Question 1

Which of the following items is reported only in current and future periods?

Accepted Answer

A)  Prior period adjustment 
B)  Change in estimate 
C)  Change in accounting principle 
D)  Effects of changing prices 
A)  Prior period adjustment 
B)  Change in estimate 
C)  Change in accounting principle 
D)  Effects of changing prices B

Question 2

Which of the following events would be considered an extraordinary item?

Accepted Answer

A)  An airline experienced a significant loss due to a strike by employees of the company who provide its aircraft maintenance. 
B)  A food cannery was faced with a large loss of inventory of canned soups due to government condemnation because of possible botulism contamination; the company had never experienced a similar situation in its history. 
C)  A company, located on an island which has experienced severe flooding three times in the past 25 years, was subjected to a heavy loss of physical plant due to flooding. 
D)  A medical corporation was required to pay damages equal to three times its average net income to a patient. The corporation had experienced suits of this nature in the past, but the amount of the losses had never exceeded 5 percent of the corporation's average net income. 
A)  An airline experienced a significant loss due to a strike by employees of the company who provide its aircraft maintenance. 
B)  A food cannery was faced with a large loss of inventory of canned soups due to government condemnation because of possible botulism contamination; the company had never experienced a similar situation in its history. 
C)  A company, located on an island which has experienced severe flooding three times in the past 25 years, was subjected to a heavy loss of physical plant due to flooding. 
D)  A medical corporation was required to pay damages equal to three times its average net income to a patient. The corporation had experienced suits of this nature in the past, but the amount of the losses had never exceeded 5 percent of the corporation's average net income. B

Question 3

The following information is available for Avalon Company for 2011:
 
What amount should Avalon report as cost of goods sold for 2011?

Accepted Answer

A)  $510,000 
B)  $550,000 
C)  $610,000 
D)  $650,000 
A)  $510,000 
B)  $550,000 
C)  $610,000 
D)  $650,000 D

Question 4

Which of the following is an application of the principle of systematic and rational allocation?

Accepted Answer

A)  Sales commissions 
B)  Office salaries 
C)  Telephone expense 
D)  Depreciation expense 
A)  Sales commissions 
B)  Office salaries 
C)  Telephone expense 
D)  Depreciation expense

Question 5

Jupiter Manufacturing Company sold plant assets at a gain of $205,000 less related taxes of $62,500. Assuming the gain is not considered unusual or infrequent, Jupiter's income statement for the period should report

Accepted Answer

A)  a prior period adjustment net of applicable taxes, $142,500. 
B)  an extraordinary item net of applicable taxes, $142,500. 
C)  a gain of $205,000 and an increase in income tax expense of $62,500. 
D)  operating income net of applicable taxes, $142,500. 
A)  a prior period adjustment net of applicable taxes, $142,500. 
B)  an extraordinary item net of applicable taxes, $142,500. 
C)  a gain of $205,000 and an increase in income tax expense of $62,500. 
D)  operating income net of applicable taxes, $142,500.

Question 6

Changes in accounting principles generally are reported as

Accepted Answer

A)  adjustments to prior period statements. 
B)  extraordinary items. 
C)  adjustments to current period statements only. 
D)  adjustments to current and/or prior period statements. 
A)  adjustments to prior period statements. 
B)  extraordinary items. 
C)  adjustments to current period statements only. 
D)  adjustments to current and/or prior period statements.

Question 7

Byron Inc. decided on August 1, 2011, to dispose of a component of its business. The component was sold on November 30, 2011. Byron's income for 2011 included income of $250,000 from operating the discontinued segment from January 1 to the sale date. Byron incurred a loss on the November 30 sale of $220,000. Ignoring income taxes, what amount should be reported in the 2011 income statement as the net income or loss under "Discontinued Operations"?

Accepted Answer

A)  $220,000 loss 
B)  $30,000 loss 
C)  $30,000 income 
D)  $250,000 income 
A)  $220,000 loss 
B)  $30,000 loss 
C)  $30,000 income 
D)  $250,000 income

Question 8

Under the general rule of revenue recognition, revenue is recognized when

Accepted Answer

A)  marketability and market price are assured. 
B)  a contractual agreement exists, and cash collection is assured. 
C)  the earnings process is complete, and a valid promise of payment has been received. 
D)  all related expenses have been incurred. 
A)  marketability and market price are assured. 
B)  a contractual agreement exists, and cash collection is assured. 
C)  the earnings process is complete, and a valid promise of payment has been received. 
D)  all related expenses have been incurred.

Question 9

A company that changes from the declining-balance method of depreciation for previously recorded assets to the straight-line method should report the change as a(n)

Accepted Answer

A)  change in accounting principle. 
B)  change in accounting estimate. 
C)  prior period adjustment. 
D)  extraordinary item. 
A)  change in accounting principle. 
B)  change in accounting estimate. 
C)  prior period adjustment. 
D)  extraordinary item.

Question 10

The following data are available for Carlton Products, a partnership:
   
Compute the purchases and the net income for the partnership for 2010, 2011, and 2012, assuming that the firm sells its merchandise at 25 percent above cost.

Accepted Answer

The answer of The following data are available for Carlton...

Question 11

Voyager Corporation separates operating expenses in two categories: (1) selling, and (2) general and administrative. The adjusted trial balance at December 31, 2011, included the following expenses and loss accounts:
 
One-half of the rented premises is occupied by the sales department. Voyager's total selling expenses for 2011 are

Accepted Answer

A)  $720,000. 
B)  $740,000. 
C)  $800,000. 
D)  $960,000. 
A)  $720,000. 
B)  $740,000. 
C)  $800,000. 
D)  $960,000.

Question 12

Which of the following accounting changes requires the restatement of financial statements presented for prior years?

Accepted Answer

A)  A change in depreciation method from the straight-line method to the double-declining-balance method 
B)  A change from the LIFO to the FIFO inventory valuation method 
C)  A change from the FIFO to the LIFO inventory valuation method 
D)  A change in the useful life used in the depreciation calculations for a company's manufacturing equipment 
A)  A change in depreciation method from the straight-line method to the double-declining-balance method 
B)  A change from the LIFO to the FIFO inventory valuation method 
C)  A change from the FIFO to the LIFO inventory valuation method 
D)  A change in the useful life used in the depreciation calculations for a company's manufacturing equipment

Question 13

Greene Enterprises, Inc., has two operating divisions, one manufactures machinery and the other is a trucking operation that has been used to ship finished product for the manufacturing operation. Both divisions are considered separate components as defined by SFAS No. 144. The management of Greene Enterprises wants to focus on the manufacturing operation and accordingly adopted a formal plan to sell the trucking division on November 15, 2011. The sale was completed on April 30, 2012. At December 31, 2011, the trucking component was considered as held for sale.
On December 31, 2011, the company's fiscal year-end, the book value of the assets of the trucking division was $250,000. On that date, the fair value of the assets, less costs to sell, was $200,000. The before-tax operating loss of the division for the year was $140,000. The company's tax rate is 40%. The after-tax income from continuing operations for 2011 was $400,000.
Prepare a partial income statement for 2011 beginning with income from continuing operations. Ignore EPS disclosures.

Accepted Answer

Income from continuing operations.......

Question 14

A change from the straight-line method of depreciation to an accelerated method should be accounted for as a(n)

Accepted Answer

A)  change in an accounting principle. 
B)  change in an accounting estimate. 
C)  prior period adjustment. 
D)  accounting error. 
A)  change in an accounting principle. 
B)  change in an accounting estimate. 
C)  prior period adjustment. 
D)  accounting error.

Question 15

Landon, Inc., has several operating divisions. In September 2011, the management of Landon decided on a formal plan to sell one of its divisions. This division is considered a separate component as defined by SFAS No. 144.
The sale was completed on December 10, 2011, at which time the division was sold for $900,000. The book value of the assets of the division was $1,000,000. The before-tax operating loss of the division for the period January 1, 2011 to the date of disposal was $130,000. The company's tax rate is 40%. The after-tax income from continuing operations for 2011 was $350,000.
Prepare a partial income statement for 2011 beginning with income from continuing operations. Ignore EPS disclosures.

Accepted Answer

Income from continuing operations.......

Question 16

The financial statements of Cresent Corporation for 2011 and 2012 contained the following errors:
 
Assuming that none of the errors were detected or corrected, by what amount will 2012 operating income be overstated or understated?

Accepted Answer

A)  $13,400 overstated 
B)  $27,800 understated 
C)  $35,800 understated 
D)  $40,600 understated 
A)  $13,400 overstated 
B)  $27,800 understated 
C)  $35,800 understated 
D)  $40,600 understated

Question 17

Which of the following most likely would be considered a discontinued operation?

Accepted Answer

A)  Production or marketing functions are shifted from one location to another. 
B)  A sporting goods manufacturer has a bicycle division that meets FASB's definition of a component of the entity and decides to outsource the manufacture of its bicycles. 
C)  The unprofitable brands of a beauty products component of an entity that manufactures and sells consumer products are discontinued. 
D)  An entity that is a franchiser in the quick-service restaurant business also operates company-owned restaurants that are unprofitable in a certain region and, as a result, the entity decides to exit both the quick-service business as well as the company-owned restaurants in that region. 
A)  Production or marketing functions are shifted from one location to another. 
B)  A sporting goods manufacturer has a bicycle division that meets FASB's definition of a component of the entity and decides to outsource the manufacture of its bicycles. 
C)  The unprofitable brands of a beauty products component of an entity that manufactures and sells consumer products are discontinued. 
D)  An entity that is a franchiser in the quick-service restaurant business also operates company-owned restaurants that are unprofitable in a certain region and, as a result, the entity decides to exit both the quick-service business as well as the company-owned restaurants in that region.

Question 18

Jaguar Corp. reported the following pretax amounts for the year ending December 31, 2011:
   
The income tax rate applicable to Jaguar is 30 percent. Prepare a partial income statement for the year ending December 31, 2011, beginning with "Income from continuing operations before income taxes." Include the presentation of earnings per share, assuming 50,000 shares were outstanding during the year.

Accepted Answer

The answer of Jaguar Corp. reported the following pretax amounts...

Question 19

International Accounting Standard 8 requires

Accepted Answer

A)  a restatement of prior years' income for a change in accounting principle. 
B)  the reporting of the cumulative effect of a change in accounting principle as part of net income in the year of the change. 
C)  the reporting of the cumulative effect of a change in accounting principle as a direct adjustment to beginning retained earnings in the year of the change. 
D)  the amortization of the cumulative effect of a change in accounting principle over the future periods expected to be affected by the change. 
A)  a restatement of prior years' income for a change in accounting principle. 
B)  the reporting of the cumulative effect of a change in accounting principle as part of net income in the year of the change. 
C)  the reporting of the cumulative effect of a change in accounting principle as a direct adjustment to beginning retained earnings in the year of the change. 
D)  the amortization of the cumulative effect of a change in accounting principle over the future periods expected to be affected by the change.

Question 20

All of the following represent the likely options for financing business expansion except

Accepted Answer

A)  sale of preferred stock. 
B)  sale of common stock. 
C)  internal financing through use of retained earnings. 
D)  an unrealized gain on available-for-sale securities. 
A)  sale of preferred stock. 
B)  sale of common stock. 
C)  internal financing through use of retained earnings. 
D)  an unrealized gain on available-for-sale securities.

Which of the following items is reported only in current and future periods?

Which of the following events would be considered an extraordinary item?

The following information is available for Avalon Company for 2011: What amount should Avalon report as cost of goods sold for 2011?

Which of the following is an application of the principle of systematic and rational allocation?

Jupiter Manufacturing Company sold plant assets at a gain of $205,000 less related taxes of $62,500. Assuming the gain is not considered unusual or infrequent, Jupiter's income statement for the period should report

Changes in accounting principles generally are reported as

Under the general rule of revenue recognition, revenue is recognized when

A company that changes from the declining-balance method of depreciation for previously recorded assets to the straight-line method should report the change as a(n)

The following data are available for Carlton Products, a partnership: Compute the purchases and the net income for the partnership for 2010, 2011, and 2012, assuming that the firm sells its merchandise at 25 percent above cost.

Which of the following accounting changes requires the restatement of financial statements presented for prior years?

A change from the straight-line method of depreciation to an accelerated method should be accounted for as a(n)

The financial statements of Cresent Corporation for 2011 and 2012 contained the following errors: Assuming that none of the errors were detected or corrected, by what amount will 2012 operating income be overstated or understated?

Which of the following most likely would be considered a discontinued operation?

International Accounting Standard 8 requires

All of the following represent the likely options for financing business expansion except

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 4: The Income Statement

Which of the following items is reported only in current and future periods?

Which of the following events would be considered an extraordinary item?

The following information is available for Avalon Company for 2011: What amount should Avalon report as cost of goods sold for 2011?

Which of the following is an application of the principle of systematic and rational allocation?

Jupiter Manufacturing Company sold plant assets at a gain of $205,000 less related taxes of $62,500. Assuming the gain is not considered unusual or infrequent, Jupiter's income statement for the period should report

Changes in accounting principles generally are reported as

Under the general rule of revenue recognition, revenue is recognized when

A company that changes from the declining-balance method of depreciation for previously recorded assets to the straight-line method should report the change as a(n)

The following data are available for Carlton Products, a partnership: Compute the purchases and the net income for the partnership for 2010, 2011, and 2012, assuming that the firm sells its merchandise at 25 percent above cost.

Which of the following accounting changes requires the restatement of financial statements presented for prior years?

A change from the straight-line method of depreciation to an accelerated method should be accounted for as a(n)

The financial statements of Cresent Corporation for 2011 and 2012 contained the following errors: Assuming that none of the errors were detected or corrected, by what amount will 2012 operating income be overstated or understated?

Which of the following most likely would be considered a discontinued operation?

International Accounting Standard 8 requires

All of the following represent the likely options for financing business expansion except

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters