ACCT Midterm-The primary measurement basis currently

ACCT Midterm-The primary measurement basis currently

ACCT MidtermName________________________________1. The primary measurement basis currently used to value assets in external financial statements of anenterprise is thea. current market price if the assets currently held by an enterprise were sold on the openmarket.b. current market price if the assets held by an enterprise were purchased on the open market.c. present value of the cash flows the assets are expected to generate over their remaininguseful lives.d. market price of the assets held by an enterprise at the date the assets were acquired(although some assets may be valued at their current selling price or net realizable value).2. Financial disclosure statements are strictest ina. the United Kingdom.b. Germany.c. the United States.d. France.3. Which of the following qualitative characteristics of financial information requires that informationNOT be biased in favor of one group of users to the detriment of others?a. Relevanceb. Reliabilityc. Verifiabilityd. Neutrality4. Which of the following is true?a. Form 10-K is required under the FASB Conceptual Framework.b. Form 10-Q is a quarterly report of significant events required by the SEC.c. Form 8-K is a quarterly report of significant events required by the SEC.d. Form 8-K is the annual report submitted by small businesses to the SEC.5. The accrual basis of accounting is based primarily ona. conservatism and revenue realization.b. conservatism and matching.c. consistency and matching.d. revenue realization and matching.6. In an effort to improve the conceptual framework, the FASB, in conjunction with the IASB has beenmoving towards more __________ standards.a. rules approachb. principles approachc. broad approachd. international approach7. According to the FASB’s conceptual framework, the process of reporting an item in the financialstatements of an entity isa. realization.b. recognition.c. matching.d. allocation.18. Which of the following statements concerning the objectives of financial reporting is correct?a. The objectives are intended to be specific in nature.b. The objectives are directed primarily toward the needs of internal users of accountinginformation.c. The objectives were the end result of the FASB’s conceptual framework project.d. The objectives encompass not only financial statement disclosures, but other informationas well.9. Which of the following is NOT a purpose of the conceptual framework of accounting?a. To provide definitions of key terms and fundamental conceptsb. To provide specific guidelines for resolving situations not covered by existing accountingstandardsc. To assist accountants and others in selecting among alternative accounting and reportingmethodsd. To assist the FASB in the standard-setting process10. What accounting concept justifies the use of accruals and deferrals?a. Going-concern assumptionb. Corporate form of organizationc. Consistency characteristicd. Arm’s-length transactions11. A conceptual framework of accounting shoulda. lead to uniformity of financial statements among companies within the same industry.b. eliminate alternative accounting principles and methods.c. guide the AICPA in developing generally accepted auditing standards.d. define the basic objectives, terms, and concepts of accounting.12. Generally accepted accounting principlesa. are accounting adaptations based on the laws of economic science.b. derive their credibility and authority from legal rulings and court precedents.c. derive their credibility and authority from the federal government through the financialreporting section of the SEC.d. derive their credibility and authority from general recognition and acceptance by theaccounting profession.13. The cost of capital is defined as thea. simple average of the interest rates of all debt outstanding.b. simple average of the cost of debt and equity.c. weighted average of the interest rates of all debt outstanding.d. weighted average of the cost of debt and equity.14. "Purchased in-process research and development" is typically associated witha. creative acquisition accounting.b. cookie jar reserves.c. proforma earnings amounts.d. big bath accounting.215. Most companies that engage in earnings management typically do NOT go beyond which of thefollowing activities on the earnings management continuum?a. Strategic matchingb. Change in methods or estimates with full disclosurec. Change in methods or estimates with little or no disclosured. Non-GAAP accounting16. Earnings management through strategic matching is best exemplified bya. changing the useful life of a depreciable asset.b. timing transactions such that large one-time gains and losses occur in the samequarter.c. changing the interest rate used in accounting for leases without describing thechange in the notes to the financial statements.d. capitalizing as assets expenditures that have no future economic benefit.17. Recording as an asset expenditures that have no future economic benefit is an example ofa. strategic matching.b. change in methods or estimates with full disclosure.c. a fictitious transaction.d. non-GAAP accounting.18. Excluding some revenues, expenses, gains, losses from the earnings figure calculated usinggenerally accepted accounting principles is an example ofa. income smoothing.b. "big bath" accounting.c. a "cookie jar" reserve.d. proforma earnings.19. Excessive earnings management typically begins as a result ofa. a regulatory investigation.b. pressure to meet the expectations of stakeholders.c. a downturn in business.d. a violation of generally accepted accounting principles.20. The GAAP Oval best represents thea. fact that only one true earnings number exists.b. flexibility managers have within GAAP to report one earnings number from amongmany possibilities.c. philosophy that earnings management within limits is ethical.d. fact that GAAP is not subject to interpretation.21. Which of the following regarding the weighted-average cost of capital is true?a. The tax effect of preferred stock dividends should be included in the calculation ofweighted-average cost of capital.b. The tax effect of common stock dividends should be included in the calculation ofweighted-average cost of capital.c. The tax effect of debt should be included in the calculation of the weighted-average3cost of capital.d. Taxes do not affect the weighted-average cost of capital.22. Which of the following is NOT correct?a. The after-tax cost of debt for a firm with losses is equal to the interest rate on thedebt.b. Firms always pay dividends on their common stock issues because of the ease withwhich common shareholders can assume control of the firm.c. Flotation costs for preferred stock are higher than for debt.d. Most debt is placed privately and thus there is no flotation cost.23. Which of the following is NOT a function of a financial analyst?a. Providing buy recommendations on a company’s stockb. Providing sell recommendations on a company’s stockc. Generating forecasts of company earningsd. Serving as an investment banker for a company for which the analyst is providingresearch coverage24. Net income for Parton Company for 2014 includes the effect of the following transactionsinvolving the sale of fixed assets:SalesAssetPriceCostGain/LossX$ 20,000$ 80,000$ 10,000Y35,000$ 150,000$ (28,000)Purchases of fixed assets during 2014 amounted to $340,000. The AccumulatedDepreciation account increased $40,000 during 2014. How much was depreciation expensefor 2014?a. $175,000b. $187,000c. $197,000d. $215,00025. Sapphire Company reported the following information for the year 2014: Sales revenue of$280,000; cost of goods sold of $100,000; selling expenses of $40,000; administrativeexpenses of $35,000; depreciation of $25,000; interest expense of $8,000; and income taxexpense of $28,000. All sales were made for cash and all expenses (other than depreciationand bond premium amortization of $2,000) were paid in cash. All current assets and currentliabilities remained unchanged. How much cash was provided by operations for SapphireCompany during 2014?a. $44,000b. $69,000c. $67,000d. $71,00026. During 2014, Stewart Company reported revenues on an accrual basis of $70,000. Accountsreceivable decreased during the year from $35,000 at the beginning to $24,500 at the end.How much cash was provided by collections from customers during the year?a. $45,500b. $59,500c. $70,000d. $80,500427. Which of the following is classified as a cash inflow from financing activities?a. Cash received from re-issuance of treasury stock held by the companyb. Cash received from the sale of stock held as a long-term investmentc. Cash received as dividends on stock held as a long-term investmentd. Cash received from the sale of land28. A cash dividend that is declared during an accounting period, to be paid in the next accountingperiod, may be presented in the statement of cash flows in which of the following ways?a. A use of cash from operating activitiesb. A noncash transaction presented in a separate schedulec. A use of cash from financing activitiesd. A use of cash from investing activities29. Which of the following is not a source of cash?a. Sale of equipment below book value at a lossb. Issuance of bonds payable below par value at a discountc. Collection of a long-term note receivable from a customerd. Declaration of a cash dividend to be paid in the next accounting period30. Which of the following is a noncash transaction that should be disclosed in a scheduleaccompanying the statement of cash flows?a. Sale of an investment for cashb. Purchase of a machine for cashc. Issuance of common stock in exchange for landd. Declaration and payment of a cash dividend on common stock31. Stanner Company’s 2014 income statement reported cost of goods sold as $135,000. Additionalinformation is as follows:December 31, 2014December 31, 2013Inventory …………..$30,000$22,500Accounts Payable …….13,00019,500If Stanner uses the direct method, what amount should Stanner report as cash paid tosuppliers in its 2014 statement of cash flows?a. $121,000b. $134,000c. $149,000d. $136,000Use the following information to answer questions 32, 33, and 34:Dingo Boot Company uses the direct method to prepare its statement of cash flows. Thecompany had the following cash flows during 2014:Cash receipts from the issuance of common stock ….Cash receipts from customers …………………..Cash receipts from dividends on long-term$400,000200,00030,0005investmentsCash receipts from repayment of loan made to anothercompany ……………………………………Cash payments for wages and other operating expensesCash payments for insurance ……………………Cash payments for dividends ……………………Cash payments for taxes ……………………….Cash payment to purchase land ………………….220,000120,00010,00020,00040,00080,00032. See information regarding Dingo Boot Company above. The net cash provided by (used in)operating activities isa. $60,000.b. $40,000.c. $30,000.d. $(20,000).33. See information regarding Ding Boot Company above. The net cash provided by (used in)investing activities isa. $220,000.b. $140,000.c. $60,000.d. $(80,000).34. See information regarding Dingo Boot Company above. The net cash provided by (used in) allactivities isa. $580,000.b. $410,000.c. $380,000.d. $(60,000).35, During 2014, Larson Corp. acquired buildings for $325,000, paying $75,000 cash and signing a10% mortgage note payable in 10 years for the balance. How should the transaction beshown in the cash flow statement for Larson in 2014?a. As a $325,000 reduction in cash flows from investing activities and a $250,000increase in cash flows from financing activitiesb. As a $325,000 reduction in cash flows from investing activitiesc. As a $75,000 reduction in cash flows from investing activitiesd. As a $250,000 increase in cash flows from financing activities36. Almondine Company sold a computer for $50,000. The computer’s original cost was $250,000,and the accumulated depreciation at the date of sale was $180,000. The sale of the computershould appear on Almondine’s annual statement of cash flows (indirect method) asa. a reduction in cash flows from operating activities of $20,000 and an increase in cashflows from investing activities of $50,000.b. an increase in cash flows from operating activities of $20,000 and an increase in cashflows from investing activities of $50,000.c. a reduction in cash flows from operating activities of $20,000 and an increase in cash6flows from investing activities of $70,000.d. an increase in cash flows from operating activities of $20,000 and an increase in cashflows from investing activities of $70,000.37. The following information is available from Dodger Corporation’s accounting records for theyear ended December 31, 2014:Cash paid to suppliers and employees ………….. $1,020,000Cash dividends paid …………………………60,000Cash received from customers ………………….1,740,000Rent received ……………………………….20,000Taxes paid ………………………………….220,000Net cash flow provided by operating activities for 2014 wasa. $520,000.b. $500,000.c. $460,000.d. $440,000.38. Thomson Company’s income statement for the year ended December 31, 2014, reported netincome of $360,000. The financial statements also disclosed the following information:Amortization …………………………………Depreciation …………………………………Increase in accounts receivable ………………..Increase in inventory …………………………Decrease in accounts payable …………………..Increase in salaries payable …………………..Dividends paid ……………………………….Purchase of equipment …………………………Increase in long-term note payable ……………..$ 20,00060,000140,00048,00076,00028,000120,000150,000300,000Net cash provided by operating activities for 2014 should be reported asa. $84,000.b. $204,000.c. $234,000.d. $324,000.39. Daisy Corporation reported net income of $420,000 for 2014. Changes occurred in severalbalance sheet accounts as follows:Equipment ………………………….$35,000 increaseAccumulated depreciation …………….56,000 increaseNote payable ……………………….42,000 increaseAdditional information:· During 2014, Daisy sold equipment costing $35,000, with accumulateddepreciation of $16,800, for a gain of $7,000.· In December 2014, Daisy purchased equipment costing $70,000 with $28,0007·cash and a 12% note payable of $42,000.Depreciation expense for the year was $72,800.In Daisy’s 2014 statement of cash flows, net cash provided by operating activities should bea. $476,000.b. $485,800.c. $492,800.d. $499,800.40. Which of the following is true?a. The FASB requires dividends paid to be classified as an operating activity.b. The FASB requires interest paid to be classified as a financing activity.c. The FASB allows dividends paid to be classified as an operating activity or as afinancing activity.d. The IASC allows dividends paid to be classified as an operating activity or as afinancing activity.41. An example of direct matching of an expense with revenues would bea. depreciation expense.b. office salaries expense.c. direct labor costs incurred to produce inventory sold during a period.d. advertising expense.42. Which of the following categories of expenses is subject to immediate recognition on theincome statement?a. Repairs and maintenance expense incurred on production equipment of amanufacturerb. The salary of the company presidentc. The salary of the production foremand. Utilities expense for the production line of a manufacturer43. The revenue principle states that revenue should be recognized at a point whena. an exchange transaction involving goods and services has occurred and the earningsprocess is essentially complete.b. an order for shipment of a definite amount of merchandise has been received.c. a contract between buyer and seller has been signed by both parties.d. the seller has shipped merchandise to a customer under the terms that the customerneed not pay for the merchandise until it is sold.44. International Accounting Standard 8 requiresa. a restatement of prior years’ income for a change in accounting principle.b. the reporting of the cumulative effect of a change in accounting principle as part ofnet income in the year of the change.c. the reporting of the cumulative effect of a change in accounting principle as a directadjustment to beginning retained earnings in the year of the change.d. the amortization of the cumulative effect of a change in accounting principle over thefuture periods expected to be affected by the change.845. Which of the following accounting changes requires the restatement of financial statementspresented for prior years?a. A change in depreciation method from the straight-line method to the doubledeclining-balance methodb. A change from the LIFO to the FIFO inventory valuation methodc. A change from the FIFO to the LIFO inventory valuation methodd. A change in the useful life used in the depreciation calculations for a company’smanufacturing equipment46. Starship Corporation incurred the following losses during 2014:• Loss of $100,000 was incurred in the abandonment of equipment.• Accounts receivable of $30,000 were written off as uncollectible.• Several factories were shut down during a strike at a cost of $240,000.• Loss of $150,000 was sustained as a result of flood damage, an unusual andinfrequent occurrence.Ignoring income taxes, what amount of loss should Starship report as extraordinary on itsannual income statement?a. $100,000b. $520,000c. $270,000d. $150,00047. Barrister Corporation separates operating expenses in two categories: (1) selling, and (2)general and administrative. The adjusted trial balance at December 31, 2014, included thefollowing expenses and loss accounts:Interest …………………………………….$140,000Advertising ………………………………….300,000Freight-Out ………………………………….160,000Product Development …………………………..240,000Loss on Sale of Long-Term Investment ……………60,000Officers’ Salaries ……………………………450,000Rent for Office Space …………………………440,000Sales Salaries and Commissions …………………280,000One-half of the rented premises is occupied by the sales department. Barrister’s total sellingexpenses for 2014 are9a.b.c.d.$720,000.$740,000.$800,000.$960,000.48. Astro Incorporated’s financial statements for the years 2014 and 2015 contained the followingerrors:20142015Ending Inventory$6,000 understated$9,000 overstatedDepreciation Expense$12,000 overstated$7,500 overstatedAssuming that none of the errors were detected or corrected, and that no additional errorswere made in 2016, by what amount will current assets at December 31, 2016, beoverstated or understated?a. $0b. $3,000 overstatedc. $9,000 understatedd. $9,000 overstated49. The financial statements of Bollinger Corporation for 2014 and 2015 contained the followingerrors:20142015Ending Inventory$14,000 overstated$20,000 understatedRent Expense$4,800 understated$6,600 overstatedAssuming that none of the errors were detected or corrected, by what amount will 2015operating income be overstated or understated?a. $40,600 understatedb. $35,800 understatedc. $27,800 understatedd. $13,400 overstated50. The financial statements of Mannassass Corporation for 2014 and 2015 contained thefollowing errors:20142015Ending Inventory$14,000 overstated$20,000 understatedRent Expense$4,800 understated$6,600 overstatedAssuming that none of the errors were detected or corrected, by what amount will 2014operating income be overstated or understated?a. $9,200 overstatedb. $9,200 understatedc. $18,800 understatedd. $18,800 overstated51. On June 30, 2014, Sonata Company’s operating facilities in Nebraska were destroyed by a flood.The loss of $700,000 was not covered by insurance. Sonata’s tax rate for 2014 is 40 percent.In Sonata’s income statement for the year ended September 30, 2014, this event should bereported as an extraordinary loss of10a.b.c.d.$0.$280,000.$420,000.$700,000.52. Stratosphere Manufacturing Company sold plant assets at a gain of $205,000 less related taxesof $62,500. Assuming the gain is not considered unusual or infrequent, Stratosphere’sincome statement for the period should reporta. a prior period adjustment net of applicable taxes, $142,500.b. an extraordinary item net of applicable taxes, $142,500.c. a gain of $205,000 and an increase in income tax expense of $62,500.d. operating income net of applicable taxes, $142,500.53. Seaworthy Company’s gross sales in 2014 were $3,930,000. Assuming sales returns andallowances were $74,000, sales discounts were $35,000, and freight-out was $28,000, whatwere Seaworthy’s net sales in 2014?a. $3,793,000b. $3,821,000c. $3,856,000d. $3,930,00054. The changes in account balances of the Dunedin Corporation during 2014 are presented below:IncreaseAssets ………………………………………$133,500Liabilities ………………………………….40,500Common Stock …………………………………90,000Additional Paid-In Capital …………………….9,000Assuming there are no changes in retained earnings except for net income and a dividendpayment of $19,500, the net income for 2014 should bea. $6,000.b. $13,500.c. $19,500.d. $25,500.55. Saginaw Inc. decided on August 1, 2014, to dispose of a component of its business. Thecomponent was sold on November 30, 2014. Saginaw’s income for 2014 included income of$250,000 from operating the discontinued segment from January 1 to the sale date. Saginawincurred a loss on the November 30 sale of $220,000. Ignoring income taxes, what amountshould be reported in the 2014 income statement as the net income or loss under"Discontinued Operations"?11a.b.c.d.$220,000 loss$30,000 loss$30,000 income$250,000 income56. The following amounts are from Silverton Co.’s 2014 income statement:Sales ……………………………………….$340,000Sales returns and allowances …………………..5,000Cost of goods sold ……………………………132,000Utilities expense …………………………….66,000Interest revenue ……………………………..1,000Income tax on operations ………………………28,000Extraordinary loss due to earthquake, net of tax …5,000Interest expense ……………………………..4,000Salaries expense ……………………………..46,000Loss on sale of investments ……………………3,000What amount would Silverton show for income from continuing operations on a multiplestep format income statement?a. $52,000b. $68,000c. $57,000d. $96,00057. Most forecasting exercises begin with a forecast ofa. cash.b. total assets.c. net income.d. sales.58. Which of the following events would be considered an extraordinary item?a. An airline experienced a significant loss due to a strike by employees of the companywho provide its aircraft maintenance.b. A food cannery was faced with a large loss of inventory of canned soups due togovernment condemnation because of possible botulism contamination; thecompany had never experienced a similar situation in its history.c. A company, located on an island which has experienced severe flooding three times inthe past 25 years, was subjected to a heavy loss of physical plant due to flooding.d. A medical corporation was required to pay damages equal to three times its averagenet income to a patient. The corporation had experienced suits of this nature in thepast, but the amount of the losses had never exceeded 5 percent of the corporation’saverage net income.59. In relation to a set of 2015 basic financial statements, a subsequent event is one thata. occurs before the 2015 financial statements are issued.b. involves uncertainty as to possible gain or loss that will ultimately be resolved in122016 or later.c. occurs after the 2015 financial statements are issued.d. requires an appropriate adjusting entry to be made as of the end of 2015.60. An operating cyclea. is twelve months or less in length.b. is the average time required for a company to collect its rece…


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