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ACT 5741 quiz

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1. Which of the following is a financing activity?;A. gain on the sale of common stock;B. selling short term investments;C. buying equipment;D. none of the above is a financing activity;2. Which statement is true about the cash flow statement?;A. the operations section (using the direct method) starts with net income;B. an increase in accounts receivable adds back cash using the indirect method;C. the financing section is the same under either the direct or indirect method;D. None of the above is a true statement;3. The Fantastic Company purchased 100% of the stock of the Stinky Company. Fantastic Company will record the Stinky assets and liabilities at?;A The fair value of the consideration given up by Fantastic.;B The fair value of the shares obtained from the owners of Fantastic.;C. It depends if we use the purchase or acquisition method;D. None of the above is correct;4. Tall Company buys all of the outstanding stock of Small Company on November 1, Year One for $500,000 and is now preparing consolidated financial statements at the end of Year One. Small earned revenues of $10,000 per month during Year One along with expenses of $8,000 per month. On November 1, Year One, Small had only one asset?a piece of land with a cost of $300,000 and a fair value of $450,000?and no liabilities. The land continues to appreciate in value and is worth $470,000 at the end of Year One. Which of the following statements is true about the consolidated financial statements at the end of Year One?;A Consolidated net income will include $120,000 minus $96,000 earned by Small.;B Goodwill at the end of Year One is reported as 0 under the acquisition method.;C The gain on the land owned by Small is reported as a $30,000 gain;D. None of the above statements are true.;5. Held to maturity securities include which of the following?;A. Short term trading securities;B. Preferred stock in an investee;C. A 10 year bond held as investment;D. None of the above are held to maturity securities;6. Which of the following is a true statement?;A. Amortization of a premium causes the effective rate to be higher than the face rate on held to maturity investments;B. Amortization of a premium causes the effective rate to be lower than the face rate on held to maturity investments.;C. Since it is an investment there is no need to test for impairment;D. None of the above are true statements.;7. Which statement is true regarding trading securities;A. Adjustments to FMV is a part of comprehensive income;B. Adjustments to FMV flows though the income statement;C. Amortization of a discount decreases the carrying value;D. None of the above are true statements;8. Cost of available for sale securities include;A. Purchase price plus consulting fees;B. Purchase price plus brokerage fees;C. Gains on sale of securities used to purchase the new securities;D. None of the above is a correct answer;9. Which state is true regarding available for sale securities?;A. If FMV is greater than cost write up to market and recognize gain as part of operations in the income statement;B. Test available for sale securities for impairment;C. Subsequent increases in value (after adjusting down for impairment) are allowed;D. None of the above statements are true;10. Which FASB is the primary source for accounting for Investments?;A. FAS 123;B. FAS 115;C. SAS 112;D. None of the above is the source for the application of investment accounting.

 

Paper#81704 | Written in 18-Jul-2015

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