Question 1

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are not true?

Accepted Answer

A) Some of the differences may arise because of permanent differences (items that affect income for financial reporting but never affect taxable income, or vice versa). 
B) Some of the differences may arise because of temporary differences (items that affect income for financial reporting in a different period than for tax reporting). 
C) The difference between income tax expense and income tax payable represents the tax effects of temporary differences: either the firm will receive future benefits (deferred tax assets) or it must pay future taxes (deferred tax liabilities). 
D) U.S.GAAP and IFRS require firms to measure income tax expense based on the taxes assessed on the firm by income tax authorities. 
E) all of the above 
A) Some of the differences may arise because of permanent differences (items that affect income for financial reporting but never affect taxable income, or vice versa). 
B) Some of the differences may arise because of temporary differences (items that affect income for financial reporting in a different period than for tax reporting). 
C) The difference between income tax expense and income tax payable represents the tax effects of temporary differences: either the firm will receive future benefits (deferred tax assets) or it must pay future taxes (deferred tax liabilities). 
D) U.S.GAAP and IFRS require firms to measure income tax expense based on the taxes assessed on the firm by income tax authorities. 
E) all of the above

Question 2

Which of the following is not true?

Accepted Answer

A) Comprehensive income equals the net amount of revenues, expenses, gains, and losses during an accounting period. 
B) Authoritative guidance classifies revenues and expenses arising from a firm's core business as components of net income. 
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) Comprehensive income equals the net amount of revenues, expenses, gains, and losses during an accounting period. 
B) Authoritative guidance classifies revenues and expenses arising from a firm's core business as components of net income. 
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 3

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are not true?

Accepted Answer

A) Some of the differences may arise because of permanent differences (items that affect income for financial reporting but never affect taxable income, or vice versa). 
B) Some of the differences may arise because of temporary differences (items that affect income for financial reporting in a different period than for tax reporting). 
C) The difference between income tax expense and income tax payable represents the tax effects of permanent differences: either the firm will receive future benefits (deferred tax assets) or it must pay future taxes (deferred tax liabilities). 
D) U.S.GAAP and IFRS require firms to measure income tax expense based on income for financial reporting (excluding permanent differences) and the income tax authorities impose taxes on taxable income. 
E) all of the above 
A) Some of the differences may arise because of permanent differences (items that affect income for financial reporting but never affect taxable income, or vice versa). 
B) Some of the differences may arise because of temporary differences (items that affect income for financial reporting in a different period than for tax reporting). 
C) The difference between income tax expense and income tax payable represents the tax effects of permanent differences: either the firm will receive future benefits (deferred tax assets) or it must pay future taxes (deferred tax liabilities). 
D) U.S.GAAP and IFRS require firms to measure income tax expense based on income for financial reporting (excluding permanent differences) and the income tax authorities impose taxes on taxable income. 
E) all of the above

Question 4

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 value per option. 
C) Firms amortize total compensation 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 value per option. 
C) Firms amortize total compensation 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 5

U.S.GAAP and IFRS account for notes and nonconvertible bonds payable similarly.Which of the following is/are not true?

Accepted Answer

A) Firms initially record long-term notes and bonds at their issue price, the present value of the future contractual cash flows discounted at the market interest rate for the bonds at the time of issue. 
B) The market interest rate at the time of issue is the rate that discounts the contractual cash flows to the initial issue price. 
C) If the market interest rate equals the coupon rate for the bonds, the firm will issue the bonds for face value. 
D) If the market interest rate exceeds the coupon rate, the firm will issue the bonds for less than face value. 
E) If the coupon rate exceeds the market interest rate, the firm will issue the bonds for less than face value. 
A) Firms initially record long-term notes and bonds at their issue price, the present value of the future contractual cash flows discounted at the market interest rate for the bonds at the time of issue. 
B) The market interest rate at the time of issue is the rate that discounts the contractual cash flows to the initial issue price. 
C) If the market interest rate equals the coupon rate for the bonds, the firm will issue the bonds for face value. 
D) If the market interest rate exceeds the coupon rate, the firm will issue the bonds for less than face value. 
E) If the coupon rate exceeds the market interest rate, the firm will issue the bonds for less than face value.

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

If practical, firms account for voluntary changes in accounting principles, such as from a LIFO to a FIFO cost-flow assumption for inventories, 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 8

Which of the following is not true?

Accepted Answer

A) Gains (losses) are increases (decreases) in net 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 the present value of future cash flows; 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 net 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 the present value of future cash flows; 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 9

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data. Firms reporting multiple categories of income items must disclose earnings per common share

Accepted Answer

A) in the body of the statement of cash flows. 
B) in the body of the balance sheet. 
C) for the total, only. 
D) for each reported category. 
E) in the footnotes to the financial statements. 
A) in the body of the statement of cash flows. 
B) in the body of the balance sheet. 
C) for the total, only. 
D) for each reported category. 
E) in the footnotes to the financial statements.

Question 10

Which of the following is not true regarding shareholders' equity for a corporation?

Accepted Answer

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

Question 11

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

Accepted Answer

A) at fair value. 
B) as expenses in the period of the expenditure. 
C) as capitalized assets without amortization because of infinite lives. 
D) as capitalized assets with amortization over the finite lives. 
E) as capitalized assets tested annually for impairment. 
A) at fair value. 
B) as expenses in the period of the expenditure. 
C) as capitalized assets without amortization because of infinite lives. 
D) as capitalized assets with amortization over the finite lives. 
E) as capitalized assets tested annually for impairment.

Question 12

The FASB's conceptual framework for financial reporting objectives identify the provision of information to make _____ as the principal purpose of financial reports.

Accepted Answer

A) investment decisions, only 
B) credit decisions, only 
C) employment decisions 
D) management decisions 
E) investment and credit decisions 
A) investment decisions, only 
B) credit decisions, only 
C) employment decisions 
D) management decisions 
E) investment and credit decisions

Question 13

Which of the following is not true?

Accepted Answer

A) Firms must test goodwill annually for impairment. 
B) Goodwill is the excess of the amount paid for the acquired company over the fair value of identifiable net assets. 
C) Goodwill, because it includes unidentifiable intangible resources, has an indefinite life. 
D) U.S.GAAP requires tests for impairment of goodwill as part of a reporting unit because a firm cannot separate goodwill from other assets. 
E) U.S.GAAP requires firms to amortize goodwill over its expected useful life. 
A) Firms must test goodwill annually for impairment. 
B) Goodwill is the excess of the amount paid for the acquired company over the fair value of identifiable net assets. 
C) Goodwill, because it includes unidentifiable intangible resources, has an indefinite life. 
D) U.S.GAAP requires tests for impairment of goodwill as part of a reporting unit because a firm cannot separate goodwill from other assets. 
E) U.S.GAAP requires firms to amortize goodwill over its expected useful life.

Question 14

The FASB's and IASB'S qualitative characteristics describe the attributes that enhance the usefulness of financing reporting information.What are they?

Accepted Answer

QUALITATIVE CHARACTERISTICS OF FINANCIAL

Question 15

Firms account for changes in accounting principles required by a new reporting standard in accordance with the guidance specified in the standard.

Accepted Answer

A) True 
 B)False

Question 16

The current price of a share of common stock reflects current economic conditions, not the requirements of authoritative guidance.Market-to-book-value ratios tend to be large for firms that

Accepted Answer

A) make substantial expenditures on internally developed assets. 
B) have a favorable competitive position. 
C) have a favorable growth potential. 
D) All of the above are correct. 
E) None of these answer choices is correct. 
A) make substantial expenditures on internally developed assets. 
B) have a favorable competitive position. 
C) have a favorable growth potential. 
D) All of the above are correct. 
E) None of these answer choices is correct.

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) Under the capital, or finance, lease method, the lessor records the signing of a capital lease the same as if the lessor sold the leased asset for an installment note receivable. 
B) Under the capital, or finance, lease method, the lessee recognizes interest expense on the lease liability, similar to recognizing interest expense on long-term notes or bonds. 
C) Under the capital, or finance, lease method, the lessor amortizes the leased asset, similar to recognizing depreciation on buildings and equipment. 
D) Under the capital, or finance, lease method, 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. 
E) 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. 
A) Under the capital, or finance, lease method, the lessor records the signing of a capital lease the same as if the lessor sold the leased asset for an installment note receivable. 
B) Under the capital, or finance, lease method, the lessee recognizes interest expense on the lease liability, similar to recognizing interest expense on long-term notes or bonds. 
C) Under the capital, or finance, lease method, the lessor amortizes the leased asset, similar to recognizing depreciation on buildings and equipment. 
D) Under the capital, or finance, lease method, 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. 
E) 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.

Question 18

Regarding employee stock options, which of the following is/are not 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 value per option. 
C) Firms amortize total compensation 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 redemption 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 value per option. 
C) Firms amortize total compensation 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 redemption date. 
E) Firms do not typically remeasure most types of stock options after the initial grant date.

Question 19

Explain the accounting for income taxes.

Accepted Answer

INCOME TAXES
Income before taxes for fin

Question 20

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 fundamental qualitative characteristics?

Accepted Answer

A) relevance, only 
B) faithful representation, only 
C) relevance and faithful representation 
D) materiality, only 
E) cost, only 
A) relevance, only 
B) faithful representation, only 
C) relevance and faithful representation 
D) materiality, only 
E) cost, only

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are not true?

Which of the following is not true?

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are not true?

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

U.S.GAAP and IFRS account for notes and nonconvertible bonds payable similarly.Which of the following is/are not true?

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.

If practical, firms account for voluntary changes in accounting principles, such as from a LIFO to a FIFO cost-flow assumption for inventories, by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings of the current period.

Which of the following is not true?

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data. Firms reporting multiple categories of income items must disclose earnings per common share

Which of the following is not true regarding shareholders' equity for a corporation?

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

The FASB's conceptual framework for financial reporting objectives identify the provision of information to make _____ as the principal purpose of financial reports.

Which of the following is not true?

The FASB's and IASB'S qualitative characteristics describe the attributes that enhance the usefulness of financing reporting information.What are they?

Firms account for changes in accounting principles required by a new reporting standard in accordance with the guidance specified in the standard.

The current price of a share of common stock reflects current economic conditions, not the requirements of authoritative guidance.Market-to-book-value ratios tend to be large for firms that

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

Regarding employee stock options, which of the following is/are not true?

Explain the accounting for income taxes.

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 fundamental qualitative characteristics?

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

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are not true?

Which of the following is not true?

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are not true?

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

U.S.GAAP and IFRS account for notes and nonconvertible bonds payable similarly.Which of the following is/are not true?

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.

If practical, firms account for voluntary changes in accounting principles, such as from a LIFO to a FIFO cost-flow assumption for inventories, by retrospectively restating net income of prior periods and adjusting the beginning balance in Retained Earnings of the current period.

Which of the following is not true?

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data. Firms reporting multiple categories of income items must disclose earnings per common share

Which of the following is not true regarding shareholders' equity for a corporation?

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

The FASB's conceptual framework for financial reporting objectives identify the provision of information to make _____ as the principal purpose of financial reports.

Which of the following is not true?

The FASB's and IASB'S qualitative characteristics describe the attributes that enhance the usefulness of financing reporting information.What are they?

Firms account for changes in accounting principles required by a new reporting standard in accordance with the guidance specified in the standard.

The current price of a share of common stock reflects current economic conditions, not the requirements of authoritative guidance.Market-to-book-value ratios tend to be large for firms that

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

Regarding employee stock options, which of the following is/are not true?

Explain the accounting for income taxes.

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 fundamental qualitative characteristics?

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

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