Reference no: EM132455096

Part A -

Q1. Financial information demonstrates consistency when:

firms in the same industry use different accounting methods to account for the same type of transaction.

a company uses the same method for depreciation from year to year on its financial statements.

a company fails to adjust its financial statements for changes in the value of the measuring unit.

All of the above

Q2. The cash method of accounting:

is used by most publicly traded corporations for financial statement purposes.

is not in accordance with the matching principle for most publicly traded corporations.

often is used on the income statement by large, publicly held companies.

All of the above

Q3. Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?

Consistency

Verifiability

Timeliness

Comparability

Q4. Information is neutral if it:

provides benefits that are at least equal to the costs of its preparation.

can be compared with similar information about an enterprise at other points in time.

would have no impact on a decision maker.

is free from bias toward a predetermined result.

Q5. Which of the following is not a basic element of financial statements?

Assets

Balance sheet

Losses

Revenues

Q6. Which basic element of financial statements arises from peripheral or incidental transactions?

Assets

Liabilities

Gains

Expenses

Q7. Faithful representation has as an enhancing quality for which of the following?

Timeliness

Comparability

Relevance

Consistency

Q8. Which of the following is a limitation of the balance sheet?

Many items that are of financial value are omitted.

Judgments and estimates are used.

Current fair value is not reported.

All of above

Q9. The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as:

solvency.

financial flexibility.

liquidity.

exchangeability.

Q10. Accounting information is considered to be relevant when it:

can be depended on to represent the economic conditions and events that is intended to represent.

is capable of making a difference in a decision.

is understandable by reasonably informed users of accounting information.

is verifiable and neutral.

Part B -

Q1. The basis for classifying assets as current or noncurrent is conversion to cash within:

the accounting cycle or one year, whichever is shorter.

the operating cycle or one year, whichever is longer.

the accounting cycle or one year, whichever is longer.

the operating cycle or one year, whichever is shorter.

Q2. Why are some of the major differences between iGAAP and U.S. GAAP? Explain in detail.

Q3. Blue Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 201X, included the following expense accounts.

Accounting and legal fees	$150,000
Advertising	$125,000
Freight-out	$65,000
Interest	$80,000
Loss on sale of long-term investments	$35,000
Officers' salaries	$200,000
Rent for office space	$160,000
Sales salaries and commissions	$110,000

One half of the rented premises are occupied by the sales department.

How much of the expenses listed above should be included in Perry's selling expenses for 201X?

Q4. An income statement shows "income before income taxes and extraordinary items" in the amount of $3,000,000. The income taxes payable for the year are $1,500,000, including $260,000 that is applicable to an extraordinary gain. Thus, what is the "income before extraordinary items"?

Q5. Dolly Company reported the following information for 201X.

Sales revenue	$510,000
Cost of goods sold	$400,000
Operating expenses	$50,000
Unrealized holding gain on available-for-sale securities	$45,000
Cash dividends received on the securities	$3,000

For 201X, what would Dolly report as other comprehensive income?

Q6. Retained earnings at 1/1/1X was $150,000 and at 12/31/1X it was $200,000. During 2010, cash dividends of $50,000 were paid and a stock dividend of $30,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. Please indicate DR (debit) or CR (credit) to the left of the account title, and place a comma between the account title and the amount of the adjustment.

Q7. Retained earnings at 1/1/1X was $90,000 and at 12/31/1X it was $210,000. During 201X, cash dividends of $50,000 were paid and a stock dividend of $40,000 was issued. Both dividends were properly charged to retained earnings. You are to provide the missing closing entry. Please indicate DR (debit) or CR (credit) to the left of the account title, and place a comma between the account title and the amount of the adjustment.

Q8. Allowance for doubtful accounts on 1/1/1X was $60,000. The balance in the allowance account on 12/31/1X after making the annual adjusting entry was $55,000, and during 201X, bad debts written off amounted to $40,000. You are to provide the missing adjusting entry. Please indicate DR (debit) or CR (credit) to the left of the account title, and place a comma between the account title and the amount of the adjustment.

Q9. Prepaid rent at 1/1/1X was $40,000. During 201X, rent payments of $115,000 were made and charged to "rent expense." The 201X income statement shows as a general expense the item "rent expense" in the amount of $125,000. You are to prepare the missing adjusting entry that must have been made, assuming reversing entries are not made. Please indicate DR (debit) or CR (credit) to the left of the account title, and place a comma between the account title and the amount of the adjustment.

Q10. Which of the following is not an acceptable major asset classification?

Current assets

Long-term assets

Property, plant, and equipment

Deferred charges

Q11. Which item below is not a current liability?

Unearned revenue

Stocks dividends distributable

The currently maturing portion of long-term debt

Trade accounts payable

Q12. Financial information exhibits the characteristic of consistency when:

expenses are reported as charges against revenue in the period in which they are paid.

accounting entities give accountable events the same accounting treatment from period to period.

extraordinary gains and losses are not included on the income statement.

accounting procedures are adopted which give a consistent rate of net income

Q13. The current assets section of the balance sheet should include:

accounts receivables.

long-term debt.

retained earnings.

patents.

Q14. Ahnen Company owns the following investments.

Trading securities (fair value) $70,000

Available-for-sale securities (fair value) 40,000

Held-to-maturity securities (amortized cost) 47,000

What will Ahnen report investments in its current assets section?

$0

Exactly $70,000

$70,000 or an amount greater than $70,000, depending upon the circumstances

Exactly $110,000