Question 1

U.S.GAAP permits companies to report components of other comprehensive income (OCI)as part of the statement of changes in stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 2

Revenue is earned when

Accepted Answer

A) a contract is signed by both parties. 
B) the seller substantially completes performance required by an agreement. 
C) the buyer completes payment required under an agreement. 
D) the buyer accepts delivery and completes required payments. 
A) a contract is signed by both parties. 
B) the seller substantially completes performance required by an agreement. 
C) the buyer completes payment required under an agreement. 
D) the buyer accepts delivery and completes required payments.

Question 3

Changes in accounting principle and changes in the reporting entity are reported under the retrospective approach.

Accepted Answer

A) True 
 B)False

Question 4

The business environment in which an enterprise operates is of little consideration in determining whether an underlying event or transaction is unusual in nature and infrequent in occurrence.

Accepted Answer

A) True 
 B)False

Question 5

Traceable costs are also called

Accepted Answer

A) period costs. 
B) expired costs. 
C) product costs. 
D) administrative costs. 
A) period costs. 
B) expired costs. 
C) product costs. 
D) administrative costs.

Question 6

Accrual accounting can produce large discrepancies between the firm's reported profit performance and the amount of cash generated from operations.

Accepted Answer

A) True 
 B)False

Question 7

The rationale behind the rules for multiple-step income statements is to subdivide the income in a manner that facilitates

Accepted Answer

A) cash flows. 
B) forecasting. 
C) tax return preparation. 
D) audits. 
A) cash flows. 
B) forecasting. 
C) tax return preparation. 
D) audits.

Question 8

By definition,discontinued operations will not generate future cash flows thus transactions related to operations the firm intends to discontinue,or has already discontinued,must be reported separately from other income items on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

Using the accrual basis,which one of the following entries would properly record Canon's revenue recognition for October?

Accepted Answer

A)  DR Cash$\quad$$\quad$40,000
CR Copier sales$\quad$$\quad$40,000 
B)  DR Cash$\quad$16,000
CR Copier sales$\quad$16,000 
C)  DR Cash$\quad$$\quad$16,000
DR Accounts receivable$\quad$$\quad$24,000
CR Copier sales$\quad$$\quad$40,000 
D)  DR Accounts receivable$\quad$40,000
CR Copier sales$\quad$40,000 
A)  DR Cash$\quad$$\quad$40,000
CR Copier sales$\quad$$\quad$40,000 
B)  DR Cash$\quad$16,000
CR Copier sales$\quad$16,000 
C)  DR Cash$\quad$$\quad$16,000
DR Accounts receivable$\quad$$\quad$24,000
CR Copier sales$\quad$$\quad$40,000 
D)  DR Accounts receivable$\quad$40,000
CR Copier sales$\quad$40,000

Question 10

Net asset valuation and net income determination are inextricably intertwined.

Accepted Answer

A) True 
 B)False

Question 11

When a company changes from LIFO to another inventory method,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 12

When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e.,nonrecurring)gains or losses and certain other non-cash charges,such earnings are frequently referred to as

Accepted Answer

A) normal earnings. 
B) pro forma earnings. 
C) sustainable earnings. 
D) real earnings. 
A) normal earnings. 
B) pro forma earnings. 
C) sustainable earnings. 
D) real earnings.

Question 13

The disposal group notion under IFRS rules envisions a larger unit than the component of an entity notion under U.S.GAAP.

Accepted Answer

A) True 
 B)False

Question 14

The discontinued operations section of the income statement is comprised of which one of the following?

Accepted Answer

A) Income from the operation of discontinued business component and gain or loss from the disposal of the discontinued component. 
B) Income from the operation of discontinued business component,net of tax,and gain or loss from the disposal of the discontinued component,net of tax. 
C) Income from the operation of discontinued business component,net of tax and gain or loss from the disposal of the discontinued component. 
D) Gain or loss from the disposal of the discontinued component,net of tax. 
A) Income from the operation of discontinued business component and gain or loss from the disposal of the discontinued component. 
B) Income from the operation of discontinued business component,net of tax,and gain or loss from the disposal of the discontinued component,net of tax. 
C) Income from the operation of discontinued business component,net of tax and gain or loss from the disposal of the discontinued component. 
D) Gain or loss from the disposal of the discontinued component,net of tax.

Question 15

Under Bart Company's accounting system,all insurance premiums paid are debited to prepaid insurance.For interim reports,Bart makes monthly estimated charges to insurance expense with credits to prepaid insurance.Additional information for the year ended December 31,2014 is as follows:
$\begin{array}{lc}
\text { Prepaid insurance at December 31, 2013 } & \$ 310,000 \
\text { Charges to insurance expense during 2014, including a year-end } & \
\quad \text { adjustment of } \$ 50,000 & 975,000 \
\text { Unexpired insurance premiums at December 31, 2014 } & 265,000
\end{array}$ 
Required:
What was the total amount of insurance premiums paid by Bart during 2014?

Accepted Answer

@#IMG-DLM& Feedback:The total amount of

Question 16

The activities comprising the operating cycle are generally consistent across firms.

Accepted Answer

A) True 
 B)False

Question 17

When reporting a change in an accounting principle,the general rule requires that the current year's income from continuing operations reflect

Accepted Answer

A) use of the newly adopted principle for the current year recognition. 
B) use of the old principle for the current year recognition. 
C) management's choice of either the old or newly adopted principle for the current year recognition. 
D) FASB's designation of either the old or newly-adopted principle based on the item being changeD. 
A) use of the newly adopted principle for the current year recognition. 
B) use of the old principle for the current year recognition. 
C) management's choice of either the old or newly adopted principle for the current year recognition. 
D) FASB's designation of either the old or newly-adopted principle based on the item being changeD.

Question 18

The matching principle says that expenses are matched to the revenue recognized during the period,not that revenue is matched to the period's expenses.

Accepted Answer

A) True 
 B)False

Question 19

Hickory Furniture Company had the following costs paid during the month of May:
$\begin{array}{lr}
\text { Inventory purchases } & \$ 40,000 \
\text { Advertising costs } & 8,000 \
\text { Delivery costs } & 2.000
\end{array}$
Hickory sold $32,000 of the inventory and has agreed to pay warranty expenses for its customers. These are expected to be $1,600 and occur evenly over the next four months (i.e., starting in June).
-What is the amount of Hickory's cash-basis expenses for the month of May?

Accepted Answer

A) $33,600 
B) $42,400 
C) $50,000 
D) $51,600 
A) $33,600 
B) $42,400 
C) $50,000 
D) $51,600

Question 20

GAAP states that if it is impractical to determine the cumulative effect of applying a change in accounting principle to prior periods-such as when a firm adopts the LIFO inventory accounting method-the new accounting principle is to be applied as if the change was made prospectively as of the earliest date practicable.

Accepted Answer

A) True 
 B)False

U.S.GAAP permits companies to report components of other comprehensive income (OCI)as part of the statement of changes in stockholders' equity.

Revenue is earned when

Changes in accounting principle and changes in the reporting entity are reported under the retrospective approach.

The business environment in which an enterprise operates is of little consideration in determining whether an underlying event or transaction is unusual in nature and infrequent in occurrence.

Traceable costs are also called

Accrual accounting can produce large discrepancies between the firm's reported profit performance and the amount of cash generated from operations.

The rationale behind the rules for multiple-step income statements is to subdivide the income in a manner that facilitates

By definition,discontinued operations will not generate future cash flows thus transactions related to operations the firm intends to discontinue,or has already discontinued,must be reported separately from other income items on the income statement.

Using the accrual basis,which one of the following entries would properly record Canon's revenue recognition for October?

Net asset valuation and net income determination are inextricably intertwined.

When a company changes from LIFO to another inventory method,the change is reported

When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e.,nonrecurring)gains or losses and certain other non-cash charges,such earnings are frequently referred to as

The disposal group notion under IFRS rules envisions a larger unit than the component of an entity notion under U.S.GAAP.

The discontinued operations section of the income statement is comprised of which one of the following?

The activities comprising the operating cycle are generally consistent across firms.

When reporting a change in an accounting principle,the general rule requires that the current year's income from continuing operations reflect

The matching principle says that expenses are matched to the revenue recognized during the period,not that revenue is matched to the period's expenses.

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

U.S.GAAP permits companies to report components of other comprehensive income (OCI)as part of the statement of changes in stockholders' equity.

Revenue is earned when

Changes in accounting principle and changes in the reporting entity are reported under the retrospective approach.

The business environment in which an enterprise operates is of little consideration in determining whether an underlying event or transaction is unusual in nature and infrequent in occurrence.

Traceable costs are also called

Accrual accounting can produce large discrepancies between the firm's reported profit performance and the amount of cash generated from operations.

The rationale behind the rules for multiple-step income statements is to subdivide the income in a manner that facilitates

By definition,discontinued operations will not generate future cash flows thus transactions related to operations the firm intends to discontinue,or has already discontinued,must be reported separately from other income items on the income statement.

Using the accrual basis,which one of the following entries would properly record Canon's revenue recognition for October?

Net asset valuation and net income determination are inextricably intertwined.

When a company changes from LIFO to another inventory method,the change is reported

When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e.,nonrecurring)gains or losses and certain other non-cash charges,such earnings are frequently referred to as

The disposal group notion under IFRS rules envisions a larger unit than the component of an entity notion under U.S.GAAP.

The discontinued operations section of the income statement is comprised of which one of the following?

The activities comprising the operating cycle are generally consistent across firms.

When reporting a change in an accounting principle,the general rule requires that the current year's income from continuing operations reflect

The matching principle says that expenses are matched to the revenue recognized during the period,not that revenue is matched to the period's expenses.

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