accounting-Which of the following should be reported as a change in accounting estimate

QUESTION

Which of
the following should be reported as a change in accounting estimate?
a) Change in the reported beginning inventory
amount due to a discovery of a bookkeeping error
b) Change from the completed-contract method to
the percentage-of- completion method for revenue recognition on long-term
construction contracts
c) Increase in the rate applied to net credit
sales from 1 percent to 1-1/2 percent in determining losses from uncollectible
receivables
d) Change made to comply with a new FASB
pronouncement

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Question 2
(3 points)
Question 2 Saved

Which of
the following is NOT a change in reporting entity?

Question 2
options:

a) A company acquires a subsidiary that is to be
accounted for as a purchase.

b) A company presents consolidated or combined
statements in place of statements of individual companies.

c) A company changes the companies included in
combined financial statements.

d) A company changes the subsidiaries for which
consolidated statements are presented.

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Question 3
(3 points)
Question 3 Saved

McCartney
Corp. reports on a calendar-year basis. Its 2013 and 2014 financial statements
contained the following errors:

2013

2014

Over(under)statement
of ending inventory ….
$(10,000)

$ 4,000

Depreciation
understatement ……………..
4,000

6,000

Failure to
accrue salaries at year end ……
8,000

12,000

As a result
of the above errors, 2014 income would be

Question 3
options:

a) overstated by $4,000.

b) overstated by $24,000.

c) overstated by $22,000.

d) overstated by $16,000.

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Question 4
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Badger
Corporation purchased a machine for $132,000 on January 1, 2011, and
depreciated it by the straight-line method using an estimated useful life of
eight years with no salvage value. On January 1, 2014, Badger determined that
the machine had a useful life of six years from the date of acquisition and
will have a salvage value of $12,000. A change in estimate was made in 2014 to
reflect these additional data. What amount should Badger record as the balance
of the accumulated depreciation account for this machine at December 31, 2014?

Question 4
options:

a) $73,000

b) $77,000

c) $61,250

d) $63,600

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Question 5
(3 points)
Question 5 Saved

Pages, Inc.
receives subscription payments for annual (one year) subscriptions to its
magazine. Payments are recorded as revenue when received. Amounts received but
unearned at the end of each of the last three years are shown below.

2012

2013

2014

Unearned
revenues ………….
$120,000

$150,000

$176,000

Pages
failed to record the unearned revenues in each of the three years. The entry
needed to correct the above errors is

Question 5
options:

a) Retained Earnings ……………… 150,000
Subscription
Revenues ………….. 26,000
Unearned Revenues …………… 176,000

b) Retained Earnings ……………… 30,000
Subscription
Revenues ………….. 26,000
Unearned Revenues …………… 56,000

c) Subscription Revenues ………….. 176,000
Unearned Revenues …………… 176,000

d) Subscription Revenues ………….. 150,000
Retained Earnings
……………… 26,000
Unearned Revenues …………… 176,000

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Question 6
(3 points)
Question 6 Saved

On December
31, 2014, Artistown Company appropriately changed to the FIFO cost method from
the weighted-average cost method for financial statement and income tax
purposes. The change will result in a $700,000 increase in the beginning
inventory at January 1, 2014. Assuming a 40 percent income tax rate and that no
comparative financial statements for prior years are reported, the cumulative
effect of this accounting change reported for the year ended December 31, 2014,
is

Question 6
options:

a) $700,000.

b) $350,000.

c) $420,000.

d) $280,000.

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Question 7
(3 points)
Question 7 Saved

On January
1, 2011, Caravanos Company purchased for $320,000 a machine with a useful life
of ten years and no salvage value. The machine was depreciated by the
double-declining-balance method, and the carrying amount of the machine was
$204,800 on December 31, 2012. Caravanos changed to the straight-line method on
January 1, 2013. Caravanos can justify the change. What should be the
depreciation expense on this machine for the year ended December 31, 2014?

Question 7
options:

a) $20,480

b) 25,600

c) 32,000

d) 52,480

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Question 8
(3 points)
Question 8 Saved

On January
1, 2011, Mardi Gras Shipping bought a machine for $1,500,000. At that time,
this machine had an estimated useful life of six years, with no salvage value.
As a result of additional information, Mardi Gras determined on January 1,
2014, that the machine had an estimated useful life of eight years from the
date it was acquired, with no salvage value. Accordingly, the appropriate
accounting change was made in 2014. How much depreciation expense for this
machine should Mardi Gras record for the year ended December 31, 2014, assuming
Mardi Gras uses the straight-line method of depreciation?

Question 8
options:

a) $125,000

b) $150,000

c) $187,500

d) $250,000

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Question 9
(3 points)
Question 9 Saved

When a firm
changed its method of accounting for inventory from LIFO to FIFO in 2014, it
decided that the 2014 financial statements should be shown comparatively with
the 2013 results.

Which of
the following statements concerning reporting the change in the retained
earnings statement is correct?

Question 9
options:

a) Both the January 1, 2013, and January 1,
2014, retained earnings balances are reported at different amounts to reflect
the effects of the change in earnings before those respective dates.

b) Only the January 1, 2013, retained earnings
balance is reported at a different amount to reflect the effects of the change
in earnings.

c) Only the January 1, 2014, retained earnings
balance is reported at a different amount to reflect the effects of the change
in earnings.

d) No direct change to retained earnings is
needed since earnings for both years have been adjusted to reflect the change.

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Question 10
(3 points)
Question 10 Saved

Which of
the following, if discovered by Somber Company in the accounting period
subsequent to the period of occurrence, requires the company to report the
correction of an error?

Question 10
options:

a) The estimate of the useful life of a depreciable
asset should have been revised.

b) Capitalization of an expense

c) A change from declining-balance depreciation
method to straight-line method

d) Change in percentage of sales used for
determining bad debt expense

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Question 11
(3 points)
Question 11 Saved

Asuncion
Company purchased some equipment on January 2, 2011, for $24,000. The company
used straight-line depreciation based on a ten-year estimated life with no
residual value. During 2014, management decided that this equipment could be
used only three more years and then would be replaced with a technologically
superior model. What entry should the company make as of January 1, 2014, to
reflect this change?

Question 11
options:

a) No entry

b) Debit a Prior Period Adjustment account for
$4,800 and credit accumulated depreciation for $4,800.

c) Debit Retained Earnings for $4,800 and credit
accumulated depreciation for $4,800.

d) Debit Depreciation Expense for $4,800 and
credit Accumulated Depreciation for $4,800.

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Question 12
(3 points)
Question 12 Saved

Which of
the following is not a justification for a change in depreciation methods?

Question 12
options:

a) A change in the estimated useful life of an
asset as a result of unexpected obsolescence

b) A change in the pattern of receiving the
estimated future benefits from an asset

c) To conform to the depreciation method
prevalent in a particular industry

d) A change in the estimated future benefits
from the asset

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Question 13
(3 points)
Question 13 Saved

Which of
the following independent transactions would cause net income to be more than
cash from operating activities?

Question 13
options:

a) A decrease in the accounts receivable account

b) An increase in the merchandise inventory
account

c) An increase in the accounts payable account

d) An increase in the accrued wages payable
account

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Question 14
(3 points)
Question 14 Saved

Which of
the following investments should be classified as cash equivalents for Lastima
Company in preparing the statement of cash flows?

1 Shares of stock in Lastima Company.
2 A one-month Treasury note purchased by
Lastima Company when only
3 months remained in the note’s term.
3 Share in a money market fund purchased by
Lastima Company; the fund
purchases only investment grade corporate
debt instruments with
maturities of 2 months or less.
4 A one-year treasury note purchased by
Lastima Company when the
treasury note was issued, which now has
only 2 months
remaining in its term.

Question 14
options:

a) 2, 3

b) 2, 4

c) 2, 3, 4

d) 1, 2, 3, 4

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Question 15
(3 points)
Question 15 Saved

Choose the
combination that best reflects the appropriate classification of cash received
from operating, investing and financing activities.

Operating Investing Financing

Question 15
options:

a) Cash paid by customers Sale of operational assets Issuance of bonds payable

b) Dividends received Cash paid by customers Issuance of bonds payable

c) Sale of operational assets Dividends received Cash paid by customers

d) Issuance of bonds payable Sale of operational assets Dividends received

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Question 16
(3 points)
Question 16 Saved

Under the
direct method, which one of the following would represent cash paid?

Question 16
options:

a) Losses on sales of plant assets

b) Gains on sales of plant assets

c) Interest expense, adjusted for changes in
interest payable and amortization of bond premium or discount

d) Depreciation expense, adjusted for changes in
depreciation methods

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Question 17
(3 points)
Question 17 Saved

Choose the
combination below that best reflects the appropriate classification of cash
received from investing and financing activities.

Cash Received from Cash
Received from
Investing Activities
Financing Activities

Question 17
options:

a) Sale of treasury stock Proceeds from
issuing common stock

b) Sale of treasury stock Sale of
investment securities

c) Sale of investment securities Proceeds of issuing common
stock

d) Proceeds from issuing common stock Sale of investment securities

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Question 18
(3 points)
Question 18 Saved

At the
beginning of the year, a firm leased equipment on a capital lease, capitalizing
$60,000 in both its lease liability and leased assets accounts. The contract
calls for December 31 payments of $15,000. The lessee’s annual reporting period
ends December 31 and the contract reflects 10% interest. The lessee made the
first payment as required. The direct method statement of cash flows for the
lessee should reflect which of the following in the first year of the lease
contract (ignore noncash disclosures)?

Question 18
options:

a) $15,000 financing cash outflow

b) $15,000 operating cash outflow

c) $6,000 operating cash outflow; $9,000
financing cash outflow

d) $9,000 financing cash outflow

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Question 19
(3 points)
Question 19 Saved

Melville
Company reported sales of $700,000, bad debt expense of $60,000, and an
increase in net accounts receivable of $150,000 during the current year. What
is the amount of cash collected from customers for the current year if the
company did not record any write-offs during the current year?

Question 19
options:

a) $550,000

b) $590,000

c) $610,000

d) $640,000

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Question 20
(3 points)
Question 20 Saved

Assume cash
paid to suppliers for 2014 is $420,000, that merchandise inventory increased by
$20,000 during the year, and that cost of goods sold was $415,000 for the year.
During 2014, accounts payable must have

Question 20
options:

a) increased by $5,000.

b) decreased by $5,000.

c) increased by $15,000.

d) decreased by $15,000.

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Question 21
(3 points)
Question 21 Saved

A firm sold
an investment in securities available for sale originally costing $30,000, for
$28,000. At the beginning of the year, the investment had a valuation allowance
of $3,000, debit. What is the correct disclosure for these events in the
statement of cash flows prepared under the direct method, assuming this is the
only investment in securities available for sale?

Question 21
options:

a) $28,000 investing cash inflow; add $33,000 in
the reconciliation of earnings and net operating cash flow

b) $28,000 investing cash inflow; add $2,000 in
the reconciliation of earnings and net operating cash inflow

c) $28,000 investing cash inflow; add $5,000 in
the reconciliation of earnings and net operating cash inflow

d) Add $5,000 in the reconciliation of earnings
and net operating cash flow.

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Question 22
(3 points)
Question 22 Saved

How should
the sale of $3,000 worth of cash equivalents costing $2,500 be reflected on the
statement of cash flows prepared under the indirect method?

Question 22
options:

a) $500 operating cash inflow

b) No disclosure

c) $500 operating cash outflow

d) $500 subtraction in the reconciliation of
earnings to net operating cash flow

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Question 23
(3 points)
Question 23 Saved

If a
company issues both a balance sheet and an income statement with comparative
figures from last year, a statement of cash flows:

Question 23
options:

a) is no longer necessary; but may be used at
the company’s option.

b) should not be issued.

c) should be issued for the current year only.

d) should be issued for each period for which an
income statement is presented.

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Question 24
(3 points)
Question 24 Saved

Aboard
Company began the current year with the following:

Accounts receivable
$
10,000

Allowance for doubtful accounts
(800)

Net account receivable
9,200

During the
current year, the following events occurred:

Accounts written off
$ 1,200

Sales on account
30,000

Bad debt expense recognized
2,000

At the end
of the current year, Aboard showed a balance in gross accounts receivable
(before the allowance for doubtful accounts) of $16,800.

What amount
would be shown as an operating cash inflow in the statement of cash flows under
the indirect method?

Question 24
options:

a) $21,000

b) $22,000

c) $30,000

d) $28,200

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Question 25
(3 points)
Question 25 Saved

A
translation adjustment resulting from the translation process is disclosed on
the financial statements as

Question 25
options:

a) a separate component of stockholders’ equity.

b) a below-the-line item on the income
statement.

c) an adjustment to retained earnings.

d) a part of income from operations on the
income statement.

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Question 26
(3 points)
Question 26 Saved

Which of
the following is NOT a short-term convergence topic that the FASB must address
in order to eliminate the reconciliation of accounts prepared under different
sets of standards of different countries?

Question 26
options:

a) Segment reporting

b) Accounting for income taxes

c) Accounting for research and development costs

d) Accounting for the impairment of assets

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Question 27
(3 points)
Question 27 Saved

Which of
the following is NOT a long-term, joint FASB–IASB project?

Question 27
options:

a) Derecognition

b) Fair value measurement

c) Accounting for income taxes

d) Accounting and reporting for intangible
assets

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Question 28
(3 points)
Question 28 Saved

According
to FASB ASC Topic 830 (Foreign Currency Matters – Translation of Financial
Statements), the appropriate method of restatement from a foreign currency to
the U.S. dollar for each of the following is

Remeasurement Translation

Question 28
options:

a) Current rate Monetary/nonmonetary

b) Monetary/nonmonetary Monetary/nonmonetary

c) Monetary/nonmonetary Current rate

d) Current rate Current rate

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Question 29
(3 points)
Question 29 Saved

Pilsner
Company. converts its foreign subsidiary financial statements using the
translation process. The company’s subsidiary in the Czech Republic reported
the following for 2014: revenues and expenses of 25,000,000 and 18,500,000
koruna, respectively, earned or incurred evenly throughout the year, dividends
of 1,500,000 koruna were paid during the year. The following exchange rates are
available:

On January
1, 2014 ………………………………
$.040

On December
31, 2014 …………………………….
.030

Average
rate for 2014 ……………………………
.035

Rate when
dividends were declared and paid …………
.031

Translated
net income for 2014 is

Question 29
options:

a) $148,500.

b) $227,500.

c) $175,000.

d) $195,000.

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Question 30
(3 points)
Question 30 Saved

Monty
Enterprises, a subsidiary of Kerry Company based in Delaware, reported the
following information at the end of its first year of operations (all in
British pounds): assets–483,000; expenses–360,000; liabilities–105,000;
capital stock–90,000, revenues–648,000. Relevant exchange rates are as
follows:

On date
subsidiary stock was purchased …………….
$2.07

Average
rate for the year ………………………..
1.86

At year end
…………………………………….
1.82

As a result
of the translation process, what amount is recorded on the financial statements
as the translation adjustment?

Question 30
options:

a) $34,020 debit adjustment

b) $34,020 credit adjustment

c) $11,520 debit adjustment

d) $11,520 credit adjustment

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Question 31
(3 points)
Question 31 Saved

Under
international accounting standards, cash received from dividends (associated
with dividend revenue) can be shown on the statement of cash flows as

Question 31
options:

a) an operating or a financing activity

b) a financing activity only.

c) a financing or an investing activity.

d) an investing activity only.

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Question 32
(3 points)
Question 32 Saved

Under
international accounting standards regarding depreciation, an entity

Question 32
options:

a) must depreciate separately the components of
a composite asset (e.g., land and building) separately.

b) is not allowed to depreciate the components
of a composite asset (e.g., land and building) separately.

c) may depreciate separately the components of a
composite asset (e.g., land and building)

d) must use fair value accounting for property,
plant, and equipment, thus eliminating the need for depreciation.

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Question 33
(3 points)
Question 33 Saved

Under
international accounting standards, remote contingent liabilities are

Question 33
options:

a) not disclosed.

b) not disclosed unless a guarantee arrangement
(e. g., cosigning the loan of another party) exists.

c) disclosed if the amount of the contingent
liability is reasonably estimable.

d) treated the same as reasonable possible
contingencies.

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Question 34
(3 points)
Question 34 Saved

The
measurement of deferred tax liabilities and assets under international
accounting standards requires the use of

Question 34
options:

a) current-year tax rates; use of future-years’
tax rates even though enacted is prohibited.

b) currently-enacted tax rates for future
years..

c) currently-enacted tax rates for future years
and future tax rates that have been announced by the government but have not
yet been formally enacted into law

d) tax rates in effect when the temporary
difference originated.

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Question 35
(3 points)
Question 35 Saved

Under
international accounting standards, deferred tax assets and liabilities are
classified as

Question 35
options:

a) neither current or noncurrent but are
disclosed in a separate section of the balance sheet.

b) current and noncurrent.

c) only current.

d) only noncurrent.

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Question 36
(3 points)
Question 36 Saved

Which of
the following statements is correct?

Question 36
options:

a) Retained earnings are translated at the
average exchange rate for the year.

b) Capital stock of a foreign subsidiary is
translated at the historical rate, that is, the rate prevailing on the date the
subsidiary was acquired.

c) Dividends are translated at the average
exchange rate for the year.

d) Assets and liabilities are translated at the
historical rate prevailing when the subsidiary was acquired.

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Question 37
(3 points)
Question 37 Saved

Which of
the following statements best describes the use of financial statement
analysis?

Question 37
options:

a) Financial statement analysis techniques are
merely guides to interpretation of financial data.

b) Financial statement analysis can eliminate
the risk in investment decisions.

c) Measurements for a specific company should be
compared only with data from past periods.

d) All of these are correct.

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Question 38
(3 points)
Question 38 Saved

If a firm
changes its inventory method from FIFO to LIFO just prior to a period of rising
prices, the effect in the next period will be

Current Ratio Inventory Turnover

Question 38
options:

a) No effect Increase

b) No effect Decrease

c) Increase Decrease

d) Decrease Increase

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Question 39
(3 points)
Question 39 Saved

Brookville
Corporation’s books disclosed the following information for the year ended
December 31, 2014:

Net credit
sales ………………………………
$1,500,000

Net cash
sales ………………………………..
240,000

Accounts
receivable at beginning of year …………
200,000

Accounts
receivable at end of year ………………
400,000

Brookville’s
accounts receivable turnover is

Question 39
options:

a) 3.75 times.

b) 4.35 times.

c) 5.00 times.

d) 5.80 times.

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Question 40
(3 points)
Question 40 Saved

Selected
information from the accounting records of Carbine Manufacturing follows:

Net sales
………………………………………
$2,900,000

Cost of
goods sold ………………………………
1,900,000

Inventories
at January 1 ………………………..

572,000

Inventories
at December 31 ……………………….
476,000

What is the
number of days’ sales in average inventories for the year?

Question 40
options:

a) 132

b) 109

c) 101

d) 66

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Question 41
(3 points)
Question 41 Saved

Selected
financial data of Nicholas Corporation for the year ended December 31, 2014, is
presented below:

Operating
income ………………………………..
$800,000

Interest
expense ………………………………..
(150,000)

Income before
income tax …………………………
$650,000

Income tax
expense ………………………………
(220,000)

Net income
……………………………………..
$430,000

Preferred
stock dividends ………………………..
(200,000)

Net income
available to common stockholders ………..
$230,000

Common
stock dividends were $120,000. The times-interest-earned ratio is

Question 41
options:

a) 2.9 to 1.

b) 3.6 to 1.

c) 4.3 to 1.

d) 5.3 to 1.

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Question 42
(3 points)
Question 42 Saved

Which of
the following is included in the calculation of the acid-test (quick) ratio?

Accounts Receivable Inventories

Question 42
options:

a) No No

b) No Yes

c) Yes No

d) Yes Yes

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Question 43
(3 points)
Question 43 Saved

What is the
effect of the collection of accounts receivable on the current ratio and net
working capital, respectively?

Current Ratio Net Working Capital

Question 43
options:

a) No effect No effect

b) Increase Increase

c) Increase No effect

d) No effect Increase

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Question 44
(3 points)
Question 44 Saved

During the
year, The Core Company purchased $1,700,000 of inventory. The cost of goods
sold for the year was $1,600,000 and the ending inventory at December 31 was
$330,000. What was the inventory turnover for the year?

Question 44
options:

a) 2.9

b) 3.3

c) 5.7

d) 6.1

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Question 45
(3 points)
Question 45 Saved

The
calculation of the return on total assets ratio would use all of the following
except

Question 45
options:

a) average stockholders’ equity.

b) total assets.

c) average total assets.

d) net sales.

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Question 46
(3 points)
Question 46 Saved

Hermine
Company wrote off an $700 uncollectible account receivable against the
allowance for doubtful accounts with a balance of $2,000. The current ratio
after the write-off of the uncollectible account

Question 46
options:

a) would be less than before the write-off of
the account.

b) would be greater than before the write-off of
the account.

c) would be the same as before the write-off of
the account.

d) cannot be determined with the information
given.

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Question 47
(3 points)
Question 47 Saved

The book
value per share of common stock measures

Question 47
options:

a) liquidity.

b) profitability.

c) equity position and coverage.

d) efficiency.

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Question 48
(3 points)
Question 48 Saved

The
inventory turnover ratio

Question 48
options:

a) measures management’s ability to productively
employ all of its resources.

b) measures the efficient use of assets held for
resale.

c) is a stringent measure of liquidity.

d) provides a measure of the strength of the
sales mix the company currently employs.

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Question 49
(3 points)
Question 49 Saved

Which of
the following is NOT correct regarding the rate of return on assets?

Question 49
options:

a) The rate of return on assets measures
management’s ability to productively employ all its resources.

b) The rate of return on assets measures the
return on all assets used regardless of how the assets are financed.

c) The rate of return on assets is a measure of
profitability.

d) The rate of return on assets measures the
return on the investment made by the owners of the entity.

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Question 50
(3 points)
Question 50 Saved

Which of
the following ratios would not be affected by the choice of depreciation
methods?

Question 50
options:

a) Working capital turnover

b) Earnings per share of common stock

c) Debt to equity

d) Price-earnings ratio

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