Question 1

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 more than face value. 
E) If the coupon rate exceeds the market interest rate, the firm will issue the bonds for more 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 more than face value. 
E) If the coupon rate exceeds the market interest rate, the firm will issue the bonds for more than face value.

Question 2

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

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 lessee 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) all of the above 
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 lessee 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) all of the above

Question 3

Which of the following is/are true?

Accepted Answer

A) A firm that controls another entity prepares consolidated financial statements with that entity. 
B) The consolidated financial statements reflect the results of the legally separate entities as if they were a single entity. 
C) The consolidated financial statements eliminate intercompany balance sheet and income statement accounts and intercompany profit or loss on transactions between the entities. 
D) Consolidated balance sheets consolidate all of the assets and liabilities of the controlled entity and then show the claim of noncontrolling shareholders against consolidated net assets as part of shareholders' equity. 
E) all of the above 
A) A firm that controls another entity prepares consolidated financial statements with that entity. 
B) The consolidated financial statements reflect the results of the legally separate entities as if they were a single entity. 
C) The consolidated financial statements eliminate intercompany balance sheet and income statement accounts and intercompany profit or loss on transactions between the entities. 
D) Consolidated balance sheets consolidate all of the assets and liabilities of the controlled entity and then show the claim of noncontrolling shareholders against consolidated net assets as part of shareholders' equity. 
E) all of the above

Question 4

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 between the bonds and the conversion feature. 
C) IFRS requires firms to allocate the issue price between the bonds and the conversion feature. 
D) Under IFRS, the firm allocates the issue price of bonds with terms similar to those issued but without the conversion feature to the bonds and the remainder of the issue price to the conversion option. 
E) all of the above 
A) Firms sometimes issue bonds with stock warrants attached and allocate the amount received between the bonds and the warrants based on their respective fair values. 
B) When firms issue convertible bonds U.S.GAAP requires firms to allocate the full issue price between the bonds and the conversion feature. 
C) IFRS requires firms to allocate the issue price between the bonds and the conversion feature. 
D) Under IFRS, the firm allocates the issue price of bonds with terms similar to those issued but without the conversion feature to the bonds and the remainder of the issue price to the conversion option. 
E) all of the above

Question 5

Which of the following is/are true?

Accepted Answer

A) Firms report accounts receivable they expect to collect within one year at the amount of cash the firms expect to receive. 
B) Both U.S.GAAP and IFRS require firms with significant uncollectible accounts receivable to estimate the amount of uncollectible accounts related to a particular period's sales and recognize that amount as bad debt expense in the same period as the related revenues. 
C) Firms typically use a contra account to accounts receivable, such as Allowance for Uncollectibles, to reflect the amount of accounts receivable they do not expect to collect. 
D) The entry to recognize estimated uncollectible amounts involves a debit to Bad Debt Expense and a credit to Allowance for Uncollectibles. 
E) all of the above 
A) Firms report accounts receivable they expect to collect within one year at the amount of cash the firms expect to receive. 
B) Both U.S.GAAP and IFRS require firms with significant uncollectible accounts receivable to estimate the amount of uncollectible accounts related to a particular period's sales and recognize that amount as bad debt expense in the same period as the related revenues. 
C) Firms typically use a contra account to accounts receivable, such as Allowance for Uncollectibles, to reflect the amount of accounts receivable they do not expect to collect. 
D) The entry to recognize estimated uncollectible amounts involves a debit to Bad Debt Expense and a credit to Allowance for Uncollectibles. 
E) all of the above

Question 6

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 legally separate from the employer, to fund their retirement obligations. 
C) The accounting records of the trust established to fund the retirement obligations are consolidated with the accounting records of the employer. 
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 legally separate from the employer, to fund their retirement obligations. 
C) The accounting records of the trust established to fund the retirement obligations are consolidated with the accounting records of the employer. 
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 7

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 a net amount; 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 never 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 a net amount; 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 never 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 8

Firms initially record property, plant, and equipment, sometimes referred to as fixed assets, at acquisition cost, the cash paid or the fair value of other consideration given in exchange for the asset. Which of the following is not true?

Accepted Answer

A) Acquisition cost includes all costs necessary to prepare the asset for its intended use. 
B) Firms capitalize into the asset's carrying amount subsequent expenditures that extend the service life or increase the benefits of a fixed asset beyond those initially anticipated. 
C) Buildings and equipment have a finite life, so firms must depreciate their acquisition cost less estimated salvage over the expected service life. 
D) Firms may use a straight-line method or accelerated depreciation methods. 
E) If new information becomes available that indicates that the expected service life or estimated salvage value differs significantly from that initially anticipated, the firm revises its depreciation claimed in prior years and restates the financial statements. 
A) Acquisition cost includes all costs necessary to prepare the asset for its intended use. 
B) Firms capitalize into the asset's carrying amount subsequent expenditures that extend the service life or increase the benefits of a fixed asset beyond those initially anticipated. 
C) Buildings and equipment have a finite life, so firms must depreciate their acquisition cost less estimated salvage over the expected service life. 
D) Firms may use a straight-line method or accelerated depreciation methods. 
E) If new information becomes available that indicates that the expected service life or estimated salvage value differs significantly from that initially anticipated, the firm revises its depreciation claimed in prior years and restates the financial statements.

Question 9

Which of the following is/are true?

Accepted Answer

A) Acquisition cost for a merchandising firm includes the costs incurred to purchase and transport the inventory prior to sale. 
B) Acquisition cost for a manufacturing firm includes the direct material, direct labor, and manufacturing overhead cost to produce the inventory. 
C) If the market values of inventory items decline below acquisition cost prior to sale, firms must reduce their balance sheet carrying values using the lower of cost or market method. 
D) U.S.GAAP uses a combination of replacement cost and net realizable values to measure market value. 
E) all of the above 
A) Acquisition cost for a merchandising firm includes the costs incurred to purchase and transport the inventory prior to sale. 
B) Acquisition cost for a manufacturing firm includes the direct material, direct labor, and manufacturing overhead cost to produce the inventory. 
C) If the market values of inventory items decline below acquisition cost prior to sale, firms must reduce their balance sheet carrying values using the lower of cost or market method. 
D) U.S.GAAP uses a combination of replacement cost and net realizable values to measure market value. 
E) all of the above

Question 10

The FASB's conceptual framework includes which of the following as financial reporting objectives?

Accepted Answer

A) Provide information useful for making rational investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of future cash flows. 
C) Provide information about the economic resources of a firm and the claims on those resources. 
D) Provide information about a firm's operating performance during a period. 
E) all of the above 
A) Provide information useful for making rational investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of future cash flows. 
C) Provide information about the economic resources of a firm and the claims on those resources. 
D) Provide information about a firm's operating performance during a period. 
E) all of the above

Question 11

The FASB and the IASB are reconsidering the definition of an asset and the criteria for asset recognition.

Accepted Answer

A) True 
 B)False

Question 12

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 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 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 as a liability under IFRS.

Question 13

Which of the following is/are true?

Accepted Answer

A) An employer must recognize changes in the funded status of a defined benefit retirement plan on its balance sheet each period. 
B) U.S.GAAP and IFRS do not require the employer to recognize changes in the funded status of a defined benefit retirement plan immediately in net income. 
C) Changes in the net funded status of a defined benefit retirement plan because investment performance differs from expectations, or because of changes in actuarial assumptions, or in the retirement benefit formula, initially affect other comprehensive income. 
D) Firms amortize the amounts in Other Comprehensive Income over the expected period of benefit as an adjustment to retirement plan cost. 
E) all of the above 
A) An employer must recognize changes in the funded status of a defined benefit retirement plan on its balance sheet each period. 
B) U.S.GAAP and IFRS do not require the employer to recognize changes in the funded status of a defined benefit retirement plan immediately in net income. 
C) Changes in the net funded status of a defined benefit retirement plan because investment performance differs from expectations, or because of changes in actuarial assumptions, or in the retirement benefit formula, initially affect other comprehensive income. 
D) Firms amortize the amounts in Other Comprehensive Income over the expected period of benefit as an adjustment to retirement plan cost. 
E) all of the above

Question 14

Young Corporation's capital stock at December 31 consisted of the following:

(a)	Common stock, $2 par value; 100,000 shares authorized, issued, and outstanding.
(b)	10% noncumulative, nonconvertible preferred stock, $100 par value; 1,000 shares authorized, issued, and outstanding.
	
Young’s common stock, which is listed on a major stock exchange, was quoted at $4 per share on December 31. Young’s net income for the year ended December 31 was $50,000. The yearly preferred dividend was declared. No capital stock transactions occurred. What was the price earnings ratio on Young’s common stock at December 31?

Accepted Answer

A) 6 to 1 
B) 8 to 1 
C) 10 to 1 
D) 16 to 1 
A) 6 to 1 
B) 8 to 1 
C) 10 to 1 
D) 16 to 1

Question 15

Which of the following is/are 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) all of the above 
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) all of the above

Question 16

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 a capital 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 cannot currently apply the fair value option to capital leases. 
A) The criteria attempt to identify the entity, whether lessor or lessee, that enjoys the benefits and incurs the risk of the leased asset. 
B) When the lessor enjoys the benefits and bears the risk, the lease is a capital 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 cannot currently apply the fair value option to capital leases.

Question 17

U.S.GAAP and IFRS aid the investors' analysis process by requiring firms to classify income transactions in particular ways in the financial statements which include

Accepted Answer

A) Recurring versus nonrecurring. 
B) Central versus peripheral. 
C) Unrealized versus realized gains and losses from changes in the fair values of assets and liabilities. 
D) Adjustments for errors and changes in accounting principles and accounting estimates. 
E) all of the above 
A) Recurring versus nonrecurring. 
B) Central versus peripheral. 
C) Unrealized versus realized gains and losses from changes in the fair values of assets and liabilities. 
D) Adjustments for errors and changes in accounting principles and accounting estimates. 
E) all of the above

Question 18

Ideally, financial reporting standards should flow from and be consistent with the financial reporting objectives, qualitative characteristics of accounting information, and elements of financial statements that comprise the FASB's and the IASB's conceptual frameworks.

Accepted Answer

A) True 
 B)False

Question 19

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 between _____ of the voting stock of another entity can exert significant influence.

Accepted Answer

A) 10% and 40% 
B) 15% and 45% 
C) 20% and 50% 
D) 25% and 55% 
E) 30% and 60% 
A) 10% and 40% 
B) 15% and 45% 
C) 20% and 50% 
D) 25% and 55% 
E) 30% and 60%

Question 20

Accrual accounting requires frequent, ongoing changes in estimates.Which of the following is/are not true?

Accepted Answer

A) As time passes and conditions change, new information becomes available that causes management to change the estimates required to apply accounting principles. 
B) Firms do not recalculate revenues and expenses of previous periods to incorporate new information involving estimates. 
C) Changes in estimates do not always relate to recurring accrual accounting measurements. 
D) Examples of changes in estimates include the amount of uncollectible accounts and the useful lives of depreciable assets. 
E) Firms report the income effect of these items in the retained earnings as a direct adjustment. 
A) As time passes and conditions change, new information becomes available that causes management to change the estimates required to apply accounting principles. 
B) Firms do not recalculate revenues and expenses of previous periods to incorporate new information involving estimates. 
C) Changes in estimates do not always relate to recurring accrual accounting measurements. 
D) Examples of changes in estimates include the amount of uncollectible accounts and the useful lives of depreciable assets. 
E) Firms report the income effect of these items in the retained earnings as a direct adjustment.

U.S.GAAP and IFRS account for notes and nonconvertible bonds payable similarly.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/aretrue?

Which of the following is/are true?

Which of the following is/are not true?

Which of the following is/are true?

Which of the following is/are not true?

Which of the following is not true?

Firms initially record property, plant, and equipment, sometimes referred to as fixed assets, at acquisition cost, the cash paid or the fair value of other consideration given in exchange for the asset. Which of the following is not true?

Which of the following is/are true?

The FASB's conceptual framework includes which of the following as financial reporting objectives?

The FASB and the IASB are reconsidering the definition of an asset and the criteria for asset recognition.

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

Which of the following is/are true?

Which of the following is/are true?

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

U.S.GAAP and IFRS aid the investors' analysis process by requiring firms to classify income transactions in particular ways in the financial statements which include

Ideally, financial reporting standards should flow from and be consistent with the financial reporting objectives, qualitative characteristics of accounting information, and elements of financial statements that comprise the FASB's and the IASB's conceptual frameworks.

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 between _____ of the voting stock of another entity can exert significant influence.

Accrual accounting requires frequent, ongoing changes in estimates.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

U.S.GAAP and IFRS account for notes and nonconvertible bonds payable similarly.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/aretrue?

Which of the following is/are true?

Which of the following is/are not true?

Which of the following is/are true?

Which of the following is/are not true?

Which of the following is not true?

Firms initially record property, plant, and equipment, sometimes referred to as fixed assets, at acquisition cost, the cash paid or the fair value of other consideration given in exchange for the asset. Which of the following is not true?

Which of the following is/are true?

The FASB's conceptual framework includes which of the following as financial reporting objectives?

The FASB and the IASB are reconsidering the definition of an asset and the criteria for asset recognition.

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

Which of the following is/are true?

Which of the following is/are true?

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

U.S.GAAP and IFRS aid the investors' analysis process by requiring firms to classify income transactions in particular ways in the financial statements which include

Ideally, financial reporting standards should flow from and be consistent with the financial reporting objectives, qualitative characteristics of accounting information, and elements of financial statements that comprise the FASB's and the IASB's conceptual frameworks.

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 between _____ of the voting stock of another entity can exert significant influence.

Accrual accounting requires frequent, ongoing changes in estimates.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