Question 1

Which of the following is not among the criteria for classifying a lease as a capital lease?

Accepted Answer

A) The present value of the minimum lease payments is greater than or equal to 75% of the fair value of the asset. 
B) The noncancellable lease term is greater than or equal to 75% of the estimated economic life of the asset. 
C) The lease specifies that ownership of the asset transfers to the lessee. 
D) The lease contains a bargain purchase option. 
A) The present value of the minimum lease payments is greater than or equal to 75% of the fair value of the asset. 
B) The noncancellable lease term is greater than or equal to 75% of the estimated economic life of the asset. 
C) The lease specifies that ownership of the asset transfers to the lessee. 
D) The lease contains a bargain purchase option.

Question 2

The purchase of treasury stock is a source of cash from financing activities.

Accepted Answer

A) True 
 B)False

Question 3

Under the indirect method,which of the following would be added to net income when determining net cash flows from operations?

Accepted Answer

A) gain on the sale or a used truck 
B) amortization expense 
C) increase in inventory 
D) decrease in accounts payable 
A) gain on the sale or a used truck 
B) amortization expense 
C) increase in inventory 
D) decrease in accounts payable

Question 4

Balance sheet errors that affect assets,liabilities and equity only,are typically the result of misclassification of accounts and require correction upon discovery.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements concerning the statement of cash flows is true?

Accepted Answer

A) When pension expense exceeds cash funding,the difference is deducted from investing activities on the statement of cash flows. 
B) IFRS requires companies to classify all income taxes paid as operating cash outflows. 
C) Companies may report the cash flows from purchases and sales of trading investments as cash flows from operating activities. 
D) Under IFRS,the purchase of land by issuing ordinary shares will be shown as a cash outflow under investing activities and a cash inflow under financing activities. 
A) When pension expense exceeds cash funding,the difference is deducted from investing activities on the statement of cash flows. 
B) IFRS requires companies to classify all income taxes paid as operating cash outflows. 
C) Companies may report the cash flows from purchases and sales of trading investments as cash flows from operating activities. 
D) Under IFRS,the purchase of land by issuing ordinary shares will be shown as a cash outflow under investing activities and a cash inflow under financing activities.

Question 6

A change in reporting entity must be treated retrospectively for all years presented in the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Disclosures are required for all accounting estimates made in normal operations.

Accepted Answer

A) True 
 B)False

Question 8

The indirect method of formatting the statement of cash flow is also referred to as the income statement method.

Accepted Answer

A) True 
 B)False

Question 9

Bad debt expense and share-based compensation expense must be added to net income to determine cash flows from operations.

Accepted Answer

A) True 
 B)False

Question 10

Determine the required disclosures for this series of errors.

Accepted Answer

The required disclosures for a series of

Question 11

In 2017,Quintin Corp.reported net income of $255,000.Other transactions included:
   What is the amount of net cash flows from operations? 
A)$345,500
B)$254,500
C)$220,500
D)$194,500

Accepted Answer

The answer of In 2017,Quintin Corp.reported net income of $255,000.Other...

Question 12

When there is a unguaranteed residual value,the lessor includes the present value of the unguaranteed residual value in the lease receivable.

Accepted Answer

A) True 
 B)False

Question 13

On January 1 of the current year,Stephens Corporation leased machinery from Montgomery Company.The machine originally cost Montgomery $250,000.The lease agreement is an operating lease,the terms of which call for five annual payments of 25,000.The first payment is due at the inception of the lease; the other three payments are due on January 1 of subsequent years.What journal entry should Stephens make on January 1 of the current year?
A)
   
B)
   
C)
   
D)

Accepted Answer

A) True 
 B)False

Question 14

Presenting consolidated statements instead of individual financial statements is a change in a reporting entity.

Accepted Answer

A) True 
 B)False

Question 15

When year-end occurs between payment dates,the lessee must accrue the interest expense and the lessor must accrue interest revenue at the end of the year.

Accepted Answer

A) True 
 B)False

Question 16

Which one of the following is a change in estimate effected by a change in an accounting principle?

Accepted Answer

A) salvage value of an asset 
B) estimated life of an asset 
C) change from declining-balance to straight-line depreciation 
D) changes in pension plan asset revenues 
A) salvage value of an asset 
B) estimated life of an asset 
C) change from declining-balance to straight-line depreciation 
D) changes in pension plan asset revenues

Question 17

Which one of the following might be effected by a change in revenue recognition requiring a prospective change?

Accepted Answer

A) retained earnings 
B) management compensation 
C) unearned revenue 
D) deferred taxes 
A) retained earnings 
B) management compensation 
C) unearned revenue 
D) deferred taxes

Question 18

Prospective changes require changes be made to the current year and all future years affected.

Accepted Answer

A) True 
 B)False

Question 19

How is an unguaranteed residual value accounted for by the lessee when computing minimum lease payments?

Accepted Answer

A) The present value of the guaranteed residual value is added in to determine the minimum lease payments. 
B) It is ignored. 
C) The future value of the guaranteed residual value is added in to determine the minimum lease payments. 
D) The excess of guaranteed residual value over estimated residual value is added in by the lessee to determine the minimum lease payments. 
A) The present value of the guaranteed residual value is added in to determine the minimum lease payments. 
B) It is ignored. 
C) The future value of the guaranteed residual value is added in to determine the minimum lease payments. 
D) The excess of guaranteed residual value over estimated residual value is added in by the lessee to determine the minimum lease payments.

Question 20

Which of the following statements are correct regarding an operating lease?

Accepted Answer

A) The lessor records depreciation expense and lease revenue. 
B) The lessee records the leased asset as a long-term asset. 
C) The lessee receives title to the asset at the end of the lease. 
D) The lessee records interest expense. 
A) The lessor records depreciation expense and lease revenue. 
B) The lessee records the leased asset as a long-term asset. 
C) The lessee receives title to the asset at the end of the lease. 
D) The lessee records interest expense.

Exam 22: Accounting Corrections and Error Analysis

Which of the following is not among the criteria for classifying a lease as a capital lease?

The purchase of treasury stock is a source of cash from financing activities.

Under the indirect method,which of the following would be added to net income when determining net cash flows from operations?

Balance sheet errors that affect assets,liabilities and equity only,are typically the result of misclassification of accounts and require correction upon discovery.

Which of the following statements concerning the statement of cash flows is true?

A change in reporting entity must be treated retrospectively for all years presented in the financial statements.

Disclosures are required for all accounting estimates made in normal operations.

The indirect method of formatting the statement of cash flow is also referred to as the income statement method.

Bad debt expense and share-based compensation expense must be added to net income to determine cash flows from operations.

Determine the required disclosures for this series of errors.

In 2017,Quintin Corp.reported net income of $255,000.Other transactions included: What is the amount of net cash flows from operations? A)$345,500 B)$254,500 C)$220,500 D)$194,500

When there is a unguaranteed residual value,the lessor includes the present value of the unguaranteed residual value in the lease receivable.

Presenting consolidated statements instead of individual financial statements is a change in a reporting entity.

When year-end occurs between payment dates,the lessee must accrue the interest expense and the lessor must accrue interest revenue at the end of the year.

Which one of the following is a change in estimate effected by a change in an accounting principle?

Which one of the following might be effected by a change in revenue recognition requiring a prospective change?

Prospective changes require changes be made to the current year and all future years affected.

How is an unguaranteed residual value accounted for by the lessee when computing minimum lease payments?

Which of the following statements are correct regarding an operating lease?

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

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