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1) A company changes from straight-line to an acce...

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1) A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a A. credit to Deferred Tax Liability. B. debit to Retained Earnings in the amount of the difference on prior years. C. credit to Accumulated Depreciation. D. debit to Deferred Tax Asset. 2) Which of the following is NOT a retrospective-type accounting change? A. Full-cost method to another method in the extractive industry B. LIFO method to the FIFO method for inventory valuation C. Completed-contract method to the percentage-of-completion method for long-term contracts D. Sum of the years' digits method to the straight-line method 3) A company changes from percentage-of-completion to completed-contract, which is the method used for tax purposes. The entry to record this change should include a A. credit to Deferred Tax Liability. B. debit to Construction in Process. C. debit to Loss on Long-Term Contracts in the amount of the difference on prior years, net of tax. D. debit to Retained Earnings in the amount of the difference on prior years, net of tax. 4) Which of the following describes a change in reporting entity? A. Changing the companies included in combined financial statements. B. A company acquires a subsidiary that is to be accounted for as a purchase. C. A manufacturing company expands its market from regional to nationwide. D. A company divests itself of a European branch sales office. 5) On January 1, 2005, Baden Co. purchased a machine, which was its only depreciable asset, for $300,000. The machine has a 5-year life, and no salvage value. Sum-of-the-years'-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2008, for financial statement reporting, Baden decided to change to the straight-line method for depreciation of the machine. Assume that Baden can justify the change. Baden's income before depreciation, before income taxes, and before the cumulative effect of the accounting change, if any, for the year ended December 31, 2008, is $250,000. The income tax rate for 2008, and for 2005 through 2007, is 30%. What amount should Baden report as net income for the year ended December 31, 2008? A. $175,000 B. $60,000 C. $91,000 D. $154,000 6) Hannah Company began operations on January 1, 2007, and uses the FIFO method in costing its raw material inventory. Management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed: Final Inventory 2007 2008 FIFO $320,000 $360,000 LIFO 240,000 300,000 Net Income (computed under the FIFO method) 500,000 600,000 Based upon the above information, a change to the LIFO method in 2008 would result in net income for 2008 of A. $660,000. B. $540,000. C. $600,000. D. $620,000. 7) At the December 31, 2007 balance sheet date, Garth Brooks Corporation reports an accrued receivable for financial reporting purposes but not for tax purposes. When this asset is recovered in 2008, a future taxable amount will occur and A. Garth will record an increase in a deferred tax asset in 2008. B. pretax financial income will exceed taxable income in 2008. C. Garth will record a decrease in a deferred tax liability in 2008. D. total income tax expense for 2008 will exceed current tax expense for 2008. 8) Interperiod income tax allocation causes A. tax expense in the income statement to be presented with the specific revenues causing the tax. B. tax expense shown on the income statement to equal the amount of income taxes payable for the current year, plus or minus the change in the deferred tax asset or liability balances for the year. C. tax expense shown in the income statement to bear a normal relation to the tax liability. D. tax liability shown in the balance sheet to bear a normal relation to the income before tax reported in the income statement. 9) The deferred tax expense is the A. decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability. B. increase in balance of deferred tax asset plus the increase in balance of deferred tax liability. C. increase in balance of deferred tax liability minus the increase in balance of deferred tax asset. D. increase in balance of deferred tax asset minus the increase in balance of deferred tax liability. 10) If the month-end bank statement shows a balance of $36,000, outstanding checks are $12,000, a deposit of $4,000 was in transit at month end, and a check for $500 was erroneously charged by the bank against the account, what is the correct balance in the bank account at month end? A. $43,500 B. $20,500 C. $28,500 D. $27,500 11) Mortonson Corporation factored, with recourse, $300,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. Mortonson estimates the recourse obligation at $7,200. What amount should Mortonson report as a loss on sale of receivables? A. $31,200 B. $16,200 C. $9,000 D. $0 12) Nottingham Corporation had accounts receivable of $100,000 on January 1st The only transactions affecting accounts receivable were sales of $900,000 and cash collections of $850,000. What is the accounts receivable turnover? A. 9.0 B. 7.2 C. 6.6 D. 6.0 13) Liabilities are A. obligations arising from past transactions and payable in assets or services in the future. B. obligations to transfer ownership shares to other entities in the future. C. deferred credits that are recognized and measured in conformity with generally accepted accounting principles. D. any accounts having credit balances after closing entries are made. 14) Among the short-term obligations of Lance Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Madison National Bank. These are 90-day notes, renewable for another 90-day period. What should these notes should be classified as on the balance sheet of Lance Company? A. Intermediate debt B. Long-term liabilities C. Deferred charges D. Current liabilities 15) Which of the following statements is false? A. FICA taxes withheld from employees' payroll checks should never be recorded as a liability because the employer will eventually remit the amounts withheld to the appropriate taxing authority. B. Under the cash basis method, warranty costs are charged to expense as they are paid. C. Cash dividends should be recorded as a liability when they are declared by the board of directors. D. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis and demonstrates an ability to complete the refinancing. 16) Of the following questions, which would NOT be answered by the statement of cash flows? A. What was the change in the cash balance during the period? B. Were all the cash expenditures of benefit to the company during the period? C. What was the cash used for during the period? D. Where did the cash come from during the period? 17) To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by A. eliminating all transactions that have no current or future effect on cash, such as depreciation, from the net income computation. B. eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash. C. estimating the percentage of income statement transactions that were originally reported on a cash basis and projecting this amount to the entire array of income statement transactions. D. rerecording all income statement transactions that directly affect cash in a separate cash flow journal. 18) A statement of cash flows typically would not disclose the effects of A. a purchase and immediate retirement of treasury stock. B. cash dividends paid. C. stock dividends declared. D. capital stock issued at an amount greater than par value. 19) Belle Co. received merchandise on consignment. As of March 31, Belle had recorded the transaction as a purchase and included the goods in inventory. What would be the effect of this on its financial statements for March 31? A. Net income and current liabilities were overstated. B. Net income, current assets, and current liabilities were overstated. C. Net income was correct and current assets and current liabilities were overstated. D. No effect 20) The accountant for the Orion Sales Company is preparing the income statement for 2007 and the balance sheet at December 31, 2007. Orion uses the periodic inventory system. The January 1, 2007 merchandise inventory balance will appear A. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet. B. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. C. only in the cost of goods sold section of the income statement. D. only as an asset on the balance sheet. 21) The failure to record a purchase of merchandise on account even though the goods are properly included in the physical inventory results in A. an understatement of liabilities and an overstatement of owners' equity. B. an understatement of cost of goods sold and liabilities and an overstatement of assets. C. an understatement of assets and net income. D. an overstatement of assets and net income. 22) The cost of land does not include A. special assessments. B. costs of removing old buildings. C. costs of grading, filling, draining, and clearing. D. costs of improvements with limited lives. 23) Fences and parking lots are reported on the balance sheet as A. property and equipment. B. land improvements. C. current assets. D. land. 24) Cotton Hotel Corporation recently purchased Holiday Hotel and the land on which it is located with the plan to tear down the Holiday Hotel and build a new luxury hotel on the site. The cost of the Holiday Hotel should be A. capitalized as part of the cost of the new hotel. B. written off as an extraordinary loss in the year the hotel is torn down. C. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down. D. capitalized as part of the cost of the land. 25) On October 1, 2007, Lyman Co. purchased to hold to maturity, 200 of the $1,000 face value, 9% bonds for $208,000. An additional $6,000 was paid for accrued interest. Interest is paid semiannually on December 1 and June 1 and the bonds mature on December 1, 2011. Lyman uses straight-line amortization. Ignoring income taxes, what was the amount reported in Lyman's 2007 income statement from this investment? A. $5,460 B. $4,020 C. $4,500 D. $4,980 26) During 2007, Ellis Company purchased 20,000 shares of Hiller Corp. common stock for $315,000 as an available-for-sale investment. The fair value of these shares was $300,000 at December 31, 2007. Ellis sold all of the Hiller stock for $17 per share on December 3, 2008, incurring $14,000 in brokerage commissions. What should Ellis Company should report a realized gain on the sale of stock in 2008? A. $40,000 B. $25,000 C. $11,000 D. $26,000 27) On October 1, 2007, Porter Co. purchased to hold to maturity 1,000 of the $1,000 face value, 9% bonds for $990,000 which includes $15,000 accrued interest. The bonds, which mature on February 1, 2016, pay interest semiannually on February 1 and August 1. Porter uses the straight-line method of amortization. The bonds should be reported in the December 31, 2007 balance sheet at a carrying what value? A. $990,250 B. $975,000 C. $990,000 D. $975,750 28) Although only certain leases are currently accounted for as a sale or purchase, there is theoretic justification for considering all leases to be sales or purchases. The principal reason that supports this idea is that A. during the life of the lease the lessee can effectively treat the property as if it were owned by the lessee. B. all leases are generally for the economic life of the property and the residual value of the property at the end of the lease is minimal. C. a lease reflects the purchase or sale of a quantifiable right to the use of property. D. at the end of the lease the property usually can be purchased by the lessee. 29) Which of the following is a correct statement of one of the capitalization criteria? A. The minimum lease payments, excluding executory costs, equal or exceed 90% of the fair value of the leased property. B. The lease transfers ownership of the property to the lessor. C. The lease term is equal to or more than 75% of the estimated economic life of the leased property. D. The lease contains a purchase option. 30) An essential element of a lease conveyance is that the A. term of the lease is substantially equal to the economic life of the leased property. B. lessor conveys less than his or her total interest in the property. C. property that is the subject of the lease agreement must be held for sale by the lessor prior to the drafting of the lease agreement. D. lessee provides a sinking fund equal to one year's lease payments. 31) A debt instrument with no ready market is exchanged for property whose fair market value is currently indeterminable. When such a transaction takes place, A. the directors of both entities involved in the transaction should negotiate a value to be assigned to the property. B. the present value of the debt instrument must be approximated using an imputed interest rate. C. the board of directors of the entity receiving the property should estimate a value for the property that will serve as a basis for the transaction. D. it should not be recorded on the books of either party until the fair market value of the property becomes evident. 32) The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as A. a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption. B. an adjustment to the cost basis of the asset obtained by the debt issue. C. an amount received or paid to obtain a new debt instrument and, as such, should be amortized over the life of the new debt. D. an amount that should be considered a cash adjustment to the cost of any other debt issued over the remaining life of the old debt instrument. 33) A corporation borrowed money from a bank to build a building. The long-term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan. The corporation is to pay the bank $80,000 each year for 10 years to repay the loan. Which of the following relationships can you expect to apply to the situation? A. The amount of interest expense will remain constant over the 10-year period. B. The balance of mortgage payable at a given balance sheet date will be reported as a long-term liability. C. The amount of interest expense will decrease each period the loan is outstanding, while the portion of the annual payment applied to the loan principal will increase each period. D. The balance of mortgage payable will remain a constant amount over the 10-year period. 34) When a business enterprise enters into what is referred to as off-balance-sheet financing, the company A. is in violation of generally accepted accounting principles. B. is attempting to conceal the debt from shareholders by having no information about the debt included in the balance sheet. C. can enhance the quality of its financial position and perhaps permit credit to be obtained more readily and at less cost. D. wishes to confine all information related to the debt to the income statement and the statement of cash flow. 35) A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2006. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,145. Using straight-line amortization, what is the carrying value of the bonds on December 31, 2008? A. $19,663,523 B. $19,670,231 C. $19,633,834 D. $19,940,622 36) A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2007. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,145. Using effective-interest amortization, how much interest expense will be recognized in 2007? A. $1,568,332 B. $780,000 C. $1,568,498 D. $1,560,000 37) A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2007. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,145. Using effective-interest amortization, what will the carrying value of the bonds be on the December 31, 2007, balance sheet? A. $19,608,310 B. $19,612,643 C. $19,625,125 D. $20,000,000 38) The accumulated benefit obligation measures A. the shortest possible period for funding to maximize the tax deduction. B. an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement. C. the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels. D. the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels. 39) The relationship between the amount funded and the amount reported for pension expense is as follows: A. pension expense may be greater than, equal to, or less than the amount funded. B. pension expense will be more than the amount funded. C. pension expense must equal the amount funded. D. pension expense will be less than the amount funded. 40) The projected benefit obligation is the measure of pension obligation that A. is not sanctioned under generally accepted accounting principles for reporting the service cost component of pension expense. B. requires the longest possible period for funding to maximize the tax deduction. C. is required to be used for reporting the service cost component of pension expense. D. requires pension expense to be determined solely on the basis of the plan formula applied to years of service to date and based on existing salary levels. 41) Dividends are not paid on A. Dividends are paid on all of these. B. treasury common stock. C. noncumulative preferred stock. D. nonparticipating preferred stock. 42) Assume common stock is the only class of stock outstanding in the B-Bar-B Corporation. Total stockholders' equity divided by the number of common stock shares outstanding is called A. market value per share. B. stated value per share. C. book value per share. D. par value per share. 43) The payout ratio can be calculated by dividing A. dividends per share by earnings per share and dividing cash dividends by net income less preferred dividends. B. cash dividends by market price per share. C. dividends per share by earnings per share. D. cash dividends by net income less preferred dividends. 44) Which of the following is NOT a generally practiced method of presenting the income statement? A. Including gains and losses from discontinued operations of a component of a business in determining net income B. The single-step income statement C. Including prior period adjustments in determining net income D. The consolidated statement of income 45) Parr, Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Parr should report segment financial information for each division meeting which of the following criteria? A. Segment revenue is 10% or more of consolidated revenue. B. Segment profit or loss is 10% or more of combined profit or loss of all company segments. C. Segment profit or loss is 10% or more of consolidated profit or loss. D. Segment revenue is 10% or more of combined revenue of all the company segments. 46) Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the A. neutrality characteristic. B. relevance characteristic. C. economic entity assumption. D. comparability characteristic.,Can you please advise me how I should wait to receive the answers. Thanks,How long will it take to answer the questions? I will like to know. Thanks

 

Paper#9703 | Written in 18-Jul-2015

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