets Other assets
Balance Sheet Liabilities and Owners Equity
Current Liabilities Long-term debt Owners (stockholders) equity
Which of the following is an intangible asset?
Customer lists
The mission of the International Accounting Standards Board is to
Develop a single set of high-quality and understandable IFRS for general-purpose financial statements.
The organization whose purpose is to reach consensus on how to account for new and unusual financial transactions that have potential for creating differing financial reporting practices is the:
EITF The Emerging Issues Task Force
Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?
Earnings per share from continuing operations, discontinued operations and net income should be disclosed on the face of the income statement
Which of the following is not a user of financial reports?
Employees
Which group selects members of the FASB?
FAF (Financial Accounting Foundation)
General purpose financial statements are a product of
Financial accounting
Which of the following occur from peripheral or incidental transactions?
Gain on the sale of equipment
International Financial Reporting Standards (IFRS) are issued by the
IASB The International Accounting Standards Board
Which of the following is not considered an unusual or infrequent item on the income statement? Income Tax Expense Gain on sale property Discontinued operations Loss on condemnation
Income Tax Expense
Per share of common stock
Income from continuing operations = Income from continuing operation/share of common stock Discontinued Operations item, net of tax = Discontinued operations loss net of applicable taxes of (30% of the number)/ share of common stock Net income
Noncontrolling asset
Is reported as a separate item below net income or loss
Which of the following is an advantage of the single step income statement over the multi step income statement?
It does not imply that one type of revenue or expense has priority over another
Which of the following is not true about the information provided in the income statement?
It helps in evaluating working capital
Which of the following would result if there was not set of generally accepted and universally practiced accounting standards?
It would be almost impossible to prepare statements that could be prepared. Each company would have to develop its own standards. Readers of financial statements would have to familiarize themselves with every company;s peculiar accounting and reporting practices
Which of the following is not a significant difference between the FASB and its predecessor, the APB?
Larger membership
The balance sheet is useful for analyzing
Liquidity Solvency Financial Flexibility
The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations is called
Managerial Accounting
Earnings per share
Net income minus preferred dividends is divided by the weighted average of common shares outstanding to compute earnings per share
Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles?
On the face of the income statement
All of the following are ways in which accounting information is used by financial accounting except to
Plan and control company's operations.
What is the purpose of Emerging Issues Task Force?
Provide implementation guidance within the Codification framework to reduce diversity in practice on a timely basis.
What is the objective of financial reporting?
Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.
Which of the following pairings of an item and a basis of valuation is incorrect Prepaid expenses — Cost. Cash — Fair value. Short-term investments — Fair value. Receivables — Lower-of-cost-or-market.
Receivables — Lower-of-cost-or-market.
The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the
SEC
Which of the following was established by the federal government to help develop and standardize financial information presented to stockholders?
SEC
Prepare a multi-step income statement
Sales Revenue Cost of goods sold gross profit selling and administrative expenses income from operations other revenue other expenses income before income taxes income taxes income from continuing operations Discontinued operations loss net of applicable taxes of (30% of the number) Net Income
What would ortiz report as total revenues in a single-step income statement?
Sales Revenue+ Dividend Revenue+ Rent Revenue+ Sales Returns and Allow-
Gross Profit
Sales revenue - cost of goods sold
How should an unusual and infrequent event be disclosed in the financial statements?
Shown as a separate item after income from operations before income taxes if material and supplemented by a footnote if deemed appropriate
Which of the following statements shows the amount of cash used to pay dividends or purchase treasury stock?
Statement of stockholders' equity.
Which organization was responsible for issuing Accounting Research Bulletins?
The Committee on Accounting Procedure
What is the relationship between the Securities and Exchange Commission and accounting standard setting in the US?
The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction
The first step taken in the establishment of a typical FASB statement is:
The topics are identified and placed on the board's agenda.
Other assets include all of the following except: Restricted cash. Timberlands. Property held for sale. Assets in special funds.
Timberlands
The ________ approach focuses on the income-related activities that have occurred during the period
Transaction
A company with a ________ is better able to survive bad times, to recover from unexpected setbacks, and to take advantage of profitable and unexpected investment opportunities
a high degree of financial flexibility.
Prior period adjustments are reported as
an addition to (or a deduction from) the beginning balance of retained earnings.
When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as
an amount after continuing operations
The objective of general purpose financial reporting adopts an entity perspective, which means that
companies are viewed as separate and distinct from their owners
The income statement can be used to assess
creditworthiness
The Purpose of Statements of Financial Accounting Concepts is to
form a conceptual framework for solving existing and emerging problems.
Generally accepted accounting principles
include detailed practices and procedures as well as broad guidelines of general application, are influenced by pronouncements of the SEC and IRS, and change over time as the nature of the business environment changes
Earnings per share should always be shown separately for
income from continuing operations
Gains and losses that bypass net income but affect stockholders' equity are referred to as
other comprehensive income.
An effective capital allocation process
promotes productivity, encourages innovation, provides an efficient market for buying and selling securities
The statement of stockholders' equity
reports the change in each stockholders' equity account and in total equity for the period.
The major elements of the income statement are
revenues, expenses, gains, and losses
The income statement provides investors and creditors with information to predict all of the following except
sources of future cash flows Right answers: Amount of cash flows timing of future cash flows uncertainty of future cash flows
All of the following are true regarding the FASB Codification except:
the purpose of the Codification is to create new GAAP.
