Question 1

All of the following are questionable restructuring charges except for

Accepted Answer

A) services to be provided in some future period by lawyers and accountants. 
B) special bonuses for officers. 
C) expenses for retraining and relocating people. 
D) costs related to consolidating operations. 
A) services to be provided in some future period by lawyers and accountants. 
B) special bonuses for officers. 
C) expenses for retraining and relocating people. 
D) costs related to consolidating operations.

Question 2

Kim Company uses the installment method of revenue recognition.The following data pertain to Kim's installment sales for the years ended December 31,2013 and 2014:
$$\begin{array} { | l | r | r | } 
\hline & \underline { \mathbf { 2 0 1 3 } } & \underline { \mathbf { 2 0 1 4 } } \
\hline \text { Installment receivables at year-end on } 2013 \text { sales } & \$ 120,000 & \$ 60,000 \
\hline \text { Installment reecivables at year-end on } 2014 \text { sales } & & 138,000 \
\hline \text { Installment sales } & 160,000 & 180,000 \
\hline \text { Cost of goods sold } & 80,000 & 108,000 \
\hline
\end{array}$$ 
Required:
a.What amount should Kim report as deferred gross profit in its December 31,2013 and 2014 balance sheets?
b.What amounts should Kim report as realized gross profit in its 2013 and 2014 income statements?

Accepted Answer

a.Gross profit = Sales - Cost of sales (

Question 3

Stringent rules exist for determining when revenue has been earned and is realizable thus leaving little flexibility for management to "manage earnings" within the confines of generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 4

Under GAAP,the completed contract method is an acceptable alternative to the percentage-of-completion method of accounting for any given long-term construction project.

Accepted Answer

A) True 
 B)False

Question 5

"Cookie jar reserves" refers to the practice of overreserving estimated obligations during good times and underestimating,or reversing previous charges,in bad times.

Accepted Answer

A) True 
 B)False

Question 6

The installment sales method of recognizing profit for accounting purposes is acceptable if collection of the sales price is not reasonably assured.

Accepted Answer

A) True 
 B)False

Question 7

Under the percentage-of-completion method,the amount debited to "construction expense" each period is the actual construction costs incurred in that period.

Accepted Answer

A) True 
 B)False

Question 8

Costs incurred by the franchisor to provide initial and continuing services (for example,counseling by a registered dietician or advertising)are expensed in the same periods as the franchise revenue in accordance with the matching principle.

Accepted Answer

A) True 
 B)False

Question 9

When the outcome of a fixed-price contract cannot be reliably estimated,IFRS

Accepted Answer

A) permits firms to use either the completed contract method or the cost-recovery method to account for the contract. 
B) rules do not permit firms to use the completed contract method. 
C) follows the same accounting method required by U.S.GAAP. 
D) permits considerable latitude when accounting for the contract. 
A) permits firms to use either the completed contract method or the cost-recovery method to account for the contract. 
B) rules do not permit firms to use the completed contract method. 
C) follows the same accounting method required by U.S.GAAP. 
D) permits considerable latitude when accounting for the contract.

Question 10

All of the following are criteria for revenue recognition under the SEC except

Accepted Answer

A) persuasive evidence of an exchange arrangement exists. 
B) delivery has occurred or services have been rendered. 
C) collectibility is reasonably assured. 
D) the buyer's price to the seller cannot be determined until future performance occurs. 
A) persuasive evidence of an exchange arrangement exists. 
B) delivery has occurred or services have been rendered. 
C) collectibility is reasonably assured. 
D) the buyer's price to the seller cannot be determined until future performance occurs.

Question 11

Revenue recognition irregularities constitute the most frequently cited reason for restating financial statements during the past few years.

Accepted Answer

A) True 
 B)False

Question 12

Treating the "billings on construction in progress" account as an off-set (contra)to the construction inventory account avoids including certain costs and profits twice on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

In the case of sales with delayed delivery

Accepted Answer

A) the seller should always recognize revenue before the products are delivered to the customer. 
B) the goods belong to the customer. 
C) if the buyer requests in the sales agreement that the transaction be on a "bill and hold" basis and has a substantial business reason for doing so,the seller may recognize revenue when production of the goods is complete. 
D) recognized under the installment sales methoD. 
A) the seller should always recognize revenue before the products are delivered to the customer. 
B) the goods belong to the customer. 
C) if the buyer requests in the sales agreement that the transaction be on a "bill and hold" basis and has a substantial business reason for doing so,the seller may recognize revenue when production of the goods is complete. 
D) recognized under the installment sales methoD.

Question 14

At the end of a given long-term construction project,"retained earnings" will be the same regardless of whether the construction company uses the completed contract method or the percentage-of-completion method when accounting for the project.

Accepted Answer

A) True 
 B)False

Question 15

The once-revised exposure draft on revenue recognition issued by the IASB and the FASB

Accepted Answer

A) addresses when and how much revenue should be recognized in contracts to provide both goods and services to customers. 
B) proposes to eliminate alternate methods of revenue recognition such as the percentage-of-completion and installment sales methods. 
C) will require companies to recognize a net liability contract position on all new contracts;revenue will then arise from increases in the net contract position over the life of the contract. 
D) All of these are correct regarding the FASB/IASB exposure document. 
A) addresses when and how much revenue should be recognized in contracts to provide both goods and services to customers. 
B) proposes to eliminate alternate methods of revenue recognition such as the percentage-of-completion and installment sales methods. 
C) will require companies to recognize a net liability contract position on all new contracts;revenue will then arise from increases in the net contract position over the life of the contract. 
D) All of these are correct regarding the FASB/IASB exposure document.

Question 16

As per the SEC,nonrefundable up-front initiation fees to activate services contracts (e.g.,telecommunications services)may be immediately recognized as revenue as long as the fees are greater than the costs to activate the contracted services.

Accepted Answer

A) True 
 B)False

Question 17

IFRS rules for revenue recognition and measurement are much more voluminous and detailed than those contained in U.S.GAAP.

Accepted Answer

A) True 
 B)False

Question 18

With respect to revenue generated by selling goods,IFRS prescribes that revenue should be recognized using the percentage-of-completion method.

Accepted Answer

A) True 
 B)False

Question 19

Research indicates that few managers would engage in real transaction management (e.g.,delaying research and development or advertising)in order to meet earnings targets.

Accepted Answer

A) True 
 B)False

Question 20

Conventional wisdom is that

Accepted Answer

A) investors value a company's stock based on sustainable operating earnings. 
B) investors focus on one-time special charges and write-offs. 
C) "big bath" items adversely affect stock price. 
D) restructuring an organization causes bankruptcy. 
A) investors value a company's stock based on sustainable operating earnings. 
B) investors focus on one-time special charges and write-offs. 
C) "big bath" items adversely affect stock price. 
D) restructuring an organization causes bankruptcy.

All of the following are questionable restructuring charges except for

Stringent rules exist for determining when revenue has been earned and is realizable thus leaving little flexibility for management to "manage earnings" within the confines of generally accepted accounting principles.

Under GAAP,the completed contract method is an acceptable alternative to the percentage-of-completion method of accounting for any given long-term construction project.

"Cookie jar reserves" refers to the practice of overreserving estimated obligations during good times and underestimating,or reversing previous charges,in bad times.

The installment sales method of recognizing profit for accounting purposes is acceptable if collection of the sales price is not reasonably assured.

Under the percentage-of-completion method,the amount debited to "construction expense" each period is the actual construction costs incurred in that period.

Costs incurred by the franchisor to provide initial and continuing services (for example,counseling by a registered dietician or advertising)are expensed in the same periods as the franchise revenue in accordance with the matching principle.

When the outcome of a fixed-price contract cannot be reliably estimated,IFRS

All of the following are criteria for revenue recognition under the SEC except

Revenue recognition irregularities constitute the most frequently cited reason for restating financial statements during the past few years.

Treating the "billings on construction in progress" account as an off-set (contra)to the construction inventory account avoids including certain costs and profits twice on the balance sheet.

In the case of sales with delayed delivery

At the end of a given long-term construction project,"retained earnings" will be the same regardless of whether the construction company uses the completed contract method or the percentage-of-completion method when accounting for the project.

The once-revised exposure draft on revenue recognition issued by the IASB and the FASB

As per the SEC,nonrefundable up-front initiation fees to activate services contracts (e.g.,telecommunications services)may be immediately recognized as revenue as long as the fees are greater than the costs to activate the contracted services.

IFRS rules for revenue recognition and measurement are much more voluminous and detailed than those contained in U.S.GAAP.

With respect to revenue generated by selling goods,IFRS prescribes that revenue should be recognized using the percentage-of-completion method.

Research indicates that few managers would engage in real transaction management (e.g.,delaying research and development or advertising)in order to meet earnings targets.

Conventional wisdom is that

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and 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 3: Additional Topics in Income Determination

All of the following are questionable restructuring charges except for

Stringent rules exist for determining when revenue has been earned and is realizable thus leaving little flexibility for management to "manage earnings" within the confines of generally accepted accounting principles.

Under GAAP,the completed contract method is an acceptable alternative to the percentage-of-completion method of accounting for any given long-term construction project.

"Cookie jar reserves" refers to the practice of overreserving estimated obligations during good times and underestimating,or reversing previous charges,in bad times.

The installment sales method of recognizing profit for accounting purposes is acceptable if collection of the sales price is not reasonably assured.

Under the percentage-of-completion method,the amount debited to "construction expense" each period is the actual construction costs incurred in that period.

Costs incurred by the franchisor to provide initial and continuing services (for example,counseling by a registered dietician or advertising)are expensed in the same periods as the franchise revenue in accordance with the matching principle.

When the outcome of a fixed-price contract cannot be reliably estimated,IFRS

All of the following are criteria for revenue recognition under the SEC except

Revenue recognition irregularities constitute the most frequently cited reason for restating financial statements during the past few years.

Treating the "billings on construction in progress" account as an off-set (contra)to the construction inventory account avoids including certain costs and profits twice on the balance sheet.

In the case of sales with delayed delivery

At the end of a given long-term construction project,"retained earnings" will be the same regardless of whether the construction company uses the completed contract method or the percentage-of-completion method when accounting for the project.

The once-revised exposure draft on revenue recognition issued by the IASB and the FASB

As per the SEC,nonrefundable up-front initiation fees to activate services contracts (e.g.,telecommunications services)may be immediately recognized as revenue as long as the fees are greater than the costs to activate the contracted services.

IFRS rules for revenue recognition and measurement are much more voluminous and detailed than those contained in U.S.GAAP.

With respect to revenue generated by selling goods,IFRS prescribes that revenue should be recognized using the percentage-of-completion method.

Research indicates that few managers would engage in real transaction management (e.g.,delaying research and development or advertising)in order to meet earnings targets.

Conventional wisdom is that

The Economic and Institutional Setting for Financial Reporting

Accrual Accounting and 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