Exam 22: Accounting Corrections and Error Analysis

An decrease in a deferred tax asset is added to the accrual-basis tax expense to arrive at cash paid for income taxes.

The lease multiplier developed by credit rating agencies to estimate the capitalized value of long-term operating leases calculated as 1 divided by the discount rate.

Which one of the following changes is not an accounting change?

Worldwide Corp.'s statement of financial position accounts as of December 31,2017 and 2016 and information relating to 2017 activities are presented below. Information relating to 2017 activities: • Net income for 2017 was $1,220,000. • Equipment costing $1,000,000 and having a carrying amount of $320,000 was sold in 2017 for $360,000. • A long-term investment was sold in 2016 for $345,000.There were no other transactions affecting long-term investments in 2017. • 20,000 ordinary shares were issued in 2017 for $25 a share. • Short-term investments consist of treasury bills maturing on 9/30/18. a.What is the amount of net cash flows from operating activities? b.What is the amount of net cash flows from financing activities? c.What is the amount of net cash flows from investing activities? d.Reconcile ending cash balance with beginning cash balance.

A noncancellable lease contains a bargain purchase option.The fair value of the asset is greater than the lessor's cost.Collectability of the lease payments is reasonably assured,and no material uncertainties about future costs exist.How will the lessor account for the lease? A)direct financing lease B)operating lease C)sales-type lease D)guaranteed lease

Comparative financial statements for Tomtric Company follow: Additional data on activities during 2017 are as follows: • During 2017,Tomtric Company sold used equipment for $3,000 that had cost $15,000 with accumulated depreciation of $8,000. • New equipment was purchased for $12,000 cash. • Cash dividends totaling $8,000 were paid. • Long-term investments that had cost $18,000 when purchased were sold for $18,000. • Common stock was issued for $10,000. Required: a.Prepare the operating activities section of the statement of cash flows using the indirect method. b.Prepare the operating activities section of the statement of cash flows using the direct method. c.Prepare the investing activities section of the statement of cash flows. d.Prepare the financing activities section of the statement of cash flows.

When preparing the statement of cash flows using the indirect method,which of the following is added to net income to determine cash flows from operations?

Make the journal entry to correct the errors using the proper date.

Under U.S.GAAP,the lessee's required disclosures include required lease payments for both operating and capital leases for the next five years.

Under a capital lease,the lessee reports both interest expense and depreciation expense associated with the lease.

In April,2016,Norman Industries sold Available-for-Sale securities that cost $450,000 and received a check from its broker for $793,000.When the check was deposited,the accounting clerk debited cash and credited investments for the full amount.The CFO questioned the entry in December,2016.If this is an error,what is the proper correcting entry? (Tax rate is 40%.)

Which of the following is a financial disclosure that a lessee must make on its financial statements?

Georgio,Inc.decided to move its business from its current location to another larger plant.Management should examine the salvage value of the building in the future and the change in the useful life to see if a change in the depreciation of the current building is warranted.

The statement of cash flows assists financial statement users in all of the following ways except ________. A)determining the entity's need for external financing B)evaluating the ability of the entity to meet its obligations C)assessing the ability of the entity to satisfy its customers D)identifying the entity's investing transactions during the period