Question 1

Regarding employee stock options, which of the following is/are true?

Accepted Answer

A) Firms compute a fair-value-based measure of employee stock options on the date of the grant using an option-pricing model that incorporates information about the current market price, the exercise price, the expected time between grant and exercise, the expected volatility of the stock, the expected dividends, and the risk-free interest rate. 
B) Total compensation cost is the number of options the firm expects to vest times the expected value per option at the date of redemption. 
C) Firms amortize this total cost over the requisite service period, which is the expected period of benefit. 
D) The requisite service period is usually the period between the grant date and the vesting date. 
E) Firms do not typically remeasure most types of stock options after the initial grant date. 
A) Firms compute a fair-value-based measure of employee stock options on the date of the grant using an option-pricing model that incorporates information about the current market price, the exercise price, the expected time between grant and exercise, the expected volatility of the stock, the expected dividends, and the risk-free interest rate. 
B) Total compensation cost is the number of options the firm expects to vest times the expected value per option at the date of redemption. 
C) Firms amortize this total cost over the requisite service period, which is the expected period of benefit. 
D) The requisite service period is usually the period between the grant date and the vesting date. 
E) Firms do not typically remeasure most types of stock options after the initial grant date.

Question 2

Earnings per share of common stock (assuming no convertible or other potentially dilutive securities outstanding)

Accepted Answer

A) equals net income attributable to common stock divided by the weighted average number of common shares outstanding during the period. 
B) equals net income attributable to common stock divided by the number of common shares outstanding at the beginning of the period. 
C) equals net income attributable to common stock divided by the number of common shares outstanding at the end of the period. 
D) all of the above. 
E) none of the above. 
A) equals net income attributable to common stock divided by the weighted average number of common shares outstanding during the period. 
B) equals net income attributable to common stock divided by the number of common shares outstanding at the beginning of the period. 
C) equals net income attributable to common stock divided by the number of common shares outstanding at the end of the period. 
D) all of the above. 
E) none of the above.

Question 3

U.S.GAAP and IFRS do not require firms to disclose the fair value of long-term notes and bonds in notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 4

Explain the accounting for treasury shares.

Accepted Answer

TREASURY SHARES
Firms recognize no gain

Question 5

Firms account for leases using either the operating lease method or the capital (finance) lease method.Which of the following is not true?

Accepted Answer

A) The capital, or finance, lease method treats leases equivalent to installment purchases or sales, where the lessee borrows funds from the lessor to purchase the asset and the lessor recognizes profit at the time of sale. 
B) The lessee records the leased asset and the lease liability on the balance sheet at the present value of the contractual cash flows at the time of signing the lease. 
C) The lessee amortizes the leased asset, similar to recognizing depreciation on buildings and equipment. 
D) The lessor recognizes interest expense on the lease liability, similar to recognizing interest expense on long-term notes or bonds. 
E) The lessor records the signing of a capital lease the same as if the lessor sold the leased asset for an installment note receivable. 
A) The capital, or finance, lease method treats leases equivalent to installment purchases or sales, where the lessee borrows funds from the lessor to purchase the asset and the lessor recognizes profit at the time of sale. 
B) The lessee records the leased asset and the lease liability on the balance sheet at the present value of the contractual cash flows at the time of signing the lease. 
C) The lessee amortizes the leased asset, similar to recognizing depreciation on buildings and equipment. 
D) The lessor recognizes interest expense on the lease liability, similar to recognizing interest expense on long-term notes or bonds. 
E) The lessor records the signing of a capital lease the same as if the lessor sold the leased asset for an installment note receivable.

Question 6

The criteria for recognition of a liability does not include which of the following?

Accepted Answer

A) The obligation represents a present obligation. 
B) The obligation exists as a result of a past transaction or exchange, called the obligating event. 
C) The obligation requires the probable future sacrifice of an economic resource that the firm has little or no discretion to avoid. 
D) The obligation has a relevant measurement attribute that the firm can quantify with sufficient reliability. 
E) The obligation represents a potential future commitment or intent. 
A) The obligation represents a present obligation. 
B) The obligation exists as a result of a past transaction or exchange, called the obligating event. 
C) The obligation requires the probable future sacrifice of an economic resource that the firm has little or no discretion to avoid. 
D) The obligation has a relevant measurement attribute that the firm can quantify with sufficient reliability. 
E) The obligation represents a potential future commitment or intent.

Question 7

If firms expect to receive cash more than one year after the time of recognizing revenue, they measure revenues at the

Accepted Answer

A) future value of the amount of cash they expect to receive. 
B) present value of the amount of cash they expect to receive. 
C) fair value. 
D) aggregate total of the amount of cash they expect to receive. 
E) net realizable value. 
A) future value of the amount of cash they expect to receive. 
B) present value of the amount of cash they expect to receive. 
C) fair value. 
D) aggregate total of the amount of cash they expect to receive. 
E) net realizable value.

Question 8

Describe accrual and cash accounting.

Accepted Answer

Accrual Accounting
Accrual accounting me

Question 9

Discuss recent changes in the financial reporting environment.

Accepted Answer

Recent changes in the financial reportin

Question 10

Explain the accounting for retirement benefits.

Accepted Answer

RETIREMENT BENEFITS
U.S.GAAP and IFRS re

Question 11

Firms can currently apply the fair value option to capital leases.

Accepted Answer

A) True 
 B)False

Question 12

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 _____ envisions that the nature of the information is relevant and that its effect is large enough to influence a decision. As standard setters make decisions about financial reporting standards, they consider the costs and benefits of those standards.They assess whether the benefits to users of financial reports from a particular financial reporting requirement exceed the costs of providing the information.

Accepted Answer

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

Question 13

Firms often acquire derivative instruments to hedge interest rate, exchange rate, commodity price, and other risks.U.S.GAAP and IFRS classify derivatives into which of the following categories?

Accepted Answer

A) Fair value hedges of a recognized asset or liability or of an unrecognized firm commitment, only. 
B) Cash flow hedges of an existing asset or liability or of a forecasted transaction, only. 
C) Nonhedging derivative, only. 
D) Fair value hedges of a recognized asset or liability or of an unrecognized firm commitment, cash flow hedges of an existing asset or liability or of a forecasted transaction, and nonhedging derivative. 
E) none of the above 
A) Fair value hedges of a recognized asset or liability or of an unrecognized firm commitment, only. 
B) Cash flow hedges of an existing asset or liability or of a forecasted transaction, only. 
C) Nonhedging derivative, only. 
D) Fair value hedges of a recognized asset or liability or of an unrecognized firm commitment, cash flow hedges of an existing asset or liability or of a forecasted transaction, and nonhedging derivative. 
E) none of the above

Question 14

Correction of a material error occurring in prior periods is reported as

Accepted Answer

A) an adjustment of earnings of the current period, only. 
B) a retroactive restatement of prior years earnings, only. 
C) a retroactive restatement of prior years earnings and an adjustment to the beginning balance of retained earnings for the current period. 
D) an adjustment of earnings of the current and future periods. 
E) an adjustment of earnings of the current period, and an adjustment to the ending balance of retained earnings for the current period. 
A) an adjustment of earnings of the current period, only. 
B) a retroactive restatement of prior years earnings, only. 
C) a retroactive restatement of prior years earnings and an adjustment to the beginning balance of retained earnings for the current period. 
D) an adjustment of earnings of the current and future periods. 
E) an adjustment of earnings of the current period, and an adjustment to the ending balance of retained earnings for the current period.

Question 15

U.S.GAAP and IFRS require firms to treat some or all expenditures made to internally develop brand names, customer lists, new technologies, and other intangibles as expenses in the period of the expenditure.

Accepted Answer

A) True 
 B)False

Question 16

An employer must recognize changes in the funded status of a defined benefit retirement plan on its balance sheet each period and recognize these changes immediately in net income.

Accepted Answer

A) True 
 B)False

Question 17

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 general criteria for identifying the entity enjoying the rewards and incurring the risk. 
E) Firms can 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 general criteria for identifying the entity enjoying the rewards and incurring the risk. 
E) Firms can currently apply the fair value option to capital leases

Question 18

The qualitative characteristics describe the attributes that enhance the usefulness of financial reporting information.The IASB's conceptual framework sets forth the qualitative characteristic of _____ which refers to the attribute that users of financial reports will perceive the significance of a reported item to their decisions.Such perception involves comprehending the economic effects of a firm's actions and the measurement and reporting of those economic effects in the financial reports.

Accepted Answer

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

Question 19

Firms sometimes acquire bonds or capital stock of other entities for their expected returns (through interest, dividends, and price appreciation) without any intent to exert influence or control over the other entity.Which of the following is/are not true?

Accepted Answer

A) U.S.GAAP and IFRS presume that the acquisition of any amount of bonds, and the acquisition of less than 50% of the voting stock of another entity implies an inability to exert significant influence or control. 
B) Firms may classify such securities as debt securities held to maturity (IFRS uses the term held-to-maturity investments). 
C) Firms may classify such securities as trading securities (IFRS uses the term financial assets at fair value through profit or loss). 
D) Firms may classify such securities as securities available for sale (IFRS uses the term available-for-sale financial assets). 
E) all of the above 
A) U.S.GAAP and IFRS presume that the acquisition of any amount of bonds, and the acquisition of less than 50% of the voting stock of another entity implies an inability to exert significant influence or control. 
B) Firms may classify such securities as debt securities held to maturity (IFRS uses the term held-to-maturity investments). 
C) Firms may classify such securities as trading securities (IFRS uses the term financial assets at fair value through profit or loss). 
D) Firms may classify such securities as securities available for sale (IFRS uses the term available-for-sale financial assets). 
E) all of the above

Question 20

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

Accepted Answer

A) U.S.GAAP provides fourteen criteria, any one of which qualifies a lease as a capital lease. 
B) IFRS provides general criteria for identifying the entity enjoying the rewards and incurring the risk. 
C) Firms cannot currently apply the fair value option to capital leases. 
D) The FASB and the IASB have undertaken a joint project involving the lessee's accounting for leases which may result in treating all leases as capital leases. 
E) all of the above 
A) U.S.GAAP provides fourteen criteria, any one of which qualifies a lease as a capital lease. 
B) IFRS provides general criteria for identifying the entity enjoying the rewards and incurring the risk. 
C) Firms cannot currently apply the fair value option to capital leases. 
D) The FASB and the IASB have undertaken a joint project involving the lessee's accounting for leases which may result in treating all leases as capital leases. 
E) all of the above

Regarding employee stock options, which of the following is/are true?

Earnings per share of common stock (assuming no convertible or other potentially dilutive securities outstanding)

U.S.GAAP and IFRS do not require firms to disclose the fair value of long-term notes and bonds in notes to the financial statements.

Explain the accounting for treasury shares.

Firms account for leases using either the operating lease method or the capital (finance) lease method.Which of the following is not true?

The criteria for recognition of a liability does not include which of the following?

If firms expect to receive cash more than one year after the time of recognizing revenue, they measure revenues at the

Describe accrual and cash accounting.

Discuss recent changes in the financial reporting environment.

Explain the accounting for retirement benefits.

Firms can currently apply the fair value option to capital leases.

Firms often acquire derivative instruments to hedge interest rate, exchange rate, commodity price, and other risks.U.S.GAAP and IFRS classify derivatives into which of the following categories?

Correction of a material error occurring in prior periods is reported as

U.S.GAAP and IFRS require firms to treat some or all expenditures made to internally develop brand names, customer lists, new technologies, and other intangibles as expenses in the period of the expenditure.

An employer must recognize changes in the funded status of a defined benefit retirement plan on its balance sheet each period and recognize these changes immediately in net income.

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

Firms sometimes acquire bonds or capital stock of other entities for their expected returns (through interest, dividends, and price appreciation) without any intent to exert influence or control over the other entity.Which of the following is/are not true?

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

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

Regarding employee stock options, which of the following is/are true?

Earnings per share of common stock (assuming no convertible or other potentially dilutive securities outstanding)

U.S.GAAP and IFRS do not require firms to disclose the fair value of long-term notes and bonds in notes to the financial statements.

Explain the accounting for treasury shares.

Firms account for leases using either the operating lease method or the capital (finance) lease method.Which of the following is not true?

The criteria for recognition of a liability does not include which of the following?

If firms expect to receive cash more than one year after the time of recognizing revenue, they measure revenues at the

Describe accrual and cash accounting.

Discuss recent changes in the financial reporting environment.

Explain the accounting for retirement benefits.

Firms can currently apply the fair value option to capital leases.

Firms often acquire derivative instruments to hedge interest rate, exchange rate, commodity price, and other risks.U.S.GAAP and IFRS classify derivatives into which of the following categories?

Correction of a material error occurring in prior periods is reported as

U.S.GAAP and IFRS require firms to treat some or all expenditures made to internally develop brand names, customer lists, new technologies, and other intangibles as expenses in the period of the expenditure.

An employer must recognize changes in the funded status of a defined benefit retirement plan on its balance sheet each period and recognize these changes immediately in net income.

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

Firms sometimes acquire bonds or capital stock of other entities for their expected returns (through interest, dividends, and price appreciation) without any intent to exert influence or control over the other entity.Which of the following is/are not true?

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

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