Question 1

In a statement of cash flows, the payment of a cash dividend on preferred stock outstanding should be classified as cash outflows for

Accepted Answer

A)  operating activities 
B)  investing activities 
C)  lending activities 
D)  financing activities 
A)  operating activities 
B)  investing activities 
C)  lending activities 
D)  financing activities

Question 2

To be recognized as revenue, an item must

Accepted Answer

A)  meet the definition of earned revenue 
B)  be earned revenue and be realized or realizable 
C)  be realized 
D)  be earned 
A)  meet the definition of earned revenue 
B)  be earned revenue and be realized or realizable 
C)  be realized 
D)  be earned

Question 3

Listed below are the three expense recognition principles followed by a series of expense items. 
a.association of cause and effect
b.systematic and rational allocation
c.immediate recognition

Required:
Match the expense recognition principles to their corresponding expenses by placing the appropriate letter in the space provided.

Accepted Answer

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Question 4

Which of the following is required to be disclosed, pursuant to GAAP?

Accepted Answer

A)  operating income or loss from discontinued component reported on the income statement 
B)  a description of facts and circumstances leading up to the sale of a discontinued component within the notes of the financial statements 
C)  all gains or losses from sale of the component reported on the income statement or in the footnotes 
D)  all of these 
A)  operating income or loss from discontinued component reported on the income statement 
B)  a description of facts and circumstances leading up to the sale of a discontinued component within the notes of the financial statements 
C)  all gains or losses from sale of the component reported on the income statement or in the footnotes 
D)  all of these

Question 5

One method of revenue recognition that postpones the recognition until after the time of sale is

Accepted Answer

A)  percentage-of-completion 
B)  proportional performance 
C)  cost recovery 
D)  point of sale 
A)  percentage-of-completion 
B)  proportional performance 
C)  cost recovery 
D)  point of sale

Question 6

Intraperiod tax allocation

Accepted Answer

A)  is used to allocate a company's total income tax expense to the components of net income and comprehensive income 
B)  involves temporary (timing) differences between financial and taxable incomes 
C)  requires allocation of deferred taxes across accounting periods 
D)  results from differences between tax regulations and the principles followed to determine financial income 
A)  is used to allocate a company's total income tax expense to the components of net income and comprehensive income 
B)  involves temporary (timing) differences between financial and taxable incomes 
C)  requires allocation of deferred taxes across accounting periods 
D)  results from differences between tax regulations and the principles followed to determine financial income

Question 7

Which is the most commonly computed coverage ratio?

Accepted Answer

A)  debt ratio 
B)  interest coverage ratio 
C)  return on common equity 
D)  net profit margin 
A)  debt ratio 
B)  interest coverage ratio 
C)  return on common equity 
D)  net profit margin

Question 8

All of the following are included in the computation of cost of goods sold except

Accepted Answer

A)  freight-out 
B)  purchase returns and allowances 
C)  beginning finished goods inventory 
D)  freight-in 
A)  freight-out 
B)  purchase returns and allowances 
C)  beginning finished goods inventory 
D)  freight-in

Question 9

Intraperiod tax allocation requires a corporation's total income tax expense to be allocated to all of the following except

Accepted Answer

A)  extraordinary items 
B)  other revenues and expenses 
C)  discontinued operations 
D)  prior-period adjustments 
A)  extraordinary items 
B)  other revenues and expenses 
C)  discontinued operations 
D)  prior-period adjustments

Question 10

Accounting information might be separately reported in any of the following components of the income statement or statement of retained earnings and their supporting schedules and footnotes: a.	income from continuing operations or supporting schedules
b.	extraordinary gains or losses
c.	disclosure
d.	statement of retained earnings
e.	results from discontinued operations

Several items of accounting information are listed below.   
Required:
By placing the letters (a-e) in the space provided above, identify where the information would be most appropriately reported. If the information would not appear in any of the above components, place an (X) in the space. Items may be reported in more than one location.

Accepted Answer

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Question 11

Nelly Company sold its cattle ranching component on June 30, 2014, for a gain of $1,000,000. From January through June, the component had sustained operating income of $300,000. The income tax rate is 35%. How should Nelly report the income and the sale on its income statement?

Accepted Answer

A)  as $300,000 operating income and a $1,000,000 gain on sale of component 
B)  as a $1,300,000 gain in operating income 
C)  as a net of tax gain of $845,000 after income from continuing operations 
D)  as $195,000 operating income and a $650,000 gain on sale of the component shown before extraordinary items 
A)  as $300,000 operating income and a $1,000,000 gain on sale of component 
B)  as a $1,300,000 gain in operating income 
C)  as a net of tax gain of $845,000 after income from continuing operations 
D)  as $195,000 operating income and a $650,000 gain on sale of the component shown before extraordinary items

Question 12

The major components of the income statement are listed below: A = extraordinary items
B = income from continuing operations
C = earnings per share
D = results from discontinued operations
In what sequence do they normally appear on the income statement?

Accepted Answer

A)  B-A-D-C 
B)  B-A-C-D 
C)  B-D-A-C 
D)  B-D-C-D 
A)  B-A-D-C 
B)  B-A-C-D 
C)  B-D-A-C 
D)  B-D-C-D

Question 13

A company does not have to disclose information about the sale of a discontinued component in the notes to its financial statements until the actual sale has occurred.

Accepted Answer

A) True 
 B)False

Question 14

Examples of matching expenses against revenues using the association of cause and effect include all of the following except

Accepted Answer

A)  insurance costs 
B)  transportation costs for delivery of goods to customers 
C)  costs of products sold 
D)  sales commissions 
A)  insurance costs 
B)  transportation costs for delivery of goods to customers 
C)  costs of products sold 
D)  sales commissions

Question 15

Income measurement is a fundamental accounting concept, and yet the computation of periodic income has caused the accounting profession some difficulty. Economists and accountants have long debated what constitutes income and how it should be measured. The capital maintenance method has been advocated as means of determining and measuring periodic income. Discuss the income concept.

Accepted Answer

The capital maintenance concept focuses

Question 16

The following information relates to Peter Company (in thousands):   
Required:
Compute net income, using the capital maintenance approach.

Accepted Answer

$175 ($1,1

Question 17

Which is least likely to be classified as a sale of a component?

Accepted Answer

A)  sale by a communications company of its radio stations, but none of its television stations 
B)  sale by a food distributor of its wholesale supermarket division while maintaining its wholesale fast-food restaurants division 
C)  sale by an apparel manufacturer of a woolen suit manufacturing plant in order to concentrate on the manufacture of suits from synthetic products 
D)  sale by a meat-packing company of its (entire) 20% interest in a professional football team 
A)  sale by a communications company of its radio stations, but none of its television stations 
B)  sale by a food distributor of its wholesale supermarket division while maintaining its wholesale fast-food restaurants division 
C)  sale by an apparel manufacturer of a woolen suit manufacturing plant in order to concentrate on the manufacture of suits from synthetic products 
D)  sale by a meat-packing company of its (entire) 20% interest in a professional football team

Question 18

Describe the major differences that still exist between the income statement information presentation requirements under IFRS and GAAP.

Accepted Answer

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Question 19

The statement of cash flows is least likely to help external users assess

Accepted Answer

A)  a company's ability to generate positive future cash flows 
B)  the amount of a company's future accrual-based sales revenue 
C)  a company's ability to meet its obligations and pay dividends 
D)  a company's need for external financing 
A)  a company's ability to generate positive future cash flows 
B)  the amount of a company's future accrual-based sales revenue 
C)  a company's ability to meet its obligations and pay dividends 
D)  a company's need for external financing

Question 20

In the preparation of interim income statements, the treatment of expenses is recognized differently depending on whether or not they are directly related to product sales or services.
Required:
Discuss the general treatment of expenses in interim statements when they 
a.are directly related to product sales or services.
b.are not directly related to product sales or services.

Accepted Answer

a.Expenses that are directly related to

In a statement of cash flows, the payment of a cash dividend on preferred stock outstanding should be classified as cash outflows for

To be recognized as revenue, an item must

Which of the following is required to be disclosed, pursuant to GAAP?

One method of revenue recognition that postpones the recognition until after the time of sale is

Intraperiod tax allocation

Which is the most commonly computed coverage ratio?

All of the following are included in the computation of cost of goods sold except

Intraperiod tax allocation requires a corporation's total income tax expense to be allocated to all of the following except

Nelly Company sold its cattle ranching component on June 30, 2014, for a gain of $1,000,000. From January through June, the component had sustained operating income of $300,000. The income tax rate is 35%. How should Nelly report the income and the sale on its income statement?

The major components of the income statement are listed below: A = extraordinary items B = income from continuing operations C = earnings per share D = results from discontinued operations In what sequence do they normally appear on the income statement?

A company does not have to disclose information about the sale of a discontinued component in the notes to its financial statements until the actual sale has occurred.

Examples of matching expenses against revenues using the association of cause and effect include all of the following except

The following information relates to Peter Company (in thousands): Required: Compute net income, using the capital maintenance approach.

Which is least likely to be classified as a sale of a component?

Describe the major differences that still exist between the income statement information presentation requirements under IFRS and GAAP.

The statement of cash flows is least likely to help external users assess

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 5: The Income Statement and the Statement of Cash Flows

In a statement of cash flows, the payment of a cash dividend on preferred stock outstanding should be classified as cash outflows for

To be recognized as revenue, an item must

Which of the following is required to be disclosed, pursuant to GAAP?

One method of revenue recognition that postpones the recognition until after the time of sale is

Intraperiod tax allocation

Which is the most commonly computed coverage ratio?

All of the following are included in the computation of cost of goods sold except

Intraperiod tax allocation requires a corporation's total income tax expense to be allocated to all of the following except

Nelly Company sold its cattle ranching component on June 30, 2014, for a gain of $1,000,000. From January through June, the component had sustained operating income of $300,000. The income tax rate is 35%. How should Nelly report the income and the sale on its income statement?

The major components of the income statement are listed below: A = extraordinary items B = income from continuing operations C = earnings per share D = results from discontinued operations In what sequence do they normally appear on the income statement?

A company does not have to disclose information about the sale of a discontinued component in the notes to its financial statements until the actual sale has occurred.

Examples of matching expenses against revenues using the association of cause and effect include all of the following except

The following information relates to Peter Company (in thousands): Required: Compute net income, using the capital maintenance approach.

Which is least likely to be classified as a sale of a component?

Describe the major differences that still exist between the income statement information presentation requirements under IFRS and GAAP.

The statement of cash flows is least likely to help external users assess

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters