Question 1

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 B

Question 2

Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period?

Accepted Answer

A) Direct matching 
B) Systematic and rational allocation 
C) Immediate recognition 
D) Partial recognition 
A) Direct matching 
B) Systematic and rational allocation 
C) Immediate recognition 
D) Partial recognition C

Question 3

Which of the following is NOT true regarding restructuring charges?

Accepted Answer

A) Restructuring charges reflect a loss in asset values of assets no longer consistent with a company's strategic plan. 
B) Severance pay for employees working at terminated operations may be a component of restructuring charges. 
C) Restructuring charges may include plant closing costs. 
D) Restructuring charges are reported as extraordinary items. 
A) Restructuring charges reflect a loss in asset values of assets no longer consistent with a company's strategic plan. 
B) Severance pay for employees working at terminated operations may be a component of restructuring charges. 
C) Restructuring charges may include plant closing costs. 
D) Restructuring charges are reported as extraordinary items. D

Question 4

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

Question 5

The normal ordering of items in the income statement would be best illustrated by which of the following?

Accepted Answer

A) Extraordinary items, cumulative effects, income from continuing operations, discontinued operations, net income 
B) Income from continuing operations, discontinued operations, extraordinary items, cumulative effects, net income 
C) Income from continuing operations, extraordinary items, cumulative effects, discontinued operations, net income 
D) Discontinued operations, income from continuing operations, extraordinary items, cumulative effects, net income 
A) Extraordinary items, cumulative effects, income from continuing operations, discontinued operations, net income 
B) Income from continuing operations, discontinued operations, extraordinary items, cumulative effects, net income 
C) Income from continuing operations, extraordinary items, cumulative effects, discontinued operations, net income 
D) Discontinued operations, income from continuing operations, extraordinary items, cumulative effects, net income

Question 6

A classic definition of income states that income is the amount one could consume at the end of a period and still be as well off as at the beginning of the period.Embedded in this definition of income is the concept of capital maintenance.Conceptually,income can occur only after the beginning capital has been recovered.When accountants adopt different measuring units,they are attempting to maintain different concepts of capital.
Identify the type of capital maintained when the measuring unit is (a)nominal dollars,(b)constant dollars,and (c)current costs.When would nominal cost and constant dollar measurements provide equivalent results?

Accepted Answer

Nominal dollar income statements attempt

Question 7

Saginaw Inc.decided on August 1,2014,to dispose of a component of its business.The component was sold on November 30,2014.Saginaw's income for 2014 included income of $250,000 from operating the discontinued segment from January 1 to the sale date.Saginaw incurred a loss on the November 30 sale of $220,000.Ignoring income taxes,what amount should be reported in the 2014 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

The forecast of income for future periods begins with a forecast of sales.An accurate projection of sales is essential to the determination of the amount of assets needed to do business and the level of financing required.
What factors should be considered in preparing the forecast of sales?

Accepted Answer

A forecast of sales should consider the

Question 9

According to the FASB conceptual framework,the concept of "earnings"

Accepted Answer

A) includes changes in market values of investments in marketable securities classified as available-for-sale. 
B) includes foreign currency translation adjustments. 
C) includes gains and losses resulting from the sale of a productive asset to another party in an arm's-length transaction. 
D) is the same as comprehensive income. 
A) includes changes in market values of investments in marketable securities classified as available-for-sale. 
B) includes foreign currency translation adjustments. 
C) includes gains and losses resulting from the sale of a productive asset to another party in an arm's-length transaction. 
D) is the same as comprehensive income.

Question 10

The following information is available for Ohio & West Virginia,Inc,from the company's annual Form 10-K:
"Ohio & West Virginia,Inc.(OWV)is a world-class provider of rail-freight transportation and its supporting services.OWV functions as a holding company with subsidiaries that own and operate regional freight railroads.We own or have interests in 47 railroads in five countries (United States,Canada,Mexico,Bolivia and Australia),and operate over 9,300 miles of owned and leased track and more than 3,000 additional miles under track-access arrangements.
Our revenues are generated primarily from the movement of freight over track owned or operated by our railroads.At the heart of OWV's success is the integration of our railroads into strong regional rail systems.Our subsidiary,LinkRail,Inc.,provides freight car switching and rail-related services to industrial companies operating extensive railroad facilities within their own complexes".
Information from the company's income statement contained in the Form 10-K annual report to the Securities and Exchange Commission is as follows:
   
CLOSING STOCK PRICES AT DECEMBER 31:
   
Required:
Answer the following questions:
1.What was the percentage increase in sales from 2012 to 2013,and from 2013 to 2014?
2.What was the price/earnings ratio for each year?
3.A frequently used measure of performance in the railroad industry is the operating ratio,i.e.,total operating expenses divided by total operating revenues.What were the operating ratios for 2012,2013,2014?
4.What additional information would be useful in analyzing this income statement?

Accepted Answer

1.For 2012 to 2013,the increase was 16.8

Question 11

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

Accepted Answer

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

Question 12

Which of the following approaches to income measurement underlies financial accounting and reporting?

Accepted Answer

A) Physical capital maintenance approach 
B) Economic approach 
C) Valuation approach 
D) Transaction approach 
A) Physical capital maintenance approach 
B) Economic approach 
C) Valuation approach 
D) Transaction approach

Question 13

According to the FASB's conceptual framework,comprehensive income includes which of the following?

Accepted Answer

The answer of According to the FASB's conceptual framework,comprehensive income...

Question 14

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 15

An earthquake destroyed the home office building of a company located in an inland city.This should be reported as a(n)

Accepted Answer

A) extraordinary loss. 
B) prior period adjustment. 
C) loss from continuing operations. 
D) loss from discontinued operations. 
A) extraordinary loss. 
B) prior period adjustment. 
C) loss from continuing operations. 
D) loss from discontinued operations.

Question 16

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 17

The financial statements of Mannassass Corporation for 2014 and 2015 contained the following errors:
 
Assuming that none of the errors were detected or corrected,by what amount will 2014 operating income be overstated or understated?

Accepted Answer

A) $9,200 overstated 
B) $9,200 understated 
C) $18,800 understated 
D) $18,800 overstated 
A) $9,200 overstated 
B) $9,200 understated 
C) $18,800 understated 
D) $18,800 overstated

Question 18

The term "comprehensive income" as defined by the FASB

Accepted Answer

A) must be reported on the face of the income statement. 
B) includes all changes in equity during a period except those resulting from investments by and distributions to owners. 
C) is the net change in owners' equity for the period. 
D) is synonymous with the term "net income." 
A) must be reported on the face of the income statement. 
B) includes all changes in equity during a period except those resulting from investments by and distributions to owners. 
C) is the net change in owners' equity for the period. 
D) is synonymous with the term "net income."

Question 19

The financial statements of Bollinger Corporation for 2014 and 2015 contained the following errors:
 
Assuming that none of the errors were detected or corrected,by what amount will 2015 operating income be overstated or understated?

Accepted Answer

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

Question 20

Which of the following is true regarding Statement of Financial Accounting Standards No.144,"Accounting for the Impairment or Disposal of Long-Lived Assets," accounting and reporting standards for discontinued operations?

Accepted Answer

A) A component of a business always represents the same concept as a segment of a business used in reporting disaggregate information. 
B) A test for, and recognition of, an impairment loss would be necessary for a component that had not been sold by year-end if the fair value of the component was determined to be less than the book value. 
C) Discontinued operations should follow extraordinary items on the face of the income statement. 
D) The gain or loss recognized for reported in the discontinued operation section of the income statement includes only the gain or loss on disposal of the component and not the income or loss from operating the discontinued operation. 
A) A component of a business always represents the same concept as a segment of a business used in reporting disaggregate information. 
B) A test for, and recognition of, an impairment loss would be necessary for a component that had not been sold by year-end if the fair value of the component was determined to be less than the book value. 
C) Discontinued operations should follow extraordinary items on the face of the income statement. 
D) The gain or loss recognized for reported in the discontinued operation section of the income statement includes only the gain or loss on disposal of the component and not the income or loss from operating the discontinued operation.

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

Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period?

Which of the following is NOT true regarding restructuring charges?

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

The normal ordering of items in the income statement would be best illustrated by which of the following?

The forecast of income for future periods begins with a forecast of sales.An accurate projection of sales is essential to the determination of the amount of assets needed to do business and the level of financing required. What factors should be considered in preparing the forecast of sales?

According to the FASB conceptual framework,the concept of "earnings"

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

Which of the following approaches to income measurement underlies financial accounting and reporting?

According to the FASB's conceptual framework,comprehensive income includes which of the following?

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

An earthquake destroyed the home office building of a company located in an inland city.This should be reported as a(n)

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

The financial statements of Mannassass Corporation for 2014 and 2015 contained the following errors: Assuming that none of the errors were detected or corrected,by what amount will 2014 operating income be overstated or understated?

The term "comprehensive income" as defined by the FASB

The financial statements of Bollinger Corporation for 2014 and 2015 contained the following errors: Assuming that none of the errors were detected or corrected,by what amount will 2015 operating income be overstated or understated?

Which of the following is true regarding Statement of Financial Accounting Standards No.144,"Accounting for the Impairment or Disposal of Long-Lived Assets," accounting and reporting standards for discontinued operations?

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 Compissues

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

Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period?

Which of the following is NOT true regarding restructuring charges?

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

The normal ordering of items in the income statement would be best illustrated by which of the following?

The forecast of income for future periods begins with a forecast of sales.An accurate projection of sales is essential to the determination of the amount of assets needed to do business and the level of financing required. What factors should be considered in preparing the forecast of sales?

According to the FASB conceptual framework,the concept of "earnings"

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

Which of the following approaches to income measurement underlies financial accounting and reporting?

According to the FASB's conceptual framework,comprehensive income includes which of the following?

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

An earthquake destroyed the home office building of a company located in an inland city.This should be reported as a(n)

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

The financial statements of Mannassass Corporation for 2014 and 2015 contained the following errors: Assuming that none of the errors were detected or corrected,by what amount will 2014 operating income be overstated or understated?

The term "comprehensive income" as defined by the FASB

The financial statements of Bollinger Corporation for 2014 and 2015 contained the following errors: Assuming that none of the errors were detected or corrected,by what amount will 2015 operating income be overstated or understated?

Which of the following is true regarding Statement of Financial Accounting Standards No.144,"Accounting for the Impairment or Disposal of Long-Lived Assets," accounting and reporting standards for discontinued operations?

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 Compissues

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