Financial Statements

Question 1

IS INTEREST EXPENSE INCLUDED IN GENERAL AND ADMINISTRATIVE EXPENSES?

Answer 1

NO

Question 2

IS ADVERTISING EXPENSE INCLUDED IN GENERAL AND ADMINISTRATIVE EXPENSES?

Answer 2

NO

Question 3

IS FREIGHT OUT CONSIDERED A DELIVERY SERVICE? AND IS THIS PART OF SELLING EXPENSE?

Answer 3

YES

Question 4

IS A PRIOR YEAR ADJUSTMENT FOR AMORTIZATION EXPENSE INCLUDED IN NET INCOME

Answer 4

NO

Question 5

T/F UNREALIZED GAINS ARE NOT INCLUDED IN NET INCOME

Answer 5

TRUE

Question 6

Reporting accounts receivable at net reliable value is a departure from which accounting principle?

Answer 6

Historical cost

Question 7

Purpose of comprehensive income

Answer 7

To summarize all changes in equity from non owner sources

Question 8

Which financial statement cannot be prepared directly from the adjusted trial balance

Answer 8

Statement of cash flows

Question 9

In a direct method statement of cash flows what must be used in support

Answer 9

Disclosure of a reconciliation (ending retained earnings to net cash flow from operations)

Question 10

Cash balance at the end of the year equals?

Answer 10

Cash at beginning of year + net sum of the 3 categories of cash flows

Question 11

For statement of cash flow purposes: why type of activity is payment of dividends considered?

Answer 11

Financing activity

Question 12

What is inventory turnover ratio

Answer 12

COGS / Average inventory

Question 13

Average days to collect

Answer 13

365/ AR turnover

Question 14

AR Turnover

Answer 14

Credit sales/average AR

Question 15

Quick ratio

Answer 15

Current assets / current liabilities

Question 16

Operating cycle

Answer 16

Total period of time from the purchase of inventory, to sale, and then finally the collection of cash from recievables

Question 17

Basic inventory equation

Answer 17

Beginning inventory + purchases = ending inventory + cost of good sold

Question 18

Times interest earned ratio

Answer 18

Income before interest expense and income tax / interest expense

Question 19

AR turnover

Answer 19

Ratio of sales to average AR

Question 20

Current ratio

Answer 20

Current assets / current liabilites

Question 21

Acid test ratio

Answer 21

Liquid current assets/ current liabilities

Question 22

Bond discount represents :

Answer 22

Interest in excess of the cash interest paid each period.

Bond discount is the difference between the amount borrowed and face value and thus represents interest to be recognized over the bond term.. this interest is recognized un interest expense as a reduction in the discount account

Question 23

When bond discount is amortized

Answer 23

A portion of the discount is recognized as expense. The result is that interest expense exceeds the amount t of cash paid with each interest payment.

Question 24

Is conversion of preferred stock a non cash activity?

Answer 24

Yes

Question 25

what is the defensive interval ratio

Answer 25

the ratio of quick assets to daily operating expenditures.

Question 26

Basic Book value per share

Answer 26

total owners equity is divided by the number of shares outstanding. The number of share outstanding equals the number of shares issued less the number in the treasury.

Question 27

for consolidating financial statements a majority voting interest is deemed to be

Answer 27

greater than 50% of the directly or indirectly owned outstanding voting shares of another.

Question 28

what level of voting ownership is normally assumed to convey significant influence over an investee

Answer 28

20-50%

Question 29

are consolidating processes recorded in the books of the parent or subsidiary?

Answer 29

no, the process takes place on worksheets and the results are presented on the consolidated financial statements

Question 30

Name some income measurements that would appear in Income From Continuing Operations

Answer 30

gain on disposal of plant asset unrealized loss on investment in trading securities realized gain on investment in debt securities effect of change in useful life estimate income tax expense restructuring charge loss from effect of new law dividends received on investment in debt securities

Question 31

name some income measurements that would appear in Owners' Equity other than IFCO, OCI, and income other than IFCO

Answer 31

cumulative effect of change from LIFO to FIFO (vice versa) stock dividend distributed accumulated other comprehensive income

Question 32

Name some income measurements that would appear in Other Comprehensive Income

Answer 32

Increase in unrealized pension costs | Unrealized loss on investment in debt securities available for sale

Question 33

discontinued operations are place in a separate category after income from continuing operations.

Answer 33

true

Question 34

the classification "extraordinary item" no longer exists

Answer 34

true

Question 35

a component must be classified as discontinued when it meets the criteria

Answer 35

true

Question 36

a correction of an error required restatement of the financial statements

Answer 36

true

Question 37

Under the cost method and te equity method will the carrying value of the investment normally change following a combination?

Answer 37

Under the cost method, no. Under the equity method, yes. The carrying value of the investment will change as the equity of the subsidiary changes.

Question 38

Will a parents balance sheet or income statement prepared after a business combination be different from financial statements it prepare immediately before the business combination?

Answer 38

The parents balance sheet is likely to change after a business combination because the parent will have on the balance sheet an investment account as a result of the combination. The consolidated income statement will likely be the same as the parents pre combination income statement.

Question 39

Will a parents balance sheet or income statement prepared following an operating period after a business combination be different from financial statements it prepare immediately before the business combination?

Answer 39

The parents balance sheet and income statement is likely to change after an operating period after a business combination because the parent will have on the balance sheet an investment account as a result of the combination. In addition the I come statement will Include the subsidiaries revenue and expenses as a result of the post combination.

Question 40

A balance sheet prepared AFTER a business business acquisition would record equipment with a market value in excess of book value (on the date of combination) as:

Answer 40

Plant and equipment

Question 41

On the date of a business combination using acquisition accounting, the consolidated stockholders equity will exactly equal the parents stockholders equity

Answer 41

True. Parent SE less subsidiary SE

Question 42

One criteria to qualify for simplified hedge accounting

Answer 42

The variable interest rate on the hedged borrowing are linked to the same index

Question 43

Formula to calculate ending balance of Allowance for Doubtful Accounts

Answer 43

beginning allowance balance + uncollectible accounts expense - write offs + recoveries = ending allowance balance

Question 44

what is the aging method to determine allowance for doubtful accounts?

Answer 44

the sum of the products in each age category

Question 45

what is net sales

Answer 45

net sales is sales revenue less sales returns and allowances.

Question 46

what happens to the current ratio if you purchase inventory on account?

Answer 46

decreases. inventory and accounts payable increase by the same amount. current assets increase by a smaller percentage because the numerator of the ratio before the transaction is larger than the denominator, therefore the ratio decrease.

Question 47

what happens to the current ratio if you pay accounts payable?

Answer 47

decreases. current assets decrease by a larger percentage because the numerator before the transaction is smaller than the denominator.

Question 48

formula for cost of goods sold

Answer 48

beginning inventory + purchases - ending inventory = cost of goods sold

Question 49

list the difference between periodic and perpetual applications of last in first out.

Answer 49

- in perpetual each sale is costed with most recent purchase. - perpetual results in a lower cost of goods sold in a period of rising prices.

Question 50

what account holds inventory acquisition cost during the period under a periodic system?

Answer 50

purchases

Question 51

list the differences between moving and weighted average cost flow assumptions.

Answer 51

moving average computes a new weighted average cost per unit after each purchase of inventory. moving average results in lower cost of goods sold during a period of rising prices.

Question 52

net purchases forumula

Answer 52

gross purchases + transportation - purchase returns and allowances - purchase discounts

Question 53

specific identification cost flow assumption

Answer 53

- specifically identifies cost of each item | - appropriate for large costly distinguishable products

Question 54

list the weighted average cost flow assumptions

Answer 54

- cost per unit is the average cost of all units held during the period - each item is treated as if costed at WA cost

Question 55

cost flow assumptions of a perpetual inventory system

Answer 55

- specific identification - moving average - fifo - lifo

Question 56

weighted average cost per unit formula

Answer 56

cost of good available for sale / number of units available for sale

Question 57

Ending DV LIFO formula

Answer 57

ending dv lifo= beginning dv lifo + (increase at base dollars)(price level index) ** ENDING INVENTORY IN CURRENT YEAR DOLLARS/ENDING INVENTORY IN BASE YEAR DOLLARS.

Question 58

Describe the relative sales value method for recording costs

Answer 58

cost to be recorded for each item is based on its relative sales value to the total sales value of the group.

Question 59

what are the methods used to value ending inventory?

Answer 59

gross margin method, retail inventory method. dollar-value LIFO method

Question 60

margin on costs formula

Answer 60

(sales - cost of goods sold)/cost of goods sold

Question 61

gross margin percentage formula

Answer 61

(sales - cost of goods sold) / sales

Question 62

are gains AND losses recognized on the income statement when an asset is donated?

Answer 62

YES