Question 1

Explain the accounting for leases.

Accepted Answer

LEASES
Firms account for leases using ei

Question 2

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

Question 3

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 recognizes a lease liability on the lessee's balance sheet. 
D) The lessor recognizes rent revenue as the lessee uses the leased asset over time 
E) The lessee recognizes 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 recognizes a lease liability on the lessee's balance sheet. 
D) The lessor recognizes rent revenue as the lessee uses the leased asset over time 
E) The lessee recognizes rent expense as the lessee uses the leased asset over time.

Question 4

Explain the accounting for redeemable preferred shares.

Accepted Answer

REDEEMABLE PREFERRED SHARES
The classifi

Question 5

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 four 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 can 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 four 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 can 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

Question 6

Which of the following is not 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) Under U.S.GAAP, firms recognize an impairment loss when the carrying value of a fixed asset exceeds its recoverable amount, the higher of (1) the fair value less cost to sell, and (2) value in use. 
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) Under U.S.GAAP, firms recognize an impairment loss when the carrying value of a fixed asset exceeds its recoverable amount, the higher of (1) the fair value less cost to sell, and (2) value in use.

Question 7

U.S.GAAP and IFRS require firms to recognize as assets identifiable intangibles acquired in external market transactions. Which of the following is/are true?

Accepted Answer

A) The exchange between an independent buyer and seller provides evidence of the existence of expected future benefits, and the exchange price provides evidence of the fair value of those benefits. 
B) In external market transactions, identifiable intangibles include patents, trademarks, customer lists, and other economic resources ready for use, as well as in-process technologies with uncertain future benefits. 
C) In external market transactions, identifiable intangible assets have either finite lives or indefinite lives. 
D) In external market transactions, firms must amortize intangible assets with finite lives, generally using the straight-line method. 
E) all of the above 
A) The exchange between an independent buyer and seller provides evidence of the existence of expected future benefits, and the exchange price provides evidence of the fair value of those benefits. 
B) In external market transactions, identifiable intangibles include patents, trademarks, customer lists, and other economic resources ready for use, as well as in-process technologies with uncertain future benefits. 
C) In external market transactions, identifiable intangible assets have either finite lives or indefinite lives. 
D) In external market transactions, firms must amortize intangible assets with finite lives, generally using the straight-line method. 
E) all of the above

Question 8

Investors often apply multiples to earnings per common share and book value per common share in deciding on a reasonable market price for a firm's shares.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is/are not 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 full issue price to the bonds and none to 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 full issue price to the bonds and none to 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 10

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are 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 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 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 income for financial reporting (excluding permanent differences) and the income tax authorities impose taxes on taxable income. 
E) all of the above

Question 11

How do firms account for goodwill?

Accepted Answer

GOODWILL
In ordinary usage, goodwill ref

Question 12

As part of their normal course of business, companies sometimes sell off entire divisions or segments. The accounting treatment for such sales is composed of two components and a reporting format.

Required:

a.     Describe the accounting treatment and reporting format used for such sales.
b.     Discuss why such sales are separated from other parts of the income statement.

Accepted Answer

The answer of As part of their normal course of...

Question 13

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 true?

Accepted Answer

A)  U.S.GAAP and IFRS presume that the acquisition of any amount of bonds, and the acquisition of less than 20% 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 20% 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 14

Using U.S.GAAP, a merchandising firm is trying to decide between using LIFO or FIFO for an inventory cost flow assumption.The firm had inventory purchases and sales over 3 years as follows:
  
The firm estimates that using LIFO will cost the firm $50 for additional clerical work. The tax rate for all years is 30%. Net income before cost of goods sold for each year is as follows:

Year 1 - $1,000
Year 2 - $2,000
Year 3 - $2,500

Required:

a.	What is net income after taxes under each method for years 1 through 3?
b.	Which method will result in a higher after tax cash flow for each year?

Accepted Answer

The answer of Using U.S.GAAP, a merchandising firm is trying...

Question 15

Explain the accounting for the issuance of securities with warrants attached or that have conversion privileges.

Accepted Answer

ISSUE OF SECURITIES WITH WARRANTS ATTACH

Question 16

Earnings per share is a measure of

Accepted Answer

A) cash income earned by the common shareholder. 
B) profitability. 
C) the financial viability of a firm. 
D) the amount of dividends that will be paid by the firm. 
E) how much an investor would be willing to pay for a share of common stock. 
A) cash income earned by the common shareholder. 
B) profitability. 
C) the financial viability of a firm. 
D) the amount of dividends that will be paid by the firm. 
E) how much an investor would be willing to pay for a share of common stock.

Question 17

Which of the following is/are 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 a liability. 
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 and as a liability under IFRS. 
E) all of the above 
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 a liability. 
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 and as a liability under IFRS. 
E) all of the above

Question 18

When do firms recognize revenue?

Accepted Answer

REVENUE RECOGNITION
Firms recognize reve

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 20% 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 for short-term profit (IFRS uses the term held-for-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 20% 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 for short-term profit (IFRS uses the term held-for-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

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 the faithfulness with which accounting information represents what it purports to represent and the extent to which the information is both verifiable by independent measurers and neutral with respect to the interest of a particular user group.

Accepted Answer

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

Explain the accounting for leases.

Firms account for leases using either the operating lease method or the capital (finance) lease method.Which of the following is 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?

Explain the accounting for redeemable preferred shares.

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

Which of the following is not true?

U.S.GAAP and IFRS require firms to recognize as assets identifiable intangibles acquired in external market transactions. Which of the following is/are true?

Investors often apply multiples to earnings per common share and book value per common share in deciding on a reasonable market price for a firm's shares.

Which of the following is/are not true?

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are true?

How do firms account for goodwill?

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 true?

Explain the accounting for the issuance of securities with warrants attached or that have conversion privileges.

Earnings per share is a measure of

Which of the following is/are true regarding the classification of redeemable preferred shares on the balance sheet?

When do firms recognize revenue?

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?

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

Explain the accounting for leases.

Firms account for leases using either the operating lease method or the capital (finance) lease method.Which of the following is 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?

Explain the accounting for redeemable preferred shares.

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

Which of the following is not true?

U.S.GAAP and IFRS require firms to recognize as assets identifiable intangibles acquired in external market transactions. Which of the following is/are true?

Investors often apply multiples to earnings per common share and book value per common share in deciding on a reasonable market price for a firm's shares.

Which of the following is/are not true?

Income before taxes for financial reporting usually differs from taxable income reported to tax authorities.Which of the following is/are true?

How do firms account for goodwill?

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 true?

Explain the accounting for the issuance of securities with warrants attached or that have conversion privileges.

Earnings per share is a measure of

Which of the following is/are true regarding the classification of redeemable preferred shares on the balance sheet?

When do firms recognize revenue?

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?

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