•
••
• Question 1
2 out of 2 points
When a magazine sells subscriptions to customers, it is an example of:
Answer
Selected Answer:
An unearned revenue transaction.
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• Question 2
2 out of 2 points
Gains or losses result, respectively, from the disposition of business assets for greater
than, or less than, their book values.
Answer
Selected Answer:
True
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• Question 3
2 out of 2 points
A firm's comprehensive income always:
Answer
Selected Answer:
Could be greater than or less than net income.
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• Question 4
2 out of 2 points
The assumption that in the absence of contrary information a business entity will
continue indefinitely is the:
Answer
Selected Answer:
Going concern assumption.
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• Question 5
0 out of 2 points
Shively Mfg. Co. sold for $18,000 equipment that cost $40,000 and had a book value of
$30,000. Shively would report:
Answer
Selected Answer:
Operating cash inflows of $8,000.
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• Question 6
2 out of 2 points
A sale on account would be recorded by:
Answer
Selected Answer:
Debiting assets.
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• Question 7
0 out of 2 points
Current assets include cash and all other assets expected to become cash or be consumed:
Answer
Selected Answer:
Within one year.
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• Question 8
0 out of 2 points
Flapper Jack's Pancake Restaurants Inc. sells franchises for an initial fee of $36,000 plus
operating fees of $500 per month. The initial fee covers site selection, training, computer
and accounting software, and on-site consulting and troubleshooting, as needed, over the
first five years. On March 15, 2010, Tim Cruise signed a franchise contract, paying the
standard $6,000 down with the balance due over 5 years with interest.
Assume at March 15, 2010, the time of signing the contract, collectibility of the
receivable was reasonably assured and there were no significant continuing obligations.
The journal entry at signing would include a:
Answer
Selected Answer:
Credit to unearned franchise fee revenue for $36,000.
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••
• Question 9
0 out of 2 points
The cost recovery method of accounting for long-term contracts under IFRS is
sometimes referred to as the:
Answer
Selected Answer:
"multi-step approach"
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• Question 10
0 out of 2 points
The conceptual framework's recognition and measurement concepts recognize which of
the following as a principle, rather than an assumption?
Answer
Selected Answer:
Monetary unit.
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• Question 11
0 out of 2 points
George Jones is planning on a cruise for his 70th birthday party. He wants to know how
much he should set aside at the beginning of each month at 6% interest to accumulate the
sum of $4,800 in five years. He should use a table for the:
Answer
Selected Answer:
Future value of 1.
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••
• Question 12
0 out of 2 points
Which of the following is not a financing ratio?
Answer
Selected Answer:
All of the above are financing ratios.
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• Question 13
0 out of 2 points
In its December 31, 2011 financial statements, E-Z Prices estimated that losses on its
current receivables would be $10.2 million. During 2012, E-Z Prices determined that the
losses on the Dec. 31, 2011, receivables were actually $12.4 million. Ignoring taxes, E-Z
Prices would report, in its 2012 financial statements, the additional $2.2 million loss on
receivables as:
Answer
Selected Answer:
A prior period adjustment.
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• Question 14
2 out of 2 points
Use of the percentage-of-completion method is dependent on a firm's ability to make
dependable forecasts of future costs.
Answer
Selected Answer:
True
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• Question 15
0 out of 2 points
Red Onion Restaurant classifies a six-month prepaid insurance policy as a current asset.
Its rationale is based on:
Answer
Selected Answer:
Liquidity.
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• Question 16
2 out of 2 points
Intraperiod income tax presentation is primarily a matter of:
Answer
Selected Answer:
Allocation.
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• Question 17
2 out of 2 points
EPS disclosure is required only for income from continuing operations.
Answer
Selected Answer:
False
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• Question 18
0 out of 2 points
Assume that Steffi signed a $50,000 installment note when she signed the franchise
agreement. RS has no experience estimating uncollectible accounts associated with these
sorts of notes. They can recognize
Answer
Selected Answer:
$50,000 of revenue when Steffi signs the agreement.
•
••
• Question 19
2 out of 2 points
Disclosure notes would not include:
Answer
Selected
Answer:
Data to adjust the financial statements so that they are not
misleading.
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• Question 20
0 out of 2 points
Notes payable:
Answer
Selected Answer:
Is a current liability account.
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• Question 21
0 out of 2 points
The principal benefit of separately reporting discontinued operations and extraordinary
items is to enhance:
Answer
Selected Answer:
Consistency in reporting.
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• Question 22
2 out of 2 points
Comprehensive income is the total change in shareholders' equity that occurred during
the period.
Answer
Selected Answer:
False
•
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• Question 23
2 out of 2 points
Under GAAP with respect to multiple-deliverable arrangements, if the revenue for a
particular part of a multiple-part arrangement does not qualify for separate recognition, it
is:
Answer
Selected Answer:
recognized when revenue for the other parts are recognized.
•
••
• Question 24
0 out of 2 points
On June 1, 2011, Romano Inc. changed the estimated useful life of its office equipment
from 20 to 12 years. This change would be accounted for:
Answer
Selected Answer:
Retrospectively.
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••
• Question 25
0 out of 2 points
An item must meet the subjective criteria of being either unusual or infrequent to be
reported as extraordinary.
Answer
Selected Answer:
True
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••
• Question 26
2 out of 2 points
A company's market value is generally less than its book value.
Answer
Selected Answer:
False
•
••
• Question 27
0 out of 2 points
Lake Power Sports sells jet skis and other powered recreational equipment. Customers
pay 1/3 of the sales price of a jet ski when they initially purchase the ski, and then pay
another 1/3 each year for the next two years. Because Lake has little information about
collectibility of these receivables, they use the installment method for revenue
recognition. In 2010 Lake began operations and sold jet skis with a total price of
$900,000 that cost Lake $450,000. Lake collected $300,000 in 2010, $300,000 in 2011,
and $300,000 in 2012 associated with those sales. In 2011 Lake sold jet skis with a total
price of $1,500,000 that cost Lake $900,000. Lake collected $500,000 in 2011, $400,000
in 2012, and $400,000 in 2013 associated with those sales. In 2013 Lake also repossessed
$200,000 of jet skis that were sold in 2011. Those jet skis had a fair value of $75,000 at
the time they were repossessed.
In 2010, Lake would recognize realized gross profit of:
Answer
Selected Answer:
$300,000.
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••
• Question 28
0 out of 2 points
Temporary accounts would not include:
Answer
Selected Answer:
Cost of goods sold.
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••
• Question 29
2 out of 2 points
Under the cost recovery method used to account for long-term contracts under IFRS,
equal amounts of revenue and cost are recognized until all costs are recovered.
Answer
Selected Answer:
True
•
••
• Question 30
0 out of 2 points
Merchandise sold FOB destination indicates that:
Answer
Selected
Answer:
The buyer is responsible for delivery of the merchandise to the
destination.
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••
• Question 31
2 out of 2 points
One of the elements that many believe distinguishes a profession from other occupations
is the acceptance by its members of a responsibility for the interests of those it serves,
often articulated in:
Answer
Selected Answer:
Its code of ethics.
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• Question 32
2 out of 2 points
The calculation of present value eliminates interest from future cash flows.
Answer
Selected Answer:
True
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• Question 33
2 out of 2 points
Prepaid expenses are classified as current assets if the services purchased are expected to
expire within twelve months or the operating cycle, if that is longer.
Answer
Selected Answer:
True
•
••
• Question 34
0 out of 2 points
Yamaha Inc. hires a new chief financial officer and promises to pay him a lump sum
bonus four years after he joins the company. The new CFO insists that the company
invest an amount of money at the beginning of each year in a 7% fixed rate investment
fund to insu
re the bonus will be available. To determine the amount that must be invested
each year, a computation must be made using the formula for:
Answer
Selected Answer:
None of the above is correct.
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••
• Question 35
2 out of 2 points
Which of the following accounts has a credit balance?
Answer
Selected Answer:
Accrued income taxes payable.
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••
• Question 36
0 out of 2 points
The balance sheet can be considered a change or flow statement.
Answer
Selected Answer:
True
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••
• Question 37
2 out of 2 points
The rationale for adoption of the percentage-of-completion method is that:
Answer
Selected Answer:
It provides a measure of periodic accomplishment.
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••
• Question 38
2 out of 2 points
Revenue from the sale of computer software is always recognized at the point of sale.
Answer
Selected Answer:
False
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••
• Question 39
0 out of 2 points
Bert's Meat Market sells quarters and sides of beef on the installment basis. Losses on
receivables are very difficult to predict, and meat products cannot be repossessed. The
revenue recognition method used by Bert would be:
Answer
Selected Answer:
Point of sale.
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••
• Question 40
0 out of 2 points
A change in depreciation method is accounted for:
Answer
Selected Answer:
Retrospectively.
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••
• Question 41
2 out of 2 points
An extraordinary event for financial reporting purposes is both:
Answer
Selected Answer:
Unusual and infrequent.
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••
• Question 42
0 out of 2 points
Cash flows from financing activities include:
Answer
Selected Answer:
Interest paid.
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••
• Question 43
0 out of 2 points
The primary historical reason for the FASB reversing its positions when political
pressures occur is:
Answer
Selected Answer:
They have no authority in such situations.
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••
• Question 44
0 out of 2 points
Operating cash flows would exclude:
Answer
Selected Answer:
Dividends received.
•
••
• Question 45
2 out of 2 points
The Maytag Corporation's income statement includes income from continuing
operations, a loss from discontinued operations, and extraordinary items. Earnings per
share information would be provided for:
Answer
Selected
Answer:
Income from continuing operations, loss from discontinued operations,
extraordinary items and net income.
•
••
• Question 46
2 out of 2 points
Under IFRS, firms typically use the cost recovery method if they conclude that the
percentage-of-completion method is not appropriate to account for a long-term contract.
Answer
Selected Answer:
True
•
••
• Question 47
2 out of 2 points
Which of the following has the authority to set accounting standards in the United States?
Answer
Selected Answer:
SEC
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••
• Question 48
0 out of 2 points
A company could improve its return on assets by increasing its income or by increasing
its total assets.
Answer
Selected Answer:
True
•
••
• Question 49
0 out of 2 points
The primary responsibility for properly applying GAAP when communicating with
investors and creditors through financial statements lies with a firm's auditors.
Answer
Selected Answer:
True
•
••
• Question 50
0 out of 2 points
The income statement summarizes the operating activity of a firm at a particular point in
time.
Answer
Selected Answer:
True
