Question 1

How do firms report accounts receivable?

Accepted Answer

ACCOUNTS RECEIVABLE

Firms report accounts receivable they expect to collect within one year at the amount of cash the firms expect to receive.This amount may differ from the gross amount receivable from customers because of estimated uncollectible accounts.Both U.S.GAAP and IFRS require firms with significant uncollectible accounts receivable to estimate the amount of uncollectible accounts related to a particular period's sales and recognize that amount as bad debt expense in the same period as the related revenues.Firms typically use a contra account to accounts receivable, such as Allowance for Uncollectibles, to reflect the amount of accounts receivable they do not expect to collect.The entry to recognize estimated uncollectible amounts involves a debit to Bad Debt Expense and a credit to Allowance for Uncollectibles.The write-off of a particular customer's account that becomes uncollectible involves a debit to Allowance for Uncollectibles and a credit to Accounts Receivable.Common terminology refers to this accounting as the allowance method.

Question 2

The IASB's conceptual framework defines _____ as increases in economic benefits during an accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity participants.

Accepted Answer

A) asset 
B) liability 
C) equity 
D) revenue 
E) expense 
A) asset 
B) liability 
C) equity 
D) revenue 
E) expense D

Question 3

For each of the following generally accepted accounting principles, identify an alternative acceptable accounting principle.
 a.	Installment method
b.	Operating lease
c.	Straight-line, depreciation
d.	Last-in, first-out

Accepted Answer

a.	Cost recovery first method
b.	Capital lease
c	declining-balance or units-of-production
d.	FIFO, weighted average, specific identification

Question 4

Firms must designate each derivative as a hedging instrument, or else accounting views the derivative as a nonhedging instrument.Furthermore, firms must designate each hedging instrument as either a fair value hedge or a cash flow hedge.The accounting for cash flow hedges

Accepted Answer

A) remeasures both the hedged item and the derivative to fair value each period and recognize any unrealized gains and losses in net income. 
B) remeasures the derivative to fair value each period and include the unrealized gain or loss in other comprehensive income to the extent that the derivative instrument is effective in neutralizing risk.When the firm settles the hedged item, transfer the previously unrealized gain or loss from other comprehensive income to net income. 
C) remeasures the derivative to fair value each period and include the unrealized gain or loss in net income. 
D) all of the above 
E) none of the above 
A) remeasures both the hedged item and the derivative to fair value each period and recognize any unrealized gains and losses in net income. 
B) remeasures the derivative to fair value each period and include the unrealized gain or loss in other comprehensive income to the extent that the derivative instrument is effective in neutralizing risk.When the firm settles the hedged item, transfer the previously unrealized gain or loss from other comprehensive income to net income. 
C) remeasures the derivative to fair value each period and include the unrealized gain or loss in net income. 
D) all of the above 
E) none of the above

Question 5

Firms account for material errors in previously issued financial statements by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings of the current period.

Accepted Answer

A) True 
 B)False

Question 6

Accountants and financial analysts criticize earnings per share as a measure of profitability because it does

Accepted Answer

A) not consider the amount of shareholders' equity required to generate that level of earnings. 
B) not consider the amount of liabilities required to generate that level of earnings. 
C) consider the amount of assets required to generate that level of earnings. 
D) not consider the amount of assets required to generate that level of earnings. 
E) consider the amount of liabilities required to generate that level of earnings. 
A) not consider the amount of shareholders' equity required to generate that level of earnings. 
B) not consider the amount of liabilities required to generate that level of earnings. 
C) consider the amount of assets required to generate that level of earnings. 
D) not consider the amount of assets required to generate that level of earnings. 
E) consider the amount of liabilities required to generate that level of earnings.

Question 7

The FASB's conceptual framework does not include which of the following as financial reporting objectives?

Accepted Answer

A) Provide information useful for making suboptimal investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of future cash flows. 
C) Provide information about the economic resources of a firm's customers and the claims on those resources. 
D) Provide information about a firm's operating performance during a period. 
E) Provide information about how an enterprise obtains and uses cash. 
A) Provide information useful for making suboptimal investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of future cash flows. 
C) Provide information about the economic resources of a firm's customers and the claims on those resources. 
D) Provide information about a firm's operating performance during a period. 
E) Provide information about how an enterprise obtains and uses cash.

Question 8

An entity should derecognize (remove from the balance sheet) an asset that it no longer controls.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is/are a criteria for asset recognition under the FASB's and IASB's conceptual framework?

Accepted Answer

A) The firm owns or controls the right to use the asset. 
B) The right to use the item arises as a result of a past transaction or exchange. 
C) The future benefit has a relevant measurement attribute that a firm can quantify with sufficient reliability. 
D) all of the above 
E) none of the above 
A) The firm owns or controls the right to use the asset. 
B) The right to use the item arises as a result of a past transaction or exchange. 
C) The future benefit has a relevant measurement attribute that a firm can quantify with sufficient reliability. 
D) all of the above 
E) none of the above

Question 10

U.S.GAAP and IFRS require firms to disclose the fair value of long-term notes and bonds in notes to the financial statements.Fair value is

Accepted Answer

A) the amount the firm would pay to settle the debt on the date of the balance sheet. 
B) the current market price in the case of items that trade in active markets. 
C) the present value of the contractual cash flows discounted at a current market interest rate that reflects all the factors that market participants would consider, including the item's credit risk. 
D) all of the above 
E) none of the above 
A) the amount the firm would pay to settle the debt on the date of the balance sheet. 
B) the current market price in the case of items that trade in active markets. 
C) the present value of the contractual cash flows discounted at a current market interest rate that reflects all the factors that market participants would consider, including the item's credit risk. 
D) all of the above 
E) none of the above

Question 11

Which of the following is not true?

Accepted Answer

A) Firms report accounts receivable they expect to collect within one year at the amount of cash the firms expect to receive. 
B) Both U.S.GAAP and IFRS require firms with significant uncollectible accounts receivable to estimate the amount of uncollectible accounts related to a particular period's sales and recognize that amount as bad debt expense in the same period as the related revenues. 
C) Firms typically use a contra account to accounts receivable, such as Allowance for Uncollectibles, to reflect the amount of accounts receivable they do not expect to collect. 
D) The entry to recognize estimated uncollectible amounts involves a debit to Bad Debt Expense and a credit to Allowance for Uncollectibles. 
E) The write-off of a particular customer's account that becomes uncollectible involves a debit to Accounts Receivable and a credit to Allowance for Uncollectibles . 
A) Firms report accounts receivable they expect to collect within one year at the amount of cash the firms expect to receive. 
B) Both U.S.GAAP and IFRS require firms with significant uncollectible accounts receivable to estimate the amount of uncollectible accounts related to a particular period's sales and recognize that amount as bad debt expense in the same period as the related revenues. 
C) Firms typically use a contra account to accounts receivable, such as Allowance for Uncollectibles, to reflect the amount of accounts receivable they do not expect to collect. 
D) The entry to recognize estimated uncollectible amounts involves a debit to Bad Debt Expense and a credit to Allowance for Uncollectibles. 
E) The write-off of a particular customer's account that becomes uncollectible involves a debit to Accounts Receivable and a credit to Allowance for Uncollectibles .

Question 12

Both U.S.GAAP and IFRS often refer to ownership of a majority of the voting stock of another entity as indicating control, unless evidence indicates that the majority owner cannot exercise control.

Accepted Answer

A) True 
 B)False

Question 13

Firms recognize revenue, or income, under the following condition(s)

Accepted Answer

A) completion of the earnings process, only. 
B) receipt of assets from the customer, only. 
C) completion of the earnings process and receipt of assets from the customer. 
D) receipt of cash from the customer, only. 
E) commencement of the earnings process, only. 
A) completion of the earnings process, only. 
B) receipt of assets from the customer, only. 
C) completion of the earnings process and receipt of assets from the customer. 
D) receipt of cash from the customer, only. 
E) commencement of the earnings process, only.

Question 14

IFRS _____ firms to remeasure property, plant, and equipment upward for increases in fair value under certain conditions.U.S.GAAP _____ such upward remeasurements.

Accepted Answer

A) permits; permits 
B) permits; does not permit 
C) does not permit: does not permit 
D) does not permit: permits 
E) none of the above 
A) permits; permits 
B) permits; does not permit 
C) does not permit: does not permit 
D) does not permit: permits 
E) none of the above

Question 15

Which of the following is not true?

Accepted Answer

A) Gains (losses) are increases (decreases) in assets from peripheral or incidental transactions of an entity and from other transactions and events affecting the entity except those that result from revenues (expenses) or investments by (distributions to) owners. 
B)  Firms usually report gains and losses from sales of assets or settlements of liabilities at a net amount; that is, equal to the difference between the net asset received and the carrying value of the asset sold or between the net asset given and the carrying value of the liability settled. 
C) Gains and losses may arise from the remeasurement of assets and liabilities. 
D) Firms realize gains and losses when they sell or exchange assets or settle liabilities in market transactions. 
E) Firms recognize gains and losses when those items enter the measurement of net income or other comprehensive income. 
A) Gains (losses) are increases (decreases) in assets from peripheral or incidental transactions of an entity and from other transactions and events affecting the entity except those that result from revenues (expenses) or investments by (distributions to) owners. 
B)  Firms usually report gains and losses from sales of assets or settlements of liabilities at a net amount; that is, equal to the difference between the net asset received and the carrying value of the asset sold or between the net asset given and the carrying value of the liability settled. 
C) Gains and losses may arise from the remeasurement of assets and liabilities. 
D) Firms realize gains and losses when they sell or exchange assets or settle liabilities in market transactions. 
E) Firms recognize gains and losses when those items enter the measurement of net income or other comprehensive income.

Question 16

Explain the accounting for errors and changes in accounting principles and changes in accounting estimates.

Accepted Answer

ACCOUNTING FOR ERRORS AND CHANGES IN ACC

Question 17

A firm that can exert significant influence over another entity accounts for its intercorporate investment using the

Accepted Answer

A) lower of cost or market method. 
B) equity method. 
C) liability method. 
D) consolidation method. 
E) acquisition cost method. 
A) lower of cost or market method. 
B) equity method. 
C) liability method. 
D) consolidation method. 
E) acquisition cost method.

Question 18

The qualitative characteristics describe the attributes that enhance the usefulness of financial reporting information.The FASB's conceptual framework sets forth the qualitative characteristic of _____ that refers to information that can make a difference in a resource allocation decision by helping users to form predictions about the outcomes of future events and to confirm or correct prior information or expectations.Receiving information in a timely manner (referred to as timeliness) so that it can influence decisions is an aspect of this qualitative characteristic

Accepted Answer

A) relevance 
B) reliability 
C) comparability 
D) materiality 
E) understandability 
A) relevance 
B) reliability 
C) comparability 
D) materiality 
E) understandability

Question 19

The joint efforts of the FASB and the IASB to set forth qualitative characteristics of financial reporting information have led to which of the following?

Accepted Answer

A) fundamental qualitative characteristics, only 
B) enhancing qualitative characteristics, only 
C) pervasive constraints, only 
D) fundamental qualitative characteristics, enhancing qualitative characteristics, and pervasive constraints 
E) none of the above 
A) fundamental qualitative characteristics, only 
B) enhancing qualitative characteristics, only 
C) pervasive constraints, only 
D) fundamental qualitative characteristics, enhancing qualitative characteristics, and pervasive constraints 
E) none of the above

Question 20

The concept of a reporting entity pertains to a group of entities pursuing a common business purpose under the control of one of the entities in the group.

Accepted Answer

A) True 
 B)False

How do firms report accounts receivable?

The IASB's conceptual framework defines _____ as increases in economic benefits during an accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity participants.

For each of the following generally accepted accounting principles, identify an alternative acceptable accounting principle. a. Installment method b. Operating lease c. Straight-line, depreciation d. Last-in, first-out

Firms must designate each derivative as a hedging instrument, or else accounting views the derivative as a nonhedging instrument.Furthermore, firms must designate each hedging instrument as either a fair value hedge or a cash flow hedge.The accounting for cash flow hedges

Firms account for material errors in previously issued financial statements by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings of the current period.

Accountants and financial analysts criticize earnings per share as a measure of profitability because it does

The FASB's conceptual framework does not include which of the following as financial reporting objectives?

An entity should derecognize (remove from the balance sheet) an asset that it no longer controls.

Which of the following is/are a criteria for asset recognition under the FASB's and IASB's conceptual framework?

U.S.GAAP and IFRS require firms to disclose the fair value of long-term notes and bonds in notes to the financial statements.Fair value is

Which of the following is not true?

Both U.S.GAAP and IFRS often refer to ownership of a majority of the voting stock of another entity as indicating control, unless evidence indicates that the majority owner cannot exercise control.

Firms recognize revenue, or income, under the following condition(s)

IFRS _ firms to remeasure property, plant, and equipment upward for increases in fair value under certain conditions.U.S.GAAP _ such upward remeasurements.

Which of the following is not true?

Explain the accounting for errors and changes in accounting principles and changes in accounting estimates.

A firm that can exert significant influence over another entity accounts for its intercorporate investment using the

The joint efforts of the FASB and the IASB to set forth qualitative characteristics of financial reporting information have led to which of the following?

The concept of a reporting entity pertains to a group of entities pursuing a common business purpose under the control of one of the entities in the group.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Filters

Exam 17: Synthesis and Extensions

How do firms report accounts receivable?

The IASB's conceptual framework defines _____ as increases in economic benefits during an accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity participants.

For each of the following generally accepted accounting principles, identify an alternative acceptable accounting principle. a. Installment method b. Operating lease c. Straight-line, depreciation d. Last-in, first-out

Firms must designate each derivative as a hedging instrument, or else accounting views the derivative as a nonhedging instrument.Furthermore, firms must designate each hedging instrument as either a fair value hedge or a cash flow hedge.The accounting for cash flow hedges

Firms account for material errors in previously issued financial statements by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings of the current period.

Accountants and financial analysts criticize earnings per share as a measure of profitability because it does

The FASB's conceptual framework does not include which of the following as financial reporting objectives?

An entity should derecognize (remove from the balance sheet) an asset that it no longer controls.

Which of the following is/are a criteria for asset recognition under the FASB's and IASB's conceptual framework?

U.S.GAAP and IFRS require firms to disclose the fair value of long-term notes and bonds in notes to the financial statements.Fair value is

Which of the following is not true?

Both U.S.GAAP and IFRS often refer to ownership of a majority of the voting stock of another entity as indicating control, unless evidence indicates that the majority owner cannot exercise control.

Firms recognize revenue, or income, under the following condition(s)

IFRS _____ firms to remeasure property, plant, and equipment upward for increases in fair value under certain conditions.U.S.GAAP _____ such upward remeasurements.

Which of the following is not true?

Explain the accounting for errors and changes in accounting principles and changes in accounting estimates.

A firm that can exert significant influence over another entity accounts for its intercorporate investment using the

The joint efforts of the FASB and the IASB to set forth qualitative characteristics of financial reporting information have led to which of the following?

The concept of a reporting entity pertains to a group of entities pursuing a common business purpose under the control of one of the entities in the group.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Filters

IFRS _ firms to remeasure property, plant, and equipment upward for increases in fair value under certain conditions.U.S.GAAP _ such upward remeasurements.