1. Current liabilities are normally recorded at the amount expected to be paid rather than at their present value. This practice can be supported by GAAP according to the concept of: (Points : 5)

1. Current liabilities are normally recorded at the amount expected to be paid rather than at their present value. This practice can be supported by GAAP according to the concept of: (Points : 5)

Matching

Materiality

Consistency

Conservatism

2. If a company has a 51% chance that a customer will win a law suite against them for damages between $5-$15 million how is this recognized under both GAAP and IFRS (Points : 5)

GAAP no liability would be recognized but under IFRS a liability would be recognized

GAAP a liability would be recognized but under IFRS no liability would be recognized

GAAP no liability would be recognized and under IFRS no liability would be recognized

GAAP a liability would be recognized and under IFRS a liability would be recognized

3. A $500,000 bond issue sold for 98. Therefore, the bonds: (Points : 5)

Sold at a discount which is recorded along with a debit to cash and a credit to bonds payable

Sold at a premium which is recorded along with a debit to cash and a credit to bonds payable

Sold at a discount which is recorded along with a debit to bonds payable and a credit to cash

Sold at a premium which is recorded along with a debit to bonds payable and a credit to cash

4. Debt issue costs under GAAP requires (Points : 5)

That debit issue costs are netted against the debt to lower bonds payable

The debit issue costs are netted against the debt to increase bonds payable

A debit to the asset account debt issue costs which is amortized over the term of the debt

A credit to the liability account debt issue costs which is amortized over the term of the debt

5. GAAP requires that if a company elects to report bonds at fair value they (Points : 5)

Must report the changes as an increase or decrease to bonds payable

Must report the changes as an increase or decrease to discount on bonds payable

Must report the changes in fair value to the unrealized holding gain or loss account and the fair value adjustment account

There is no such option under GAAP only IFRS

6. A ___ lease our includes a noncancelable lease term and an agreement for a bargain purchase option (Points : 5)

Capital

Operating

Equity

Bargain

7. Under IFRS a capital lease (Points : 5)

Requires all gains and losses in the fair value of the lease to be recognized at the end of each fiscal year

Can only be issued if it give the lessee the exclusive right to the property for a period of more than 3 years

Agrees to give the lessee use of the asset for the term of the lease

Does not exist under IFRS

8. Accounting for income taxes is consistent with the ____concept of accounting (Points : 5)

Adequate disclosure

Unit of measure

Accrual

Historical costs

9. All of the following will create a deferred tax asset EXCEPT (Points : 5)

Estimated warranty costs, tax deductible when paid

Operating loss carry forward

Bad debt expense when using the allowance method for accounting and direct write off for tax

Interest received on municipal bonds

10. Deferred tax assets and liabilities are classified on the balance sheet (Points : 5)

As current or noncurrent depending on how the related assets or liability is classified

As current assets or liabilities since taxes are assumed to be paid within 1 year

As current assets but noncurrent liabilities since there is no guarantee taxes will actually be paid in the future depending on company earnings

As noncurrent assets and liabilities since future earnings are unreliable

11. Which of the following would increase the employer’s periodic pension expense in the year the event occurs? (Points : 5)

Amortization of net gains

Service costs

Benefits paid to retirees

Expected return on plan assets

12. Pension expense for service and interest costs under GAAP and IFRS: (Points : 5)

Are treated the same

Are amortized over the future periods for GAAP but are expensed for IFRS

Are amortized over the future periods for IFRS but are expensed for GAAP

Are expensed under GAAP but are not accounted for until the pension plan is paid out for IFRS

13. ABC declared and paid cash dividends in January of the current year to its common shareholders. The dividend (Points : 5)

Will be added to the numerator of the earnings per share fraction for the current year

Will be added to the denominator of the earnings per share fraction for the current year.

Will be subtracted from the numerator of the earnings per share fraction for the current year.

Has no effect on the earnings per share for the coming year

14. Treasury stock will (Points : 5)

Increase stockholder’s equity

Decrease stockholder’s equity

Have no effect on stockholder’s equity

Increase the par value of common stock while decreasing the value of preferred stock

15. Which of the following is an example of a change in accounting principle? (Points : 5)

A change in inventory costing methods

A change in the estimated useful life of a depreciable asset

A change in the actuarial life expectancies of employees under a pension plan.

Consolidating a new subsidiary

16. When calculating EPS stock dividends distributed in June are (Points : 5)

Calculated retrospectively

Calculated from June to the end of the year

Calculated from the beginning of the year until the distribution occurred

Not used for EPS calculations since they are not cash dividends

17. Which of the following is not required by generally accepted accounting principles? (Points : 5)

Cash flow per share

Earnings per share

Statement of cash flows

Disclosure notes

18. As a staff accountant, you discovered that due to a change in accounting rules, you realize that you now need to report consolidated financial statements for a new entity. This change should be reported (Points : 5)

Prospectively

Retrospectively

Only if asked by your supervisors to prepare consolidated statements for the new entity

No reporting is required since it is a new entity

19. Statement of cash flows contains all of the following EXCEPT (Points : 5)

Operating activities

Cash activities

Investing activities

Financing activates

20. Which of the following would not be an ethical dilemma (Points : 5)

You find out that items included in year end inventory are damaged and your supervisor tells you to correct the situation next year.

You sell your receivables at the end of the year in an effort to generate cash and improve the cash flows statement

A change in an accounting estimate that is accounted for prospectively

Your company issues higher stock dividends due to cash flow problems and explains to the shareholders that it is in order to give them a better return.

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