Module 4
What is the Form 10-Q filing deadline for Accelerated Filers?
40 days after quarter end
What is the Form 10-Q filing deadline for Large Accelerated Filers?
40 days after quarter end
What is the Form 10-Q filing deadline for Non-Accelerated Filers?
45 days after quarter end
What is the Form 10-K filing deadline for Large Accelerated Filers?
60 days after year end
What is the Form 10-K filing deadline for Accelerated Filers?
75 days after year end
What is the Form 10-K filing deadline for Non-Accelerated Filers?
90 days after year end
An inventory loss from a market price decline occurred in the first quarter, and the decline was not expected to reverse during the fiscal year. However, in the third quarter, the inventory's market price recovery exceeded the market decline that occurred in the first quarter. For interim financial reporting, the dollar amount of net inventory should: A. Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the decrease in the first quarter. B. Decrease in the first quarter by the amount of the market price decline and increase in the third quarter by the amount of the market price recovery. C. Decrease in the first quarter by the amount of the market price decline and not be affected in the third quarter. D. Not be affected in either the first quarter or the third quarter.
A
If everything else is held constant, earnings per share is increased by: A. Purchase of treasury stock. B. Issuance of new shares of common stock. C. Payment of a cash dividend to common stockholders. D. Payment of a cash dividend to both preferred and common stockholders.
A
Opto Co. is a publicly traded, consolidated enterprise reporting segment information. Which of the following items is a required enterprise-wide disclosure regarding external customers? A. The fact that transactions with a particular external customer constitute more than 10% of the total enterprise revenues B. The identity of any external customer providing 10% or more of a particular operating segment's revenue C. The identity of any external customer considered to be "major" by management D. Information on major customers is not required in segment reporting.
A
The SEC is comprised of five commissioners, appointed by the President of the United States, and five divisions. Which of the following divisions is responsible for overseeing compliance with the securities acts? A. Division of Corporate Finance. B. Division of Enforcement. C. Division of Trading and Markets. D. Division of Investment Management.
A
What information should a public company present about revenues from foreign operations? A. Disclose separately the amount of sales to unaffiliated customers and the amount of intracompany sales between geographical areas. B. Disclose as a combined amount sales to unaffiliated customers and intracompany sales between geographical areas. C. Disclose separately the amount of sales to unaffiliated customers but not the amount of intracompany sales between geographical areas. D. No disclosure of revenues from foreign operations needs to be reported.
A
Which of the following is not a required component of the 10-K filing? A. Product market share. B. Description of the business. C. Market price of common stock. D. Executive compensation.
A
Which of the following reports would a company file to meet the U.S. Securities and Exchange Commission's requirements for unaudited, interim financial statements reviewed by an independent accountant? A. Form 10-Q B. Form 10-K C. 14A Proxy Statement D. Form S-1
A
A company reported net income available to common stockholders of $2,000,000 for the year ended December 31, year 2. The company had 1,500,000 shares of common stock outstanding as of January 1, year 2, and issued 500,000 additional shares of common stock on May 1, year 2. What amount is the company's basic earnings per share for the year ended December 31, year 2? A. $1.00 B. $1.09 C. $1.20 D. $1.33
B
A private company decided to adopt one of the standards issued by the Private Company Council. What are the requirements upon adoption of the PCC standard? A. Apply the new standard on a retrospective basis. B. Apply the new standard on a prospective basis. C. Assess whether application of the new standard is preferable and apply on a retrospective basis. D. Assess whether application of the new standard is preferable and apply on a prospective basis.
B
A public entity sells steel for use in construction. One of its customer's accounts for 43% of sales, and another customer accounts for 40% of sales. What should the entity disclose in its annual financial statements about these two customers? A. The payment terms of accounts receivable due from each of the two customers. B. The amount of the entity's revenue from each of the two customers. C. The names of the two customers. D. The financial condition of the two customers.
B
Balm Co. had 100,000 shares of common stock outstanding as of January 1. The following events occurred during the year: 4/1 Issued 30,000 shares of common stock. 6/1 Issued 36,000 shares of common stock. 7/1 Declared a 5% stock dividend. 9/1 Purchased as treasury stock 35,000 shares of its common stock. Balm used the cost method to account for the treasury stock. What is Balm's weighted average of common stock outstanding at December 31? A. 131,000 B. 139,008 C. 150,675 D. 162,342
B
Even though the SEC delegates the creation of accounting standards to the private sector, the SEC frequently comments on accounting and auditing issues. The main pronouncements published by the SEC are: A. Federal Reporting Updates (FRU). B. Financial Reporting Releases (FRR). C. Staff Auditing Bulletins (SAB). D. Accounting Principles Opinions (APO).
B
On June 30, 20X5, Mill Corp. incurred a $100,000 net loss from disposal of a business segment. Also, on June 30, 20X5, Mill paid $40,000 for property taxes assessed for the calendar year 20X5. What amount of the foregoing items should be included in the determination of Mill's net income or loss for the six-month interim period ended June 30, 20X5? A. $140,000 B. $120,000 C. $90,000 D. $70,000
B
The Private Company Council has issued modified accounting for private companies for what aspect of Goodwill? A. Goodwill impairment testing. B. Goodwill amortization. C. Goodwill measurement. D. Goodwill reporting.
B
The SEC enforces the corporate registration requirements of the Securities Act of 1933 as one of its principal objectives. These requirements are intended to provide information that enables the SEC to: A. Evaluate the financial merits of the corporation offering the securities to the public. B. Ensure that investors are provided with adequate information on which to base investment decisions. C. Guarantee that the facts contained in the registration statement are accurate. D. Assure investors of the accuracy of the financial statements.
B
Which of the following is required by Regulation S-K to be included in the Management's Discussion and Analysis (MD&A) that is part of the 10-K? A. The Balance Sheet. B. Discussion of risks and uncertainties. C. Accounting fees and services. D. Executive compensation.
B
Which of the following types of entities are required to report on business segments? A. Nonpublic business enterprises B. Publicly traded enterprises C. Not-for-profit enterprises D. Joint ventures
B
Yellow Co. received a large worker's compensation claim of $90,000 in the third quarter for an injury occurring in the third quarter. How should Yellow account for the transaction in its interim financial report? A. Recognize $30,000 for each of the first three quarters. B. Recognize $90,000 in the third quarter. C. Recognize $22,500 ratably over the four quarters of the year. D. Disclose the $90,000 in the third quarter and recognize it at year end.
B
ASC 270, Interim Reporting, concluded that interim financial reporting should be viewed primarily in which of the following ways? A. As useful only if activity is spread evenly throughout the year. B. As if the interim period were an annual accounting period. C. As reporting for an integral part of an annual period. D. As reporting under a comprehensive basis of accounting other than GAAP.
C
Alco, Inc., a small manufacturing company, prepares its financial statements using its income tax basis of accounting. In December, 2012, it determined that an error had been made in the amount of rent expense reported in its 2011 tax return. How should Alco account for the amount of the rental expense error in its 2012 financial statements? A. As an adjustment to 2012 rental income. B. As an income tax expense in 2012. C. As a prior period adjustment. D. No reporting in 2012 required.
C
Bard Co., a calendar-year corporation, reported income before income tax expense of $10,000 and income tax expense of $1,500 in its interim income statement for the first quarter of the year. Bard had income before income tax expense of $20,000 for the second quarter and an estimated effective annual rate of 25%. What amount should Bard report as income tax expense in its interim income statement for the second quarter? A. $3,500 B. $5,000 C. $6,000 D. $7,500
C
Chape Co. had the following information related to common and preferred shares during the year: Common shares outstanding, 1/1 700,000 Common shares repurchased, 3/31 20,000 Conversion of preferred shares, 6/30 40,000 Common shares repurchased, 12/1 36,000 Chape reported net income of $2,000,000 at December 31. What amount of shares should Chape use as the denominator in the computation of basic earnings per share? A. 684,000 B. 700,000 C. 702,000 D. 740,000
C
For which of the following income statement sections is earnings per share calculated? A. Sales. B. Gross profit. C. Income before discontinued operations. D. Dividends paid to common shareholders.
C
How are discontinued operations that occur at midyear initially reported? A. Disclosed only in the notes to the year-end financial statements. B. Included in net income and disclosed in the notes to the year-end financial statements. C. Included in net income and disclosed in the notes to interim financial statements. D. Disclosed only in the notes to interim financial statements.
C
LM Company has net income of $130,000, weighted average shares of common stock outstanding of 50,000, and preferred dividends for the period of $20,000. What is LM's earnings per share of common stock? A. $2.60 B. $2.50 C. $2.20 D. $0.40
C
On March 15, 20X4, Krol Co. paid property taxes of $90,000 on its office building for the calendar year 20X4. On April 1, 20X4, Krol paid $150,000 for unanticipated repairs to its office equipment. The repairs will benefit operations for the remainder of 20X4. What is the total amount of these expenses that Krol should include in its quarterly income statement for the three months ended June 30, 20X4? A. $172,500 B. $97,500 C. $72,500 D. $37,500
C
Which of the following statements, if any, concerning the modified cash basis of accounting is/are correct? I. The modified cash basis of accounting employs some elements of accrual accounting. II. To be acceptable, modifications to the cash basis of accounting must have substantial support in practice. A. I only. B. II only. C. Both I and II. D. Neither I nor II.
C
Which one of the following is not an "other comprehensive basis of accounting"? A. Pure cash basis. B. Modified cash basis. C. Pure accrual basis. D. Income tax basis.
C
Other basis of accounting (not accrual) that is based solely on cash receipts and cash disbursements; revenues are recognized only when cash is received, expenses are only recognized when cash is disbursed
Cash basis of accounting
What are the 5 divisions of the SEC?
Corporate finance, enforcement, trading and markets, investment management, and economic and risk analysis
An inventory loss from a permanent market decline of $360,000 occurred in May Year 1. Cox Co. appropriately recorded this loss in May Year 1 after its March 31, Year 1, quarterly report was issued. What amount of inventory loss should be reported in Cox's quarterly income statement for the three months ended June 30, Year 1? A. $0 B. $90,000 C. $180,000 D. $360,000
D
Due to a decline in market price in the second quarter, Petal Co. incurred an inventory loss. The market price is expected to return to previous levels by the end of the year. At the end of the year, the decline had not reversed. When should the loss be reported in Petal's interim income statements? A. Ratably over the second, third, and fourth quarters. B. Ratably over the third and fourth quarters. C. In the second quarter only. D. In the fourth quarter only.
D
Grum Corp., a publicly owned corporation, is subject to the requirements for segment reporting. In its income statement for the year ending December 31, 2004, Grum reported revenues of $50,000,000, operating expenses of $47,000,000, and net income of $3,000,000. Operating expenses include payroll costs of $15,000,000. Grum's combined identifiable assets of all industry segments at December 31, 2004 were $40,000,000. In its 2004 financial statements, Grum should disclose major customer data if sales to any single customer amount to at least: A. $300,000. B. $1,500,000. C. $4,000,000. D. $5,000,000.
D
On January 16, Tree Co. paid $60,000 in property taxes on its factory for the current calendar year. On April 2, Tree paid $240,000 for unanticipated major repairs to its factory equipment. The repairs will benefit operations for the remainder of the calendar year. What amount of these expenses should Tree include in its third quarter interim financial statements for the three months ended September 30? A. $0 B. $15,000 C. $75,000 D. $95,000
D
Why do preferred stock dividends appear in the calculation of earnings per share (EPS)? A. Preferred stock may be converted into common stock at the option of the shareholder. B. Preferred stock dividends are not included in the calculation of EPS unless they have been outstanding for the entire year. C. The denominator includes the weighted average number of shares of both preferred and common shares outstanding. D. Preferred stock dividends are subtracted from the earnings for the period in the calculation of earnings per share.
D
EPS ratio that includes securities that may become common stock in the future, in addition to actual common stock
Diluted EPS
Name for SEC's database that stores all financial statement information of publicly traded companies
EDGAR
True or False: Interim periods are reported as if they were separate periods so that investors can understand the events in those periods alone
False
True or False: Loss on equipment disposal is allocated to more than one interim period
False
True or False: The cash basis of accounting will always result in greater revenue than the accrual basis of accounting
False
True or False: All firms must report BEPS and DEPS
False (only public companies are required)
Name the annual filing report for audited financial statements
Form 10-K
Name the quarterly filing report that is reviewed but not audited by an auditor
Form 10-Q
Name the filing report for when a significant event has happened to an entity and the entity must disclose the information of the significant event to the public
Form 8-K
Name the form that is the registration form for new securities looking for an IPO
Form S-1
What method of computing Diluted EPS is used for convertible preferred stock and bonds?
If Converted Method
Other basis of accounting (not accrual) that states: income is recognized in the period it is taxable, expenses are recognized in the period they are deductible
Income tax basis of accounting
How is a "non-accelerated filer" determined in terms of market value?
Market value < $75 million
How is a "large accelerated filer" determined in terms of market value?
Market value > $700 million
How is an "accelerated filer" determined in terms of market value?
Market value > $75 million and < $700 million
Other basis of accounting (not accrual) that is based on a combination of cash basis and accrual basis accounting
Modified cash basis of accounting
What is the formula for Basic EPS?
Net income - preferred stock dividends / weighted average of common stock outstanding
Advisory body that identifies alternative GAAP for private companies to save them time and money
Private Company Council (PCC)
Term for an entity that is required to file or furnish financial statements with the SEC
Public Business Entity
SEC governing regulation that governs the form, content, and disclosures of financial statements
Regulation S-X
SEC governing regulation that governs the form and content of nonfinancial statement disclosures
Regulations S-K
Law imposed by congress that applies to the IPO process of securities
Securities Act of 1933
Law imposed by congress that applies to reporting information about securities that already are issued for the use of financial statement users
Securities Act of 1934
What method of computing Diluted EPS is used for stock options and warrants?
Treasury Stock Method
True or False: Amounts reported in income tax-based financial statements are subject to change as a result of IRS examination and determination
True
True or False: Cost accounting variances are recognized in full in the interim period if they will not be absorbed later in the year, whether they are favorable or unfavorable
True
True or False: Financial Reporting Releases are the formal pronouncements issued by the SEC that must be adhered to by public companies
True
True or False: For the second quarter report, a cumulative effects of accounting principle changes are reported in the quarter during which the change is made
True
True or False: If a private entity elects to not recognize customer contract and customer relationship intangibles associated with a business combination, it must also elect to amortize goodwill over a period not to exceed 10 years
True
True or False: In a pure cash basis of accounting, revenue will be recognized only when cash is received
True
True or False: In a pure cash basis of accounting, the only asset a balance sheet would report would be cash
True
True or False: Interim revenues/expenses that benefit more than one interim period are allocated to those interim periods that benefit
True
True or False: Non-public business entities may prepare financial statements based on a basis of accounting other than standard U.S. GAAP
True
True or False: Sales are $100,000 in quarter 3. The gross margin percentage is 40%. 60,000 of cost of goods sold should be recognized in quarter 3
True
True or False: The Securities and Exchange Commission (SEC) has the legal authority to prescribe accounting standards, but has delegated standard setting to the FASB
True
True or False: The accounting for goodwill by a private company allows for goodwill to be amortized over a period not to exceed 10 years
True
True or False: Under IFRS, EPS must be shown for continuing operations, discontinued operations, and net income
True
True or False: Under IFRS, the dilution potential of EPS is determined independently each reporting period
True
What is the Form 8-K filing deadline for all filers?
Within 4 business days of the significant event
