Question 1

If a component of an entity is classified as "held for sale," its results of operations are to be reported as discontinued operations.

Accepted Answer

A) True 
 B)False

Question 2

When accounting estimates are changed,the income effect of the changed estimate is accounted for in the period of the change and in future periods if the change affects both.

Accepted Answer

A) True 
 B)False

Question 3

To be reported as an extraordinary item on the income statement,an event must be either unusual in nature or an infrequent occurrence.

Accepted Answer

A) True 
 B)False

Question 4

U.S.GAAP requires some firms to periodically recategorize a portion of actuarial adjustment losses relating to pensions into periodic net income.

Accepted Answer

A) True 
 B)False

Question 5

Income statements prepared in accordance with GAAP differentiate between income components that are believed to be sustainable and those that are transitory.

Accepted Answer

A) True 
 B)False

Question 6

The real accounting issue in net income recognition is the

Accepted Answer

A) quantity of income recognized. 
B) type of income recognized. 
C) timing of the recognition. 
D) basis of net income recognition. 
A) quantity of income recognized. 
B) type of income recognized. 
C) timing of the recognition. 
D) basis of net income recognition.

Question 7

When a company changes from straight-line depreciation to double-declining-balance depreciation,the change is reported

Accepted Answer

A) prospectively because it is impractical to determine the effects of this change on prior years' net income. 
B) as an error correction. 
C) as a change in an accounting estimate. 
D) using the retrospective approach. 
A) prospectively because it is impractical to determine the effects of this change on prior years' net income. 
B) as an error correction. 
C) as a change in an accounting estimate. 
D) using the retrospective approach.

Question 8

The basic accounting equation may be expressed as assets = liabilities - owners' equity.

Accepted Answer

A) True 
 B)False

Question 9

Both IFRS and U.S.GAAP require companies to report valuation changes to the company's expected liability to its retired employees due to changes in actuarial estimates in other comprehensive income each period.

Accepted Answer

A) True 
 B)False

Question 10

Diluted earnings per share is a required disclosure for all corporations that have outstanding preferred stock.

Accepted Answer

A) True 
 B)False

Question 11

GAAP specifies three conditions that must be satisfied in order for revenue to be appropriately recognized.

Accepted Answer

A) True 
 B)False

Question 12

A contra account is an account that is subtracted from a related account.

Accepted Answer

A) True 
 B)False

Question 13

Black & Decker decides to discontinue producing toasters in lieu of more versatile toaster ovens.In the process of discontinuing this line,the company disposes of the old equipment and buys new.The disposal of the old equipment would be reported in the income statement as

Accepted Answer

A) gain or loss on the sale of equipment as part of continuing operations. 
B) gain or loss on the sale of production equipment as part of extraordinary gains and losses. 
C) gain or loss on the disposal of discontinued business component. 
D) income from operation of a discontinued business component. 
A) gain or loss on the sale of equipment as part of continuing operations. 
B) gain or loss on the sale of production equipment as part of extraordinary gains and losses. 
C) gain or loss on the disposal of discontinued business component. 
D) income from operation of a discontinued business component.

Question 14

GAAP requires firms to report comprehensive income

Accepted Answer

A) at the end of the income statement. 
B) as a separate statement of comprehensive income. 
C) in the statement of changes in stockholders' equity. 
D) in a statement that is displayed with the same prominence as other financial statements. 
A) at the end of the income statement. 
B) as a separate statement of comprehensive income. 
C) in the statement of changes in stockholders' equity. 
D) in a statement that is displayed with the same prominence as other financial statements.

Question 15

To recognize revenue during the production phase,a specific customer must be identified,an exchange price agreed upon,remaining costs to complete are reliably estimated,a significant portion of the services contracted are performed,and

Accepted Answer

A) a reasonable estimate of cash collection determined. 
B) the seller has the right to terminate the exchange. 
C) a firm delivery date established. 
D) the product is immediately salable at quoted market prices. 
A) a reasonable estimate of cash collection determined. 
B) the seller has the right to terminate the exchange. 
C) a firm delivery date established. 
D) the product is immediately salable at quoted market prices.

Question 16

A component of an entity may be a reportable segment or operating segment,a reporting unit,a subsidiary,or an asset group.An asset group represents the highest level for which identifiable cash flows are largely independent of the cash flows of other components of the entity.

Accepted Answer

A) True 
 B)False

Question 17

The matching principle requires that expenses incurred in generating revenue are recognized in the same period the related revenue is recognized.

Accepted Answer

A) True 
 B)False

Question 18

A ship building company is likely to recognize revenue at the completion of production.

Accepted Answer

A) True 
 B)False

Question 19

The principles that govern revenue and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cash-basis accounting.

Accepted Answer

A) True 
 B)False

Question 20

Which one of the following is part of other comprehensive income (OCI)?

Accepted Answer

A) Unrealized gains resulting from translating foreign currency financial statements of majority-owned subsidiaries to U.S.dollar amounts. 
B) Gains on sales of treasury stock. 
C) Receipt of land donated by a governmental unit. 
D) Sale of common stock above par. 
A) Unrealized gains resulting from translating foreign currency financial statements of majority-owned subsidiaries to U.S.dollar amounts. 
B) Gains on sales of treasury stock. 
C) Receipt of land donated by a governmental unit. 
D) Sale of common stock above par.

If a component of an entity is classified as "held for sale," its results of operations are to be reported as discontinued operations.

When accounting estimates are changed,the income effect of the changed estimate is accounted for in the period of the change and in future periods if the change affects both.

To be reported as an extraordinary item on the income statement,an event must be either unusual in nature or an infrequent occurrence.

U.S.GAAP requires some firms to periodically recategorize a portion of actuarial adjustment losses relating to pensions into periodic net income.

Income statements prepared in accordance with GAAP differentiate between income components that are believed to be sustainable and those that are transitory.

The real accounting issue in net income recognition is the

When a company changes from straight-line depreciation to double-declining-balance depreciation,the change is reported

The basic accounting equation may be expressed as assets = liabilities - owners' equity.

Both IFRS and U.S.GAAP require companies to report valuation changes to the company's expected liability to its retired employees due to changes in actuarial estimates in other comprehensive income each period.

Diluted earnings per share is a required disclosure for all corporations that have outstanding preferred stock.

GAAP specifies three conditions that must be satisfied in order for revenue to be appropriately recognized.

A contra account is an account that is subtracted from a related account.

Black & Decker decides to discontinue producing toasters in lieu of more versatile toaster ovens.In the process of discontinuing this line,the company disposes of the old equipment and buys new.The disposal of the old equipment would be reported in the income statement as

GAAP requires firms to report comprehensive income

To recognize revenue during the production phase,a specific customer must be identified,an exchange price agreed upon,remaining costs to complete are reliably estimated,a significant portion of the services contracted are performed,and

A component of an entity may be a reportable segment or operating segment,a reporting unit,a subsidiary,or an asset group.An asset group represents the highest level for which identifiable cash flows are largely independent of the cash flows of other components of the entity.

The matching principle requires that expenses incurred in generating revenue are recognized in the same period the related revenue is recognized.

A ship building company is likely to recognize revenue at the completion of production.

The principles that govern revenue and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cash-basis accounting.

Which one of the following is part of other comprehensive income (OCI)?

The Economic and Institutional Setting for Financial Reporting

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

Filters

Exam 2: Accrual Accounting and Income Determination

If a component of an entity is classified as "held for sale," its results of operations are to be reported as discontinued operations.

When accounting estimates are changed,the income effect of the changed estimate is accounted for in the period of the change and in future periods if the change affects both.

To be reported as an extraordinary item on the income statement,an event must be either unusual in nature or an infrequent occurrence.

U.S.GAAP requires some firms to periodically recategorize a portion of actuarial adjustment losses relating to pensions into periodic net income.

Income statements prepared in accordance with GAAP differentiate between income components that are believed to be sustainable and those that are transitory.

The real accounting issue in net income recognition is the

When a company changes from straight-line depreciation to double-declining-balance depreciation,the change is reported

The basic accounting equation may be expressed as assets = liabilities - owners' equity.

Both IFRS and U.S.GAAP require companies to report valuation changes to the company's expected liability to its retired employees due to changes in actuarial estimates in other comprehensive income each period.

Diluted earnings per share is a required disclosure for all corporations that have outstanding preferred stock.

GAAP specifies three conditions that must be satisfied in order for revenue to be appropriately recognized.

A contra account is an account that is subtracted from a related account.

Black & Decker decides to discontinue producing toasters in lieu of more versatile toaster ovens.In the process of discontinuing this line,the company disposes of the old equipment and buys new.The disposal of the old equipment would be reported in the income statement as

GAAP requires firms to report comprehensive income

To recognize revenue during the production phase,a specific customer must be identified,an exchange price agreed upon,remaining costs to complete are reliably estimated,a significant portion of the services contracted are performed,and

A component of an entity may be a reportable segment or operating segment,a reporting unit,a subsidiary,or an asset group.An asset group represents the highest level for which identifiable cash flows are largely independent of the cash flows of other components of the entity.

The matching principle requires that expenses incurred in generating revenue are recognized in the same period the related revenue is recognized.

A ship building company is likely to recognize revenue at the completion of production.

The principles that govern revenue and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cash-basis accounting.

Which one of the following is part of other comprehensive income (OCI)?

The Economic and Institutional Setting for Financial Reporting

Additional Topics in Income Determination

Structure of the Balance Sheet and Statement of Cash Flows

Essentials of Financial Statement Analysis

The Role of Financial Information in Valuation and Credit Risk Assessment

The Role of Financial Information in Contracting

Receivables

Inventories

Long-Lived Assets

Financial Instruments As Liabilities

Financial Reporting for Leases

Income Tax Reporting

Pensions and Postretirement Benefits

Financial Reporting for Owners Equity

Intercorporate Equity Investments

Statement of Cash Flows

Filters