Question 1

Which of the following is not true? Firms recognize revenue

Accepted Answer

A) when they have completed an earnings process or performed most or all of their obligations to customers, usually the delivery of a product or service. 
B) when they have received cash. 
C) using the percentage-of-completion method when the firms sell products under long-term contracts, such as construction companies. 
D) using the completed contract method [U.S.GAAP, only] when firms cannot reasonably estimate revenues and costs. 
E) using a variant of the cost-recovery method [IFRS, only] when firms cannot reasonably estimate revenues and costs. 
A) when they have completed an earnings process or performed most or all of their obligations to customers, usually the delivery of a product or service. 
B) when they have received cash. 
C) using the percentage-of-completion method when the firms sell products under long-term contracts, such as construction companies. 
D) using the completed contract method [U.S.GAAP, only] when firms cannot reasonably estimate revenues and costs. 
E) using a variant of the cost-recovery method [IFRS, only] when firms cannot reasonably estimate revenues and costs.

Question 2

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 tentative pervasive constraints?

Accepted Answer

A) cost, only 
B) materiality, only 
C) understandability, only 
D) timeliness, only 
E) materiality and cost 
A) cost, only 
B) materiality, only 
C) understandability, only 
D) timeliness, only 
E) materiality and cost

Question 3

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is not true?

Accepted Answer

A) The criteria attempt to identify the entity, whether lessor or lessee, that enjoys the benefits and incurs the risk of the leased asset. 
B) When the lessor enjoys the benefits and bears the risk, the lease is an operating lease. 
C) When the lessee enjoys the benefits and bears the risk, the lease is a capital lease. 
D) IFRS provides more specific criteria for identifying the entity enjoying the rewards and incurring the risk. 
E) Firms cannot currently apply the fair value option to capital leases. 
A) The criteria attempt to identify the entity, whether lessor or lessee, that enjoys the benefits and incurs the risk of the leased asset. 
B) When the lessor enjoys the benefits and bears the risk, the lease is an operating lease. 
C) When the lessee enjoys the benefits and bears the risk, the lease is a capital lease. 
D) IFRS provides more specific criteria for identifying the entity enjoying the rewards and incurring the risk. 
E) Firms cannot currently apply the fair value option to capital leases.

Question 4

. (U.S. GAAP)  A and X are exactly alike except for their choice of accounting methods. A uses straight-line depreciation while X uses 200 percent declining balance depreciation. A uses FIFO and X uses LIFO inventory methods.

a.	Both corporations issue 5,000 shares of $1 par value stock on January 1, for $15 per share.
b.	Both A and X acquire equipment on January 1, for $40,000 cash. The equipment has a 5-year life and a $5,000 salvage value.
c.	Both A and X purchase inventory as follows:
$\begin{array}{lll}\text { Date } & \# \text { Units } & \text { Unit Price }\
1 / 1 & 100 & \$ 100 \
7 / 1 & 150 & 110 \
11 / 1 &110& 115 \
\text { Total } & 360 &
\end{array}$
d.	Both A and X sell 200 units of inventory at $250 each. No credit sales are made.
e.	Other expenses for the year, excluding depreciation, total $10,000.

Required:

Identify and give the balance of any balance sheet and income statement accounts that have different balances at year end for companies A and X based on the above information. Ignore any tax effects.

Accepted Answer

The answer of . (U.S. GAAP)  A and X...

Question 5

The FASB and IASB are working jointly to develop a revised, coordinated set of financial reporting objectives.They envision that the proposed reporting objectives would also specify that firms should prepare financial reports from the perspective of its owners or a particular class of owners (proprietary perspective).

Accepted Answer

A) True 
 B)False

Question 6

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 financial reporting that treats similar items the same way and different items differently.Consistency refers to financial reporting that treats an item the same way over time.

Accepted Answer

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

Question 7

The financial reporting standards for property, plant, and equipment are similar under U.S.GAAP and IFRS except for

Accepted Answer

A) upward remeasurements for fair value increases, only. 
B) recognition and measurement of asset impairment losses, only. 
C) upward remeasurements for fair value increases and recognition and measurement of asset impairment losses. 
D) downward remeasurements for fair value decreases, only. 
E) downward remeasurements for fair value decreases and recognition and measurement of asset impairment losses. 
A) upward remeasurements for fair value increases, only. 
B) recognition and measurement of asset impairment losses, only. 
C) upward remeasurements for fair value increases and recognition and measurement of asset impairment losses. 
D) downward remeasurements for fair value decreases, only. 
E) downward remeasurements for fair value decreases and recognition and measurement of asset impairment losses.

Question 8

Which of the following is not true?

Accepted Answer

A) Firms reclassify gains and losses initially classified in other comprehensive income into net income when a confirming event subsequently occurs. 
B) Firms close amounts in other comprehensive income for a period to Accumulated Other Comprehensive Income at the end of the period. 
C) Net income includes gains and losses from sales or exchanges of assets or settlements of liabilities related incidentally or peripherally to the firm's core business. 
D) Authoritative guidance classifies gains and losses from the remeasurement of certain assets and liabilities as either net income or other comprehensive income. 
E) The FASB's and IASB's conceptual framework contains a conceptual model for classifying items in net income versus in other comprehensive income. 
A) Firms reclassify gains and losses initially classified in other comprehensive income into net income when a confirming event subsequently occurs. 
B) Firms close amounts in other comprehensive income for a period to Accumulated Other Comprehensive Income at the end of the period. 
C) Net income includes gains and losses from sales or exchanges of assets or settlements of liabilities related incidentally or peripherally to the firm's core business. 
D) Authoritative guidance classifies gains and losses from the remeasurement of certain assets and liabilities as either net income or other comprehensive income. 
E) The FASB's and IASB's conceptual framework contains a conceptual model for classifying items in net income versus in other comprehensive income.

Question 9

Concerning treasury shares, which of the following is/are true?

Accepted Answer

A) Firms recognize no gain or loss from purchasing their own shares or reissuing previously purchased shares. 
B) Differences between the purchase and reissue price are not earnings transactions but affect contributed capital accounts. 
C) Firms account for the purchase of treasury shares using either the cost method or the par value method or the constructive retirement method. 
D) The methods firms use to account for the purchase of treasury shares differ in terms of the shareholders' equity accounts affected, but all result in an equal reduction in total shareholders' equity when firms purchase their own shares. 
E) all of the above 
A) Firms recognize no gain or loss from purchasing their own shares or reissuing previously purchased shares. 
B) Differences between the purchase and reissue price are not earnings transactions but affect contributed capital accounts. 
C) Firms account for the purchase of treasury shares using either the cost method or the par value method or the constructive retirement method. 
D) The methods firms use to account for the purchase of treasury shares differ in terms of the shareholders' equity accounts affected, but all result in an equal reduction in total shareholders' equity when firms purchase their own shares. 
E) all of the above

Question 10

The FASB's conceptual framework defines a(n) _____ as a probable future economic benefit obtained or controlled by a particular entity as a result of a past transaction or event.

Accepted Answer

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

Question 11

The following information pertains to the Kathy Company for the year ended December 31, Year 2: 
$\begin{array}{ll}
\text { Common shares outstanding } & 1,000,000 \
\text { Stated value per share } & \$ 10.00 \
\text { Market price per share } & \$ 80.00 \
\text { Year 1 dividends paid per share } & \$ 4.00 \
\text { Year 2 dividends paid per share } & \$ 5.00 \
\text { Earnings per share } & \$ 8.00
\end{array}$

The price-earnings ratio for Kathy's common stock is

Accepted Answer

A) 8 times 
B) 9 times 
C) 10 times 
D) 12 times 
E) 14 times 
A) 8 times 
B) 9 times 
C) 10 times 
D) 12 times 
E) 14 times

Question 12

Which of the following is not true concerning the FASB and the IASB conceptual frameworks?

Accepted Answer

A) Both the FASB and the IASB rely on a conceptual framework to guide their standard-setting decisions. 
B) The conceptual framework is a rigorous set of principles from which standard setters can logically deduce appropriate financial reporting standards. 
C) The purpose of a conceptual framework is to guide standard-setting decisions in order to enhance the quality and consistency of those decisions. 
D) The FASB and the IASB have separately developed their conceptual frameworks, and those frameworks are similar. 
E) The two standard-setting bodies are currently working to develop a common conceptual framework for financial reporting. 
A) Both the FASB and the IASB rely on a conceptual framework to guide their standard-setting decisions. 
B) The conceptual framework is a rigorous set of principles from which standard setters can logically deduce appropriate financial reporting standards. 
C) The purpose of a conceptual framework is to guide standard-setting decisions in order to enhance the quality and consistency of those decisions. 
D) The FASB and the IASB have separately developed their conceptual frameworks, and those frameworks are similar. 
E) The two standard-setting bodies are currently working to develop a common conceptual framework for financial reporting.

Question 13

Which of the following is/are not true?

Accepted Answer

A) U.S.GAAP and IFRS do not permit the employer to prepare consolidated financial statements with the retirement trust. 
B) The employer must report the net funded status of each defined benefit retirement plan (that is, the fair value of retirement trust assets minus the retirement trust obligation) as either an asset or a liability on its balance sheet. 
C) The employer must report the net funded status of each defined benefit retirement plan and credit (for an overfunded plan) or debit (for an underfunded plan) is to net income. 
D) Notes to the financial statements provide information about investments made by the retirement trust and how trust assets and liabilities changed during a period. 
E) all of the above 
A) U.S.GAAP and IFRS do not permit the employer to prepare consolidated financial statements with the retirement trust. 
B) The employer must report the net funded status of each defined benefit retirement plan (that is, the fair value of retirement trust assets minus the retirement trust obligation) as either an asset or a liability on its balance sheet. 
C) The employer must report the net funded status of each defined benefit retirement plan and credit (for an overfunded plan) or debit (for an underfunded plan) is to net income. 
D) Notes to the financial statements provide information about investments made by the retirement trust and how trust assets and liabilities changed during a period. 
E) all of the above

Question 14

The FASB and the IASB are reconsidering the role of uncertainty, or probability, in the definition, recognition, and measurement of liabilities.Existing recognition criteria include a probable future sacrifice of resources; one issue involves the minimum probability level to warrant recognition of an uncertain obligation as a liability.IFRS imply a minimum probability level of greater than _____ percent.

Accepted Answer

A) 50 
B) 60 
C) 70 
D) 80 
E) 90 
A) 50 
B) 60 
C) 70 
D) 80 
E) 90

Question 15

Explain the accounting for marketable securities.

Accepted Answer

MARKETABLE SECURITIES
Firms sometimes ac

Question 16

Discuss the definition, recognition, and measurement of assets.

Accepted Answer

Asset
The FASB's conceptual framework de

Question 17

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

Accepted Answer

A) Provide information useful for making irrational investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of past 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 expected operating performance during the next period. 
E) all of the above 
A) Provide information useful for making irrational investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of past 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 expected operating performance during the next period. 
E) all of the above

Question 18

Which of the following is/are true?

Accepted Answer

A) Firms sometimes issue bonds with stock warrants attached and allocate the amount received between the bonds and the warrants based on their respective fair values. 
B) When firms issue convertible bonds U.S.GAAP requires firms to allocate the full issue price to the bonds and none to the conversion feature. 
C) IFRS requires firms to allocate the issue price between the bonds and the conversion feature. 
D) Under IFRS, the firm allocates the issue price of bonds with terms similar to those issued but without the conversion feature to the bonds and the remainder of the issue price to the conversion option. 
E) all of the above 
A) Firms sometimes issue bonds with stock warrants attached and allocate the amount received between the bonds and the warrants based on their respective fair values. 
B) When firms issue convertible bonds U.S.GAAP requires firms to allocate the full issue price to the bonds and none to the conversion feature. 
C) IFRS requires firms to allocate the issue price between the bonds and the conversion feature. 
D) Under IFRS, the firm allocates the issue price of bonds with terms similar to those issued but without the conversion feature to the bonds and the remainder of the issue price to the conversion option. 
E) all of the above

Question 19

Earnings per common share result from dividing net income

Accepted Answer

A) minus preferred stock dividends by the weighted-average number of outstanding common shares during the accounting period. 
B) by the weighted-average number of outstanding common shares during the accounting period. 
C) minus common stock dividends by the end-of-year number of outstanding common shares. 
D) minus preferred stock dividends by the end-of-year number of outstanding common shares. 
E) by the end-of-year number of outstanding common shares. 
A) minus preferred stock dividends by the weighted-average number of outstanding common shares during the accounting period. 
B) by the weighted-average number of outstanding common shares during the accounting period. 
C) minus common stock dividends by the end-of-year number of outstanding common shares. 
D) minus preferred stock dividends by the end-of-year number of outstanding common shares. 
E) by the end-of-year number of outstanding common shares.

Question 20

Firms do not recognize certain obligations that are uncertain as to amount or timing or both as liabilities, unless those items meet a probability threshold and have a reliable measurement attribute.U.S.GAAP refers to these as _____, such as the possible obligation under an unsettled lawsuit.

Accepted Answer

A) contingent liabilities 
B) unrealized contingencies 
C) realized contingencies 
D) unrecognized contingencies 
E) recognized contingencies 
A) contingent liabilities 
B) unrealized contingencies 
C) realized contingencies 
D) unrecognized contingencies 
E) recognized contingencies

Which of the following is not true? Firms recognize revenue

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 tentative pervasive constraints?

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is not true?

The financial reporting standards for property, plant, and equipment are similar under U.S.GAAP and IFRS except for

Which of the following is not true?

Concerning treasury shares, which of the following is/are true?

The FASB's conceptual framework defines a(n) _____ as a probable future economic benefit obtained or controlled by a particular entity as a result of a past transaction or event.

Which of the following is not true concerning the FASB and the IASB conceptual frameworks?

Which of the following is/are not true?

Explain the accounting for marketable securities.

Discuss the definition, recognition, and measurement of assets.

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

Which of the following is/are true?

Earnings per common share result from dividing net income

Firms do not recognize certain obligations that are uncertain as to amount or timing or both as liabilities, unless those items meet a probability threshold and have a reliable measurement attribute.U.S.GAAP refers to these as _____, such as the possible obligation under an unsettled lawsuit.

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

Which of the following is not true? Firms recognize revenue

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 tentative pervasive constraints?

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is not true?

The financial reporting standards for property, plant, and equipment are similar under U.S.GAAP and IFRS except for

Which of the following is not true?

Concerning treasury shares, which of the following is/are true?

The FASB's conceptual framework defines a(n) _____ as a probable future economic benefit obtained or controlled by a particular entity as a result of a past transaction or event.

Which of the following is not true concerning the FASB and the IASB conceptual frameworks?

Which of the following is/are not true?

Explain the accounting for marketable securities.

Discuss the definition, recognition, and measurement of assets.

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

Which of the following is/are true?

Earnings per common share result from dividing net income

Firms do not recognize certain obligations that are uncertain as to amount or timing or both as liabilities, unless those items meet a probability threshold and have a reliable measurement attribute.U.S.GAAP refers to these as _____, such as the possible obligation under an unsettled lawsuit.

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