Question 1

Recognition of revenue under the cash basis occurs when the revenue is received.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following businesses is likely to recognize revenue during the production phase?

Accepted Answer

A) Mining company 
B) Cruise ship builder 
C) Citrus grower 
D) Department store 
A) Mining company 
B) Cruise ship builder 
C) Citrus grower 
D) Department store

Question 3

When actuarial estimates related to defined benefit pension plans are adjusted

Accepted Answer

A) both U.S.GAAP and IFRS require companies to report these valuation changes in OCI each period. 
B) only U.S.GAAP requires companies to report these valuation changes in OCI each period. 
C) only IFRS requires companies to report these valuation changes in OCI each period. 
D) neither U.S.GAAP nor IFRS requires companies to report these valuation changes in the financial statements. 
A) both U.S.GAAP and IFRS require companies to report these valuation changes in OCI each period. 
B) only U.S.GAAP requires companies to report these valuation changes in OCI each period. 
C) only IFRS requires companies to report these valuation changes in OCI each period. 
D) neither U.S.GAAP nor IFRS requires companies to report these valuation changes in the financial statements.

Question 4

Primo Landscaping commenced its business on January 1,2014.On December 31,2014,Primo Landscaping did not record any adjusting entries with respect to the following transactions:
a.During the first year of its operations,Primo purchased supplies in the amount of $10,000 (debited to "Supplies expense"),and of this amount,$3,000 were unused as of December 31,2014.
b.On March 15,2014 Primo received $18,000 for landscape maintenance services to be rendered for 24 months (beginning July 1,2014).This amount was credited to "Landscaping revenue."
c.The company's fuel bill for $1,500 for the month of December 2014 was not received until January 15,2015.
d.The company borrowed $100,000 from First Bank on April 1,2014 at an interest rate of 12% per year.The principal,along with all of the interest,is due on March 30,2015.
e.On January 17,2014 the company purchased a backhoe for $65,000.The backhoe is expected to last for 10,000 hours and have no salvage value.During 2014,Primo operated the backhoe for 500 hours.
Required:
Complete the table below,showing the effect of the omission of each year-end adjusting entry on assets,liabilities,and net income.Use "OS" for overstated,"US" for understated,and "NE" for no effect.

Accepted Answer

@#IMG-DLM& 
 @#IMG-DLM& Feedback:a.Asset not recorded = $3,0

Question 5

Adjusting entries always fall into one of two categories: adjustments for prepayments or adjustments for unearned revenue.

Accepted Answer

A) True 
 B)False

Question 6

A cumulative effect of a change in an accounting principle is measured as

Accepted Answer

A) the difference between prior periods' net income under the old method and what would have been reported if the new method had been used in the prior years. 
B) the after-tax difference between prior periods' net income under the old method and what would have been reported if the new method had been used in the prior years. 
C) the difference between prior periods' net income and current net income under the old method and what would have been reported if the new method had been used in the prior years and the current year. 
D) the after-tax difference between prior periods' net income and current net income under the old method and what would have been reported if the new method had been used in the prior years and the current year. 
A) the difference between prior periods' net income under the old method and what would have been reported if the new method had been used in the prior years. 
B) the after-tax difference between prior periods' net income under the old method and what would have been reported if the new method had been used in the prior years. 
C) the difference between prior periods' net income and current net income under the old method and what would have been reported if the new method had been used in the prior years and the current year. 
D) the after-tax difference between prior periods' net income and current net income under the old method and what would have been reported if the new method had been used in the prior years and the current year.

Question 7

The matching principle requires that expenses be recognized

Accepted Answer

A) in the same period in which all the assets are used up. 
B) in the same period in which the revenue generated by these expenses is recognized. 
C) when the costs are paid by the entity. 
D) in the same period in which the revenue generated by these expenses is receiveD. 
A) in the same period in which all the assets are used up. 
B) in the same period in which the revenue generated by these expenses is recognized. 
C) when the costs are paid by the entity. 
D) in the same period in which the revenue generated by these expenses is receiveD.

Question 8

Which of the following statements best describes expenses?

Accepted Answer

A) They are recorded in the accounting period when they are "earned" and become "measurable." 
B) They consist of amounts paid for consumable items and services rendered to the organization during the accounting period. 
C) They are the expired costs or assets "used up" during the accounting period. 
D) They consist of cash payments to employees during the period for services rendereD. 
A) They are recorded in the accounting period when they are "earned" and become "measurable." 
B) They consist of amounts paid for consumable items and services rendered to the organization during the accounting period. 
C) They are the expired costs or assets "used up" during the accounting period. 
D) They consist of cash payments to employees during the period for services rendereD.

Question 9

According to generally accepted accounting principles,revenue should be recognized at the earliest time that both (1)the "critical event" has taken place,and (2)the proceeds have been collected.

Accepted Answer

A) True 
 B)False

Question 10

Changes in accounting principle arise only when there are changes mandated by a standards-setting body such as the FASB.

Accepted Answer

A) True 
 B)False

Question 11

Net income recognition always increases

Accepted Answer

A) assets. 
B) net assets. 
C) liabilities. 
D) net liabilities. 
A) assets. 
B) net assets. 
C) liabilities. 
D) net liabilities.

Question 12

Accrual accounting decouples measured earnings from operating cash inflows and outflows.

Accepted Answer

A) True 
 B)False

Question 13

According to generally accepted accounting principles,revenue should be recognized at the earliest time when

Accepted Answer

A) the "critical event" has taken place and the proceeds are collected. 
B) the "critical event" has taken place and the amount of revenue collected is reasonably assured. 
C) collection is reasonably assured and the "critical event" can be measured. 
D) collection has taken place and the "critical event" can be measureD. 
A) the "critical event" has taken place and the proceeds are collected. 
B) the "critical event" has taken place and the amount of revenue collected is reasonably assured. 
C) collection is reasonably assured and the "critical event" can be measured. 
D) collection has taken place and the "critical event" can be measureD.

Question 14

The two conditions for revenue recognition are occasionally satisfied even before a sale of product occurs.

Accepted Answer

A) True 
 B)False

Question 15

The advantage of the retrospective approach to accounting for changes in accounting principle is that the financial statements in the year of the change and for prior years presented for comparative purposes are prepared on the same basis of accounting.

Accepted Answer

A) True 
 B)False

Question 16

What type of cost is the advertising expense?

Accepted Answer

A) Product cost 
B) Traceable cost 
C) Inventory cost 
D) Period cost 
A) Product cost 
B) Traceable cost 
C) Inventory cost 
D) Period cost

Question 17

To recognize revenue upon completion of production,the product must be immediately saleable at quoted market prices,no significant uncertainty exists regarding cost of distributing the product,and

Accepted Answer

A) the seller has the right to terminate the exchange. 
B) the units are homogeneous. 
C) a firm delivery date must be established. 
D) a specific customer must be identifieD. 
A) the seller has the right to terminate the exchange. 
B) the units are homogeneous. 
C) a firm delivery date must be established. 
D) a specific customer must be identifieD.

Question 18

When transitory earnings are present,which of the following correctly depicts the order used on the income statement?

Accepted Answer

A) Income from continuing operations,income tax expense,extraordinary loss,discontinued operations,net income. 
B) Income from continuing operations,extraordinary loss,discontinued operations,income tax expense,net income. 
C) Income from continuing operations,income tax expense,discontinued operations,extraordinary loss,net income. 
D) Income tax expense,income from continuing operations,discontinued operations,extraordinary loss,net income. 
A) Income from continuing operations,income tax expense,extraordinary loss,discontinued operations,net income. 
B) Income from continuing operations,extraordinary loss,discontinued operations,income tax expense,net income. 
C) Income from continuing operations,income tax expense,discontinued operations,extraordinary loss,net income. 
D) Income tax expense,income from continuing operations,discontinued operations,extraordinary loss,net income.

Question 19

Cash-basis accounting provides the most useful measure of future operating performance.

Accepted Answer

A) True 
 B)False

Question 20

To be reported as an extraordinary item on the income statement,an event must be

Accepted Answer

A) both unusual in nature and an infrequent occurrence. 
B) either unusual in nature or an infrequent occurrence. 
C) unusual in nature. 
D) an infrequent occurrence. 
A) both unusual in nature and an infrequent occurrence. 
B) either unusual in nature or an infrequent occurrence. 
C) unusual in nature. 
D) an infrequent occurrence.

Recognition of revenue under the cash basis occurs when the revenue is received.

Which one of the following businesses is likely to recognize revenue during the production phase?

When actuarial estimates related to defined benefit pension plans are adjusted

Adjusting entries always fall into one of two categories: adjustments for prepayments or adjustments for unearned revenue.

A cumulative effect of a change in an accounting principle is measured as

The matching principle requires that expenses be recognized

Which of the following statements best describes expenses?

According to generally accepted accounting principles,revenue should be recognized at the earliest time that both (1)the "critical event" has taken place,and (2)the proceeds have been collected.

Changes in accounting principle arise only when there are changes mandated by a standards-setting body such as the FASB.

Net income recognition always increases

Accrual accounting decouples measured earnings from operating cash inflows and outflows.

According to generally accepted accounting principles,revenue should be recognized at the earliest time when

The two conditions for revenue recognition are occasionally satisfied even before a sale of product occurs.

The advantage of the retrospective approach to accounting for changes in accounting principle is that the financial statements in the year of the change and for prior years presented for comparative purposes are prepared on the same basis of accounting.

What type of cost is the advertising expense?

To recognize revenue upon completion of production,the product must be immediately saleable at quoted market prices,no significant uncertainty exists regarding cost of distributing the product,and

When transitory earnings are present,which of the following correctly depicts the order used on the income statement?

Cash-basis accounting provides the most useful measure of future operating performance.

To be reported as an extraordinary item on the income statement,an event must be

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

Recognition of revenue under the cash basis occurs when the revenue is received.

Which one of the following businesses is likely to recognize revenue during the production phase?

When actuarial estimates related to defined benefit pension plans are adjusted

Adjusting entries always fall into one of two categories: adjustments for prepayments or adjustments for unearned revenue.

A cumulative effect of a change in an accounting principle is measured as

The matching principle requires that expenses be recognized

Which of the following statements best describes expenses?

According to generally accepted accounting principles,revenue should be recognized at the earliest time that both (1)the "critical event" has taken place,and (2)the proceeds have been collected.

Changes in accounting principle arise only when there are changes mandated by a standards-setting body such as the FASB.

Net income recognition always increases

Accrual accounting decouples measured earnings from operating cash inflows and outflows.

According to generally accepted accounting principles,revenue should be recognized at the earliest time when

The two conditions for revenue recognition are occasionally satisfied even before a sale of product occurs.

The advantage of the retrospective approach to accounting for changes in accounting principle is that the financial statements in the year of the change and for prior years presented for comparative purposes are prepared on the same basis of accounting.

What type of cost is the advertising expense?

To recognize revenue upon completion of production,the product must be immediately saleable at quoted market prices,no significant uncertainty exists regarding cost of distributing the product,and

When transitory earnings are present,which of the following correctly depicts the order used on the income statement?

Cash-basis accounting provides the most useful measure of future operating performance.

To be reported as an extraordinary item on the income statement,an event must be

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