Question 1

Which of the following is/are not true regarding the classification of redeemable preferred shares on the balance sheet?

Accepted Answer

A) The classification of redeemable preferred shares on the balance sheet depends on the conditions for redemption. 
B) If only the issuing firm has the option to redeem, then the preferred shares are part of its shareholders' equity. 
C) If the issuing firm must redeem the preferred shares (so-called "mandatory redemption"), either at a specified time or upon a specified condition certain to occur, the issuing firm treats the preferred shares as its shareholders' equity. 
D) If the preferred shareholders have the option to require redemption, then the preferred shares appear as a liability under U.S.GAAP. 
E) If the preferred shareholders have the option to require redemption, then the preferred shares appear as a liability under IFRS. 
A) The classification of redeemable preferred shares on the balance sheet depends on the conditions for redemption. 
B) If only the issuing firm has the option to redeem, then the preferred shares are part of its shareholders' equity. 
C) If the issuing firm must redeem the preferred shares (so-called "mandatory redemption"), either at a specified time or upon a specified condition certain to occur, the issuing firm treats the preferred shares as its shareholders' equity. 
D) If the preferred shareholders have the option to require redemption, then the preferred shares appear as a liability under U.S.GAAP. 
E) If the preferred shareholders have the option to require redemption, then the preferred shares appear as a liability under IFRS.

Question 2

Firms account for changes in estimates, such as for depreciable lives, uncollectible accounts, or warranty cost, prospectively, in current and future periods' earnings.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is/are not true regarding the classification of redeemable preferred shares on the balance sheet?

Accepted Answer

A) The classification of redeemable preferred shares on the balance sheet depends on the conditions for redemption. 
B) If only the issuing firm has the option to redeem, then the preferred shares are part of its shareholders' equity. 
C) If the issuing firm must redeem the preferred shares (so-called "mandatory redemption"), either at a specified time or upon a specified condition certain to occur, the issuing firm treats the preferred shares as its shareholders' equity. 
D) If the preferred shareholders have the option to require redemption, then the preferred shares appear between liabilities and shareholders' equity under U.S.GAAP. 
E) If the preferred shareholders have the option to require redemption, then the preferred shares appear between liabilities and shareholders' equity under IFRS. 
A) The classification of redeemable preferred shares on the balance sheet depends on the conditions for redemption. 
B) If only the issuing firm has the option to redeem, then the preferred shares are part of its shareholders' equity. 
C) If the issuing firm must redeem the preferred shares (so-called "mandatory redemption"), either at a specified time or upon a specified condition certain to occur, the issuing firm treats the preferred shares as its shareholders' equity. 
D) If the preferred shareholders have the option to require redemption, then the preferred shares appear between liabilities and shareholders' equity under U.S.GAAP. 
E) If the preferred shareholders have the option to require redemption, then the preferred shares appear between liabilities and shareholders' equity under IFRS.

Question 4

When a firm has securities outstanding that, if exchanged for shares of common stock, would decrease basic earnings per share by _____ or more, generally accepted accounting principles require a dual presentation: basic earnings per share and diluted earnings per share.

Accepted Answer

A) 1 percent 
B) 3 percent 
C) 10 percent 
D) 20 percent 
E) 30 percent 
A) 1 percent 
B) 3 percent 
C) 10 percent 
D) 20 percent 
E) 30 percent

Question 5

Which of the following is/are not true?

Accepted Answer

A) U.S.GAAP and IFRS require firms to recognize the cost of retirement benefits (pensions, health care, life insurance) as an expense while employees work, not when they receive payments or other benefits during retirement. 
B) Employers often contribute cash to a trust, an entity administered by the employer, to fund their retirement obligations. 
C) The accounting records of the trust established to fund the retirement obligations are separate from the accounting records of the employer, and the amounts on the two sets of books usually differ. 
D) Payments to employees come from both the employer's contributions and investment returns of the trust established to fund the retirement obligations. 
E) all of the above 
A) U.S.GAAP and IFRS require firms to recognize the cost of retirement benefits (pensions, health care, life insurance) as an expense while employees work, not when they receive payments or other benefits during retirement. 
B) Employers often contribute cash to a trust, an entity administered by the employer, to fund their retirement obligations. 
C) The accounting records of the trust established to fund the retirement obligations are separate from the accounting records of the employer, and the amounts on the two sets of books usually differ. 
D) Payments to employees come from both the employer's contributions and investment returns of the trust established to fund the retirement obligations. 
E) all of the above

Question 6

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 operating lease method treats leases as executory contracts. 
B) The operating lease method does not recognize a leased asset on the lessee's balance sheet. 
C) The operating lease method does not recognize a lease liability on the lessor's balance sheet. 
D) Under the operating lease method, the lessor recognizes rent revenue as the lessee uses the leased asset over time. 
E) Under the operating lease method, the lessee does not recognize rent expense as the lessee uses the leased asset over time. 
A) The operating lease method treats leases as executory contracts. 
B) The operating lease method does not recognize a leased asset on the lessee's balance sheet. 
C) The operating lease method does not recognize a lease liability on the lessor's balance sheet. 
D) Under the operating lease method, the lessor recognizes rent revenue as the lessee uses the leased asset over time. 
E) Under the operating lease method, the lessee does not recognize rent expense as the lessee uses the leased asset over time.

Question 7

Equity, or shareholders' equity for a corporation,

Accepted Answer

A) is the residual interest of owners in the assets of an entity, after subtracting liabilities. 
B) includes assets exchanged by owners in return for an ownership interest. 
C) includes net assets generated by earnings activities in excess of net assets distributed to owners as dividends. 
D) is reduced by repurchases by the firm of its ownership interests. 
E) all of the above. 
A) is the residual interest of owners in the assets of an entity, after subtracting liabilities. 
B) includes assets exchanged by owners in return for an ownership interest. 
C) includes net assets generated by earnings activities in excess of net assets distributed to owners as dividends. 
D) is reduced by repurchases by the firm of its ownership interests. 
E) all of the above.

Question 8

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is true?

Accepted Answer

A) Firms cannot currently apply the fair value option to capital leases. 
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) all of the above 
A) Firms cannot currently apply the fair value option to capital leases. 
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) all of the above

Question 9

Firms must amortize the difference between the issue price and the face value as an adjustment to interest expense over the life of the bonds.

Accepted Answer

A) True 
 B)False

Question 10

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data in the

Accepted Answer

A) body of the income statement. 
B) footnotes to the financial statements. 
C) management discussion and analysis. 
D) body of the balance sheet. 
E) body of the statement of cash flows. 
A) body of the income statement. 
B) footnotes to the financial statements. 
C) management discussion and analysis. 
D) body of the balance sheet. 
E) body of the statement of cash flows.

Question 11

Which of the following is/are true?

Accepted Answer

A) Under U.S.GAAP, firms must test property, plant, and equipment for possible asset impairment when conditions indicate that a significant decrease in fair value has occurred. 
B) Under U.S.GAAP, firms initially compare the undiscounted cash flows expected from the asset to the asset's carrying value. 
C) Under U.S.GAAP, a fixed asset impairment occurs when the asset's carrying value exceeds the undiscounted cash flows. 
D) Under U.S.GAAP, the amount of the recognized impairment loss is the excess of the carrying value over the fair value of the asset. 
E) all of the above 
A) Under U.S.GAAP, firms must test property, plant, and equipment for possible asset impairment when conditions indicate that a significant decrease in fair value has occurred. 
B) Under U.S.GAAP, firms initially compare the undiscounted cash flows expected from the asset to the asset's carrying value. 
C) Under U.S.GAAP, a fixed asset impairment occurs when the asset's carrying value exceeds the undiscounted cash flows. 
D) Under U.S.GAAP, the amount of the recognized impairment loss is the excess of the carrying value over the fair value of the asset. 
E) all of the above

Question 12

How do firms account for property, plant, and equipment?

Accepted Answer

PROPERTY, PLANT, AND EQUIPMENT
Firms ini

Question 13

Describe the calculation of earnings and book value per share.

Accepted Answer

EARNINGS AND BOOK VALUE PER SHARE
Public

Question 14

Explain the accounting for notes and bonds.

Accepted Answer

NOTES AND BONDS
U.S.GAAP and IFRS accoun

Question 15

Firms sometimes invest in the common stock of other entities in order to exert significant influence or control over the other entity.U.S.GAAP and IFRS assume that firms owning more than ______ can exert control, unless other information indicates the contrary.

Accepted Answer

A) 20% 
B) 30% 
C) 40% 
D) 50% 
E) 60% 
A) 20% 
B) 30% 
C) 40% 
D) 50% 
E) 60%

Question 16

Identifying accounting principles.

Indicate the accounting principle or procedure apparently used to record each of the following independent transactions. Also, describe the transaction or event recorded in each case. 
a. Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X 
                  Dividend Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     X

b. Unrealized Holding Loss on 
       Marketable Securities Available for Sale . . . . . . . . . . . . . . . . . . . . X 
                    Marketable Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      X

c. Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X 
                 Investment in Affiliated Company. . . . . . . . . . . . . . . . . . . . . .           X

Dividend declared and received from affiliated company.

d. Bad Debt Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         X 
             Allowance for Uncollectibles . . . . . . . . . . . . . . . . . . . . . . . .       X

e. Rent Expense for Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .X 
            Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Investment in Affiliated Company. . . . . . . . . . . . . . . . . . . . . . . . . . .    X 
                             Equity in Earnings of Affiliated Company . . . . . . . . . . . . . . . . X

g. Allowance for Uncollectibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    X 
                      Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    X

h. Loss from Price Decline of Inventories. . . . . . . . . . . . . . . . . . . . . . .   X 
                 Merchandise Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .          X

i. Liability Under Long-Term Lease . . . . . . . . . . . . . . . . . . . . . . . .         X 
  Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          X 
                  Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X

j. Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      X 
                       Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    X

k. Interest Rate Swap Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         X 
           Gain on Remeasurement of Swap Contract 
                  (Income Statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          X

Accepted Answer

(Identifying generally accepted accounti

Question 17

Describe comprehensive income, net income, and other comprehensive income.

Accepted Answer

COMPREHENSIVE INCOME, NET INCOME, AND OT

Question 18

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 enhancing qualitative characteristics?

Accepted Answer

A) comparability, only 
B) verifiability, only 
C) understandability, only 
D) timeliness, only 
E) comparability, verifiability, timeliness, and understandability 
A) comparability, only 
B) verifiability, only 
C) understandability, only 
D) timeliness, only 
E) comparability, verifiability, timeliness, and understandability

Question 19

U.S.GAAP and IFRS require firms to retrospectively apply any changes in accounting principle by recalculating the income for prior periods under the new accounting principle, if it at all feasible.

Accepted Answer

A) True 
 B)False

Question 20

U.S.GAAP and IFRS require firms to account for correction of errors, regardless of whether they are material or not, by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings for the current period.

Accepted Answer

A) True 
 B)False

Which of the following is/are not true regarding the classification of redeemable preferred shares on the balance sheet?

Firms account for changes in estimates, such as for depreciable lives, uncollectible accounts, or warranty cost, prospectively, in current and future periods' earnings.

Which of the following is/are not true regarding the classification of redeemable preferred shares on the balance sheet?

When a firm has securities outstanding that, if exchanged for shares of common stock, would decrease basic earnings per share by _____ or more, generally accepted accounting principles require a dual presentation: basic earnings per share and diluted earnings per share.

Which of the following is/are not true?

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

Equity, or shareholders' equity for a corporation,

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is true?

Firms must amortize the difference between the issue price and the face value as an adjustment to interest expense over the life of the bonds.

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data in the

Which of the following is/are true?

How do firms account for property, plant, and equipment?

Describe the calculation of earnings and book value per share.

Explain the accounting for notes and bonds.

Firms sometimes invest in the common stock of other entities in order to exert significant influence or control over the other entity.U.S.GAAP and IFRS assume that firms owning more than ______ can exert control, unless other information indicates the contrary.

Describe comprehensive income, net income, and other comprehensive income.

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 enhancing qualitative characteristics?

U.S.GAAP and IFRS require firms to retrospectively apply any changes in accounting principle by recalculating the income for prior periods under the new accounting principle, if it at all feasible.

U.S.GAAP and IFRS require firms to account for correction of errors, regardless of whether they are material or not, by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings for the current period.

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/are not true regarding the classification of redeemable preferred shares on the balance sheet?

Firms account for changes in estimates, such as for depreciable lives, uncollectible accounts, or warranty cost, prospectively, in current and future periods' earnings.

Which of the following is/are not true regarding the classification of redeemable preferred shares on the balance sheet?

When a firm has securities outstanding that, if exchanged for shares of common stock, would decrease basic earnings per share by _____ or more, generally accepted accounting principles require a dual presentation: basic earnings per share and diluted earnings per share.

Which of the following is/are not true?

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

Equity, or shareholders' equity for a corporation,

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is true?

Firms must amortize the difference between the issue price and the face value as an adjustment to interest expense over the life of the bonds.

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data in the

Which of the following is/are true?

How do firms account for property, plant, and equipment?

Describe the calculation of earnings and book value per share.

Explain the accounting for notes and bonds.

Firms sometimes invest in the common stock of other entities in order to exert significant influence or control over the other entity.U.S.GAAP and IFRS assume that firms owning more than ______ can exert control, unless other information indicates the contrary.

Describe comprehensive income, net income, and other comprehensive income.

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 enhancing qualitative characteristics?

U.S.GAAP and IFRS require firms to retrospectively apply any changes in accounting principle by recalculating the income for prior periods under the new accounting principle, if it at all feasible.

U.S.GAAP and IFRS require firms to account for correction of errors, regardless of whether they are material or not, by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings for the current period.

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