1. (TCO 1) The FASB’s standard-setting process includes, in the correct order, (Points : 6)
exposure draft, research, discussion paper, and accounting standards update.
research, exposure draft, discussion paper, and accounting standards update.
research, discussion paper, exposure draft, and accounting standards update.
discussion paper, research, exposure draft, and accounting standards update.
2. (TCO 1) Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002? (Points : 6)
Corporate executive accountability
Retention of workpapers
All of the above are provisions of the Act.
3. (TCO 2) SFAC No. 5 focuses on (Points : 6)
objectives of financial reporting.
qualitative characteristics of accounting information.
recognition and measurement concepts in accounting.
elements of financial statements.
4. (TCO 2) Enhancing qualitative characteristics of accounting information include (Points : 6)
relevance and comparability.
comparability and timeliness.
understandability and relevance.
neutrality and consistency.
5. (TCO 3) Incurring an expense for advertising on an account would be recorded by (Points : 6)
debiting an expense.
6. (TCO 3) Adjusting entries are primarily needed for (Points : 6)
cash basis accounting.
current value accounting.
manual accounting systems.
7. (TCO 4) Current assets include cash and all other assets expected to become cash or be consumed (Points : 6)
within 1 year.
within 1 operating cycle.
within 1 year or 1 operating cycle, whichever is shorter.
within 1 year or 1 operating cycle, whichever is longer.
8. (TCO 4) Which of the following is never a current liability account? (Points : 6)
Subscriptions collected in advance
9. (TCO 5) Popson Inc. incurred a material loss that was not unusual in character, but was clearly an infrequent occurrence. This loss should be reported as (Points : 6)
an extraordinary loss.
a separate line item between income from continuing operations and income from discontinued operations.
a separate line item within income from continuing operations.
a separate line item in the retained earnings statement.
10. (TCO 5) On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was completed on December 31, 2012. The following additional facts pertain to the transaction:
The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
The book value of Footwear’s assets totaled $48 million on the date of the sale.
Footwear’s operating income was a pre-tax loss of $10 million in 2012.
Foxtrot’s income tax rate is 40%.
In the 2012 income statement for Foxtrot Co., which of the following would it would report?
(Points : 6)
All income taxes would be combined into one line item.
Income taxes would be separated for continuing and discontinued operations.
Income taxes would be reported for income and gains only.
None of the above
11. (TCO 5) In comparing the direct method with the indirect method of preparing the statement of cash flows, (Points : 6)
only operating activities are presented differently.
only investing activities are presented differently.
only financing activities are presented differently.
all activities are presented differently.
12. (TCO 5) Cash flows from investing activities do not include (Points : 6)
proceeds from issuing bonds.
payment for the purchase of equipment.
proceeds from the sale of marketable securities.
cash outflows from acquiring land.
13. (TCO 5) Merchandise sold FOB shipping point indicates that (Points : 6)
the seller pays the freight.
the buyer holds title after the merchandise leaves the seller’s location.
the common carrier holds title until the merchandise is delivered.
the sale is not consummated until the merchandise reaches the point to which it is being shipped.
14. (TCO 5) Todd Sweeney is an artist who sells his work under consignment. (He displays his work in local barbershops, and customers buy the work there.) Sweeney recently transferred a painting to a local barbershop. Sweeney most likely should recognize revenue when (Points : 6)
he paints the painting, as the painting is accreting.
when he transfers a painting to a barbershop.
when the barbershop sells the painting.
when the barbershop’s right of return expires.
15. (TCO 6) LeAnn wishes to know how much money she should set aside now at 7% interest in order to accumulate a sum of $5,000 in 4 years. She should use a table for the (Points : 6)
present value of 1.
future value of 1.
present value of an ordinary annuity of 1.
future value of an annuity due of 1.
16. (TCO 6) Zulu Corporation hires a new chief executive officer and promises to pay her a signing bonus of $2 million per year for 10 years, starting 5 years after she joins the company. The liability for this bonus when the CEO is hired (Points : 6)
is the present value of a deferred annuity.
is the present value of an annuity due.
is $20 million.
is zero because no cash is owed for 5 years.
17. (TCO 7) Cash may not include (Points : 6)
undeposited customer checks.
18. (TCO 7) Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date?
(Points : 6)
19. (TCO 8) In a periodic inventory system, the cost of purchases is debited to (Points : 6)
cost of goods sold.
20. (TCO 8) During periods when costs are rising and inventory quantities are stable, cost of goods sold will be (Points : 6)
higher under FIFO than LIFO.
higher under FIFO than average cost.
lower under average cost than LIFO.
lower under LIFO than FIFO.
21. (TCO 8) In applying LCM, market cannot be (Points : 6)
less than net realizable value.
greater than the normal profit.
less than the normal profit margin.
greater than net realizable value.
22. (TCO 8) Included in the computation of the cost-to-retail percentage for the LIFO retail method are (Points : 6)
net markups and net markdowns.
neither net markups nor net markdowns.
net markups, but not net markdowns.
net markdowns, but not net markups.
1. (TCO 8) Fulbright Corp. uses the periodic inventory system. During its first year of operation, Fulbright made the following purchases (listed in chronological order of acquisition):
• 40 units at $100
• 70 units at $80
• 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory using the FIFO method? (Points : 15)
2. (TCO 5) What is an accrued liability? Please provide two examples. (Points : 28)
3. (TCO 7) A company’s investment in receivables is affected by several related variables. Give an example of this interrelationship. (Points : 25)
1. (TCO 8) It is the end of the accounting period, and your boss asks you to help determine the inventory balance to place in the company’s balance sheet. Explain which physical quantities of inventory you will include, and which you will exclude. (Points : 25)
2. (TCO 4) You are reviewing the December 31, 2012 financial statements of Ellie’s Antiques that is considering an initial public offering of its shares. The following items come to your attention:
a. Included in long-term investments are 10-year U.S. Treasury bonds that mature March 31, 2013. The bonds were purchased November 20, 2012.
b. The property, plant, and equipment account is stated at cost, except that it includes a parcel of land purchased for investment purposes at a cost of $40,000. Because of rising land prices, the value of the land has been written up to $60,000. The company has an independent appraisal that attests to this amount.
c. The accounts receivable account includes $20,000 due in 3 years from officers and employees and a 2-year, 8% note for $25,000 due from a customer. The loan enabled the customer to buy equipment needed to process materials purchased from Ellie’s Antiques.
Please discuss how the above items should be classified and accounted for.
(Points : 25)
Here’s the SOLUTION