Question 1

Lee Limited began operations on January 1,2016.The following data relate to the company's first 2 years in business:
 
What is the correct cost of goods sold amount for 2017?

Accepted Answer

A) $400,000 
B) $405,000 
C) $450,000 
D) $460,000 
A) $400,000 
B) $405,000 
C) $450,000 
D) $460,000

Question 2

General Limited's income statement reported the following for last year:
 
Which of the following statements is correct about the income statement?

Accepted Answer

A) Gross profit percentage is 20.32%. 
B) Mark-up on cost is $573,000. 
C) Net income percentage is 20.32%. 
D) Mark-up on the selling price is $308,000. 
A) Gross profit percentage is 20.32%. 
B) Mark-up on cost is $573,000. 
C) Net income percentage is 20.32%. 
D) Mark-up on the selling price is $308,000.

Question 3

The following entry was recorded by Hollow Inc.:
 
What is the effect on Hollow's financial statements?

Accepted Answer

A) A cash inflow from investing activities of $70,000. 
B) Net assets decreased by $10,000. 
C) A decrease of $10,000 in using the indirect method of determining cash flows from operating activities. 
D) Retained earnings decreased by $10,000. 
A) A cash inflow from investing activities of $70,000. 
B) Net assets decreased by $10,000. 
C) A decrease of $10,000 in using the indirect method of determining cash flows from operating activities. 
D) Retained earnings decreased by $10,000.

Question 4

Xavier Computer Limited was started in early 2016 and continued to operate until early 2019,when it was wound up due to disputes between the two principal shareholders.When it started,the company used the following accounting policies:
1.Use 50% declining-balance depreciation for the firm's only asset,a computer which cost $1,100,000 and has an estimated useful life of four years.
2.Estimate warranty expense as 10% of sales.
3.The year-end allowance for doubtful accounts should be 40% of gross accounts receivable.
Derive net income for 2016 to 2018.For the year-end balance for 2019,assume accounts receivable,allowance for doubtful accounts,and the warranty accrual are $0,as the firm wound itself up during the year and all timing differences have been resolved.

Accepted Answer

The answer of Xavier Computer Limited was started in early...

Question 5

An adjusted trial balance for Wizzard Industries Limited at December 31,2017,follows.
Prepare a balance sheet at December 31,2017,with items classified as current or non-current.

Accepted Answer

The answer of An adjusted trial balance for Wizzard Industries...

Question 6

What is classified as a "non-current" liability?

Accepted Answer

A) An obligation expected to be settled within the ordinary operating cycle of the business. 
B) An obligation related to the company's normal operating activities. 
C) An obligation where the company has breached its covenant violations. 
D) A debt that need not be settled until more than a year after the balance sheet date. 
A) An obligation expected to be settled within the ordinary operating cycle of the business. 
B) An obligation related to the company's normal operating activities. 
C) An obligation where the company has breached its covenant violations. 
D) A debt that need not be settled until more than a year after the balance sheet date.

Question 7

What is meant by "earnings quality"?

Accepted Answer

A) A measure of how closely expense accruals correspond to actual expenses without management bias. 
B) A measure to determine management bias by comparing actual reported profits with "true" earnings. 
C) A measure to determine management bias by comparing reported income to actual cash flows. 
D) A measure of how closely earnings correspond to earnings reported without management bias. 
A) A measure of how closely expense accruals correspond to actual expenses without management bias. 
B) A measure to determine management bias by comparing actual reported profits with "true" earnings. 
C) A measure to determine management bias by comparing reported income to actual cash flows. 
D) A measure of how closely earnings correspond to earnings reported without management bias.

Question 8

Changes in accounting estimates are

Accepted Answer

A) accounted for in the same manner as accounting policy changes. 
B) accounted for on a prospective basis. 
C) applied to current and past reporting periods. 
D) accounted for in the same manner as error corrections. 
A) accounted for in the same manner as accounting policy changes. 
B) accounted for on a prospective basis. 
C) applied to current and past reporting periods. 
D) accounted for in the same manner as error corrections.

Question 9

Which one of the following errors would cause a company's unadjusted trial balance to be out of balance?

Accepted Answer

A) Overstating an asset balance by $100 and a revenue balance by the same amount. 
B) Failure to post the debit portion of a journal entry to the proper account (recorded,for example,as a credit to revenue rather than as a debit to an expense account). 
C) Recording a $5,000 revenue transaction by crediting the accounts receivable account and debiting the revenue account. 
D) Recording $1,000 cash collected from a customer as a debit to the cash account and a debit to the accounts receivable account. 
A) Overstating an asset balance by $100 and a revenue balance by the same amount. 
B) Failure to post the debit portion of a journal entry to the proper account (recorded,for example,as a credit to revenue rather than as a debit to an expense account). 
C) Recording a $5,000 revenue transaction by crediting the accounts receivable account and debiting the revenue account. 
D) Recording $1,000 cash collected from a customer as a debit to the cash account and a debit to the accounts receivable account.

Question 10

Explain how financial information prepared using accrual accounting provides better information to predict future cash flows than financial information prepared using the cash basis of accounting.

Accepted Answer

Accrual accounting numbers can be a bett

Question 11

Changes in accounting estimates are based on

Accepted Answer

A) information available from the use of hindsight. 
B) information available at the time financial statements are prepared. 
C) providing comparable information in the financial statements. 
D) low quality of professional judgment being exercised. 
A) information available from the use of hindsight. 
B) information available at the time financial statements are prepared. 
C) providing comparable information in the financial statements. 
D) low quality of professional judgment being exercised.

Question 12

The following event occurred after the company's year-end but before the completion of the audit.For this subsequent event,determine whether the event:
• requires an adjustment to the year-end financial statements,
• requires note disclosure,or
• requires neither adjustment to recognized amounts nor disclosure.
The company experiences a major labour strike.Workers are still on strike when the audit is finished.Does your answer change if this strike might force the company into bankruptcy? (Justify your recommendation).

Accepted Answer

No adjustment and no disclosure;labour s

Question 13

Which of the following is an example of an "operating" cash cycle?

Accepted Answer

A) Receipt of funding from investors that is used to generate returns from investments and operations,and then returned to investors. 
B) Purchase of property with long-term future benefits which results in cash inflows and then the property is disposed of. 
C) Planning for product growth which results in investment opportunities that will create returns for investors. 
D) Purchase of inventory,conversion into products that are delivered to customers,and receipts from customers. 
A) Receipt of funding from investors that is used to generate returns from investments and operations,and then returned to investors. 
B) Purchase of property with long-term future benefits which results in cash inflows and then the property is disposed of. 
C) Planning for product growth which results in investment opportunities that will create returns for investors. 
D) Purchase of inventory,conversion into products that are delivered to customers,and receipts from customers.

Question 14

Information on the income statement is categorized into

Accepted Answer

A) operating,investing and financing activities. 
B) current and non-current activities. 
C) continuing and discontinued activities. 
D) nature and function activities. 
A) operating,investing and financing activities. 
B) current and non-current activities. 
C) continuing and discontinued activities. 
D) nature and function activities.

Question 15

What is classified as a "non-current" liability?

Accepted Answer

A) An obligation expected to be settled within the ordinary operating cycle of the business. 
B) An obligation where the company has breached its covenants. 
C) Both A and B are non-current liabilities. 
D) Both A and B are current liabilities. 
A) An obligation expected to be settled within the ordinary operating cycle of the business. 
B) An obligation where the company has breached its covenants. 
C) Both A and B are non-current liabilities. 
D) Both A and B are current liabilities.

Question 16

Which asset groups do not need to be presented separately in the balance sheet?

Accepted Answer

A) Asset groups that differ in their function or nature. 
B) Liabilities that are due to different banks. 
C) Asset groups that are material. 
D) Investment properties. 
A) Asset groups that differ in their function or nature. 
B) Liabilities that are due to different banks. 
C) Asset groups that are material. 
D) Investment properties.

Question 17

A company's reported earnings are $2,000 and cash flows are $1,600.Based on economic conditions during the year,the company booked allowances of $150.As a result of contractual incentives,the company booked a further $250 in accruals.What is the total of the excessive accruals?

Accepted Answer

A) $150 
B) $250 
C) $400 
D) $1,600 
A) $150 
B) $250 
C) $400 
D) $1,600

Question 18

The following information was provided from the records of Nimble Limited,which began operations in the current year:
 
What was the company's pre-tax income for the year?

Accepted Answer

A) $116,000 
B) $121,000 
C) $138,000 
D) $169,000 
A) $116,000 
B) $121,000 
C) $138,000 
D) $169,000

Question 19

Sing Songs Ltd.started operations on January 1,2016.During its first year of operations,the company had a choice of accounting policies:
   
Using the information provided below,discuss whether the cumulative cash flows will be the same or different each accounting option.

Accepted Answer

Cumulative operating cash flows for all

Question 20

What is the impact of overstating an accrued expense during the 2019 fiscal year?

Accepted Answer

A) There is no effect on 2019 income. 
B) Net income for 2019 will be overstated. 
C) Current liabilities for 2019 will be understated. 
D) Ending retained earnings for 2019 will be understated. 
A) There is no effect on 2019 income. 
B) Net income for 2019 will be overstated. 
C) Current liabilities for 2019 will be understated. 
D) Ending retained earnings for 2019 will be understated.

Lee Limited began operations on January 1,2016.The following data relate to the company's first 2 years in business: What is the correct cost of goods sold amount for 2017?

General Limited's income statement reported the following for last year: Which of the following statements is correct about the income statement?

The following entry was recorded by Hollow Inc.: What is the effect on Hollow's financial statements?

An adjusted trial balance for Wizzard Industries Limited at December 31,2017,follows. Prepare a balance sheet at December 31,2017,with items classified as current or non-current.

What is classified as a "non-current" liability?

What is meant by "earnings quality"?

Changes in accounting estimates are

Which one of the following errors would cause a company's unadjusted trial balance to be out of balance?

Explain how financial information prepared using accrual accounting provides better information to predict future cash flows than financial information prepared using the cash basis of accounting.

Changes in accounting estimates are based on

Which of the following is an example of an "operating" cash cycle?

Information on the income statement is categorized into

What is classified as a "non-current" liability?

Which asset groups do not need to be presented separately in the balance sheet?

A company's reported earnings are $2,000 and cash flows are $1,600.Based on economic conditions during the year,the company booked allowances of $150.As a result of contractual incentives,the company booked a further $250 in accruals.What is the total of the excessive accruals?

The following information was provided from the records of Nimble Limited,which began operations in the current year: What was the company's pre-tax income for the year?

Sing Songs Ltd.started operations on January 1,2016.During its first year of operations,the company had a choice of accounting policies: Using the information provided below,discuss whether the cumulative cash flows will be the same or different each accounting option.

What is the impact of overstating an accrued expense during the 2019 fiscal year?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters

Exam 3: Accrual Accounting

Lee Limited began operations on January 1,2016.The following data relate to the company's first 2 years in business: What is the correct cost of goods sold amount for 2017?

General Limited's income statement reported the following for last year: Which of the following statements is correct about the income statement?

The following entry was recorded by Hollow Inc.: What is the effect on Hollow's financial statements?

An adjusted trial balance for Wizzard Industries Limited at December 31,2017,follows. Prepare a balance sheet at December 31,2017,with items classified as current or non-current.

What is classified as a "non-current" liability?

What is meant by "earnings quality"?

Changes in accounting estimates are

Which one of the following errors would cause a company's unadjusted trial balance to be out of balance?

Explain how financial information prepared using accrual accounting provides better information to predict future cash flows than financial information prepared using the cash basis of accounting.

Changes in accounting estimates are based on

Which of the following is an example of an "operating" cash cycle?

Information on the income statement is categorized into

What is classified as a "non-current" liability?

Which asset groups do not need to be presented separately in the balance sheet?

A company's reported earnings are $2,000 and cash flows are $1,600.Based on economic conditions during the year,the company booked allowances of $150.As a result of contractual incentives,the company booked a further $250 in accruals.What is the total of the excessive accruals?

The following information was provided from the records of Nimble Limited,which began operations in the current year: What was the company's pre-tax income for the year?

Sing Songs Ltd.started operations on January 1,2016.During its first year of operations,the company had a choice of accounting policies: Using the information provided below,discuss whether the cumulative cash flows will be the same or different each accounting option.

What is the impact of overstating an accrued expense during the 2019 fiscal year?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Property, plant and Equipment

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters