Question 1

All of the following are typically recognized as accounting liabilities except:

Accepted Answer

A)  Notes Payable 
B)  Warranties Payable 
C)  Purchase Commitments 
D)  Subscription Fees Received in Advance 
A)  Notes Payable 
B)  Warranties Payable 
C)  Purchase Commitments 
D)  Subscription Fees Received in Advance

Question 2

Which of the following is not one of the three criteria for recognition of a liability?

Accepted Answer

A)  The obligation involves a probable future sacrifice of resources at a specified or determinable date. 
B)  The firm is required to make a cash payment for the goods or services. 
C)  The firm has little or no discretion to avoid the transfer. 
D)  The transaction or event giving rise to the liability has already occurred. 
A)  The obligation involves a probable future sacrifice of resources at a specified or determinable date. 
B)  The firm is required to make a cash payment for the goods or services. 
C)  The firm has little or no discretion to avoid the transfer. 
D)  The transaction or event giving rise to the liability has already occurred.

Question 3

Which of the following is the date on which the dividend distribution occurs?

Accepted Answer

A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment 
A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment

Question 4

Which kind of dividend is a return of the original investment by shareholders?

Accepted Answer

A)  cash dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend 
A)  cash dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend

Question 5

Which kind of dividends typically pay dividends with additional shares of the corporation's stock?

Accepted Answer

A)  property dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend 
A)  property dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend

Question 6

Under the fair value method of accounting for stock options, firms must value stock options on the date of ____________________.

Accepted Answer

The answer of Under the fair value method of accounting...

Question 7

In some countries the account Reserve for Contingencies may be most comparable to which of the following accounts for a company reporting under U.S. GAAP?

Accepted Answer

A)  Contingency Expense 
B)  Retained Earnings Appropriated for Contingencies 
C)  Unearned Contingency Fees 
D)  Contingency Losses 
A)  Contingency Expense 
B)  Retained Earnings Appropriated for Contingencies 
C)  Unearned Contingency Fees 
D)  Contingency Losses

Question 8

Discuss the method of accounting for employee stock options. In your answer discuss the how the accounting has changed during recent years.

Accepted Answer

The FASB requires the fair value method

Question 9

All of the following are criteria that financial reporting requires before recognizing an obligation as a liability except:

Accepted Answer

A)  The transaction or event that gave rise to the obligation has already occurred. 
B)  The firm has a present obligation and little or no discretion to avoid the transfer. 
C)  The firm must know the precise amount of the obligation before recording it. 
D)  The obligation involves a probable future sacrifice of economic benefits-a future transfer of cash, goods, or services; the forgoing of a future cash receipt; or the transfer of equity shares-at a specified or determinable date. The firm can measure with reasonable precision the cash-equivalent value of the resources needed to satisfy the obligation. 
A)  The transaction or event that gave rise to the obligation has already occurred. 
B)  The firm has a present obligation and little or no discretion to avoid the transfer. 
C)  The firm must know the precise amount of the obligation before recording it. 
D)  The obligation involves a probable future sacrifice of economic benefits-a future transfer of cash, goods, or services; the forgoing of a future cash receipt; or the transfer of equity shares-at a specified or determinable date. The firm can measure with reasonable precision the cash-equivalent value of the resources needed to satisfy the obligation.

Question 10

Which of the following is the date on which a company incurs a legal liability to distribute the dividend to owners of the stock?

Accepted Answer

A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment 
A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment

Question 11

Financial reporting requires that firms recognize product financing arrangements as liabilities if which of the following conditions is met?

Accepted Answer

A)  The arrangement requires the sponsoring firm to purchase the inventory, substantially identical inventory, or processed goods of which the inventory is a component at specified prices. 
B)  The selling or sponsoring firm physically controls the inventory. 
C)  The payments made to the other entity cover all acquisition, holding, and financing costs. 
D)  Both A and C are correct. 
A)  The arrangement requires the sponsoring firm to purchase the inventory, substantially identical inventory, or processed goods of which the inventory is a component at specified prices. 
B)  The selling or sponsoring firm physically controls the inventory. 
C)  The payments made to the other entity cover all acquisition, holding, and financing costs. 
D)  Both A and C are correct.

Question 12

Which of the following is an acceptable method of accounting for employee stock options?

Accepted Answer

A)  prospective method 
B)  fair value method 
C)  intrinsic method 
D)  historical value method 
A)  prospective method 
B)  fair value method 
C)  intrinsic method 
D)  historical value method

Question 13

All of the following are the general principles underlying the valuation of liabilities except:

Accepted Answer

A)  Liabilities requiring future cash payments appear at the present value of the required future cash flows discounted at an interest rate that reflects the uncertainty that the firm will be able to make the cash payments. 
B)  The fair value of a liability cannot differ from the amount appearing on the balance sheet, particularly for long-term debt. 
C)  Liabilities representing cash advances from customers appear at the amount of the cash advance. 
D)  Liabilities requiring the future delivery of goods or services appear at the estimated cost of those goods and services. 
A)  Liabilities requiring future cash payments appear at the present value of the required future cash flows discounted at an interest rate that reflects the uncertainty that the firm will be able to make the cash payments. 
B)  The fair value of a liability cannot differ from the amount appearing on the balance sheet, particularly for long-term debt. 
C)  Liabilities representing cash advances from customers appear at the amount of the cash advance. 
D)  Liabilities requiring the future delivery of goods or services appear at the estimated cost of those goods and services.

Question 14

Liabilities requiring the future delivery of goods or services appear on the balance sheet at the ______________________________ of those goods and services.

Accepted Answer

The answer of Liabilities requiring the future delivery of goods...

Question 15

Regarding accounting for troubled debt, which of the following statements is true?

Accepted Answer

A)  The treatment for troubled debt is the same under both U.S. GAAP and IFRS. 
B)  The settlement of troubled debt results in an economic loss to the debtor because the creditor accepts more than the book value of the debt to settle the debt. 
C)  U.S. GAAP uses a "10 percent rule" to determine whether a gain is recognized by the debtor in a troubled debt situation. 
D)  Because IFRS uses the present value approach to determine the magnitude of the settlement for troubled debt, the magnitude of the new book value of the restructured debt will be lower and the gain recognition will be larger under IFRS. 
A)  The treatment for troubled debt is the same under both U.S. GAAP and IFRS. 
B)  The settlement of troubled debt results in an economic loss to the debtor because the creditor accepts more than the book value of the debt to settle the debt. 
C)  U.S. GAAP uses a "10 percent rule" to determine whether a gain is recognized by the debtor in a troubled debt situation. 
D)  Because IFRS uses the present value approach to determine the magnitude of the settlement for troubled debt, the magnitude of the new book value of the restructured debt will be lower and the gain recognition will be larger under IFRS.

Question 16

A. Listed below are 12 accounting liabilities.
 1. Rental fees received in ack ance
2. Interest Payable
3. Unsettled lawsuitswhere no estimate of loss can be made
4. Accounts payable
5. Warranties payable
6. Bonds payable
7. Subscription feesreceived in advance
8. Taxes payable
9. Employment commitments
10. Notes payable
11. Purchase commitments
12. Salaries payable
 Place the accounting liabilities in one of the following six categories:
 a. Obligationswith fixed payment dates and amounts
b. Obligationswith fixed payment amounts but estimated payment dates
c. Obligations for which the firm must estimate both timing and amount of payment
d. Obligations arising from advances from customers on unexecuted contracts and agreements
e. Obligations under mutually executed contracts
f. Contingent obligations
 
B. In addition, determine which of the liabilities would be recognized on the balance sheet as liabilities and which would not be recognized.
Suggestion: format your answer as follows (this is not a correct sample answer):
a. Obligations with fixed payment dates and amounts (not generally recognized):
1. Rental fees received in advance.

Accepted Answer

a. Obligations with fixed payment dates

Question 17

One criteria that must be satisfied for a firm to recognize an obligation is that the transaction or event giving rise to the obligation has already ____________________.

Accepted Answer

The answer of One criteria that must be satisfied for...

Question 18

Santa Corporation 
NOTE: These multiple choice questions require present value information.
Santa Corporation manufactures Christmas decorations and supplies throughout the world. The company owns property, plant, and equipment and also enters into operating leases for certain facilities. Assume that Santa's incremental borrowing rate is 8%. The company's tax rate is 40%. Listed below is selected financial data for Santa and a portion of the company's operating lease footnote.
$\begin{array}{llll}
&\underline{2012}&\underline{2011}&\underline{2010}\
\text { Property, Plant, \& Equipment (net) } &\$882,468&\$717,453&\$658,214 \
\text { Total Assets } &1,756,854 & \$ 1,405,484 & 1,254,896 \
\text { Common Shareholders'Equity } & 867,992&652,626&587,951  \
 &  \
\text { Sales } & \$ 2,922,915 & \$ 2,415,632 \
\text { Cost of GoodsSold } & 2,016,811 & 1,642,630 \
\text { Depreciation Expense } & 78,584 & 67,542 \
\text { Interest Expense } & 106,663 & 90,343 \
\text { Net Income } & 248,448 & 217,407
\end{array}$
 $\begin{array}{|l|l|}
\hline & \text { Sant Corp. } \
\hline & \text { Operating Lease Disclosure } \
\hline & \text { (amounts in thousands) } \
\hline & \
\hline & \text { Operating Lease Commitments } \
\hline & \text { at the end of } 2012 \
\hline & \
\hline & \
\hline \text { Year} & \text { Reported Lease Commitments } \
\hline 2013& \$ 148,239 \
\hline 2014  & \$ 252,800 \
\hline2015 & \$ 278,327 \
\hline  2016 & \$ 279,210 \
\hline 2017& \$ 285,452 \
\hline\text { Beyond } 2017  & \$ 2,471,600 \
\hline  
\end{array}$
-
 Using the information provided by Santa Corporation estimate the average life of the operating leases.

Accepted Answer

A)  8.66 years 
B)  13.66 years 
C)  10 years 
D)  Not able to determine 
A)  8.66 years 
B)  13.66 years 
C)  10 years 
D)  Not able to determine

Question 19

All of the following are primary events that typically lead to changes in book value of shareholders' equity except:

Accepted Answer

A)  Investments by shareholders, usually net cash received by the company at equity issue date. 
B)  Profitable operating and investing activities, with net income being a large component of this increase. 
C)  Debtholders requiring firms to enter into debt covenants. 
D)  Distributions to shareholders, usually in the form of periodic cash dividend payments to investors and sometimes in the form of share repurchases. 
A)  Investments by shareholders, usually net cash received by the company at equity issue date. 
B)  Profitable operating and investing activities, with net income being a large component of this increase. 
C)  Debtholders requiring firms to enter into debt covenants. 
D)  Distributions to shareholders, usually in the form of periodic cash dividend payments to investors and sometimes in the form of share repurchases.

Question 20

Santa Corporation
NOTE: These multiple choice questions require present value information.
Santa Corporation manufactures Christmas decorations and supplies throughout the world. The company owns property, plant, and equipment and also enters into operating leases for certain facilities. Assume that Santa's incremental borrowing rate is 8%. The company's tax rate is 40%. Listed below is selected financial data for Santa and a portion of the company's operating lease footnote.
$\begin{array}{llll}
&\underline{2012}&\underline{2011}&\underline{2010}\
\text { Property, Plant, \& Equipment (net) } &\$882,468&\$717,453&\$658,214 \
\text { Total Assets } &1,756,854 & \$ 1,405,484 & 1,254,896 \
\text { Common Shareholders'Equity } & 867,992&652,626&587,951  \
 &  \
\text { Sales } & \$ 2,922,915 & \$ 2,415,632 \
\text { Cost of GoodsSold } & 2,016,811 & 1,642,630 \
\text { Depreciation Expense } & 78,584 & 67,542 \
\text { Interest Expense } & 106,663 & 90,343 \
\text { Net Income } & 248,448 & 217,407
\end{array}$

$\begin{array}{|l|l|}
\hline & \text { Sant Corp. } \
\hline & \text { Operating Lease Disclosure } \
\hline & \text { (amounts in thousands) } \
\hline & \
\hline & \text { Operating Lease Commitments } \
\hline & \text { at the end of } 2012 \
\hline & \
\hline & \
\hline \text { Year} & \text { Reported Lease Commitments } \
\hline 2013& \$ 148,239 \
\hline 2014  & \$ 252,800 \
\hline2015 & \$ 278,327 \
\hline  2016 & \$ 279,210 \
\hline 2017& \$ 285,452 \
\hline\text { Beyond } 2017  & \$ 2,471,600 \
\hline  
\end{array}$

-

Using the information provided by Santa Corporation calculate the company's 2012 fixed asset ratio.

Accepted Answer

A)  3.0 
B)  3.65 
C)  3.23 
D)  5.21 
A)  3.0 
B)  3.65 
C)  3.23 
D)  5.21

All of the following are typically recognized as accounting liabilities except:

Which of the following is not one of the three criteria for recognition of a liability?

Which of the following is the date on which the dividend distribution occurs?

Which kind of dividend is a return of the original investment by shareholders?

Which kind of dividends typically pay dividends with additional shares of the corporation's stock?

Under the fair value method of accounting for stock options, firms must value stock options on the date of ____________________.

In some countries the account Reserve for Contingencies may be most comparable to which of the following accounts for a company reporting under U.S. GAAP?

Discuss the method of accounting for employee stock options. In your answer discuss the how the accounting has changed during recent years.

All of the following are criteria that financial reporting requires before recognizing an obligation as a liability except:

Which of the following is the date on which a company incurs a legal liability to distribute the dividend to owners of the stock?

Financial reporting requires that firms recognize product financing arrangements as liabilities if which of the following conditions is met?

Which of the following is an acceptable method of accounting for employee stock options?

All of the following are the general principles underlying the valuation of liabilities except:

Liabilities requiring the future delivery of goods or services appear on the balance sheet at the ______________________________ of those goods and services.

Regarding accounting for troubled debt, which of the following statements is true?

One criteria that must be satisfied for a firm to recognize an obligation is that the transaction or event giving rise to the obligation has already ____________________.

All of the following are primary events that typically lead to changes in book value of shareholders' equity except:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

Exam 6: Financing Activities

All of the following are typically recognized as accounting liabilities except:

Which of the following is not one of the three criteria for recognition of a liability?

Which of the following is the date on which the dividend distribution occurs?

Which kind of dividend is a return of the original investment by shareholders?

Which kind of dividends typically pay dividends with additional shares of the corporation's stock?

Under the fair value method of accounting for stock options, firms must value stock options on the date of ____________________.

In some countries the account Reserve for Contingencies may be most comparable to which of the following accounts for a company reporting under U.S. GAAP?

Discuss the method of accounting for employee stock options. In your answer discuss the how the accounting has changed during recent years.

All of the following are criteria that financial reporting requires before recognizing an obligation as a liability except:

Which of the following is the date on which a company incurs a legal liability to distribute the dividend to owners of the stock?

Financial reporting requires that firms recognize product financing arrangements as liabilities if which of the following conditions is met?

Which of the following is an acceptable method of accounting for employee stock options?

All of the following are the general principles underlying the valuation of liabilities except:

Liabilities requiring the future delivery of goods or services appear on the balance sheet at the ______________________________ of those goods and services.

Regarding accounting for troubled debt, which of the following statements is true?

One criteria that must be satisfied for a firm to recognize an obligation is that the transaction or event giving rise to the obligation has already ____________________.

All of the following are primary events that typically lead to changes in book value of shareholders' equity except:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters