Quiz 9-20B Wrong Answers Flashcards Preview

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Flashcards in Quiz 9-20B Wrong Answers Deck (36):

Calling bonds at an unamortized premium produces a...

Gain from retirement of bonds


An asset can be recorded only when the business is certain that it will...

Derive a benefit from the expenditure


Expenditures for startup activities, including organization costs, accounting treatment?

Expensed as incurred


The amortization of a bond discount is the difference between...

Cash interest and interest expense


Cash paid for interest on a bond discount, where does it go in the statement of cashflows, with indirect method being used?

Addition to net income in operating activities section


Amortization of a discount on bonds payable results in...

2) because more expense has been deducted in computing income than the amount of cash paid for interest, the difference (captured in the change in the bond discount account) must be...

Interest expense greater than cash interest

2) added to income to reconcile cash provided or used from
Operating activities


Under the cost method, when stock was repurchased at $20 and the treasury stock was reissued for $12, what must happen before retained earnings is reduced?

Additional paid in capital recorded from when the stock was first
Issued must be reduced in full


Permanent differences between taxable income and pre tax accounting income affect only...

Current reconciliation of book income to taxable income


Permanent differences do not affect either...

Interperiod or intra period income tax allocation


Risk of accounting loss

Amount of write off that a company would record if any party
To agreement failed to perform the terms of contract


Off balance sheet risk occurs when the amount of accounting loss...

Exceeds the amount of associated asset or liability recorded
On the balance sheet


The maximum amount of accounting loss associated with trade accounts receivable occurs if...

No amount of current asset is collected


The calculation of the income recognized in he third year of a 5 year construction contract accounted for using the percentage completion method includes the ratio of...

Total costs incurred to date to total estimated costs


What 2 items should be disclosed in a company's financial statements related to deferred taxes?

1 types and amounts of existing temporary differences

2 nature and amount of each type of operating loss and tax credit
Carry forward


An entity shall disclose the amounts and expiration dates of...

Operating loss and tax credit carry forwards for tax purposes


What is the journal entry to record a discount on notes payable for cash received?

Cash. Xxx
Discount on notes payable. Xxx
Notes payable. Xxx


For construction of qualifying assets...

There is no interest expense on a note payable during construction

All the interest is capitalized during each year of construction


If a computer software arrangement has an agreement to deliver
Software that requires significant production, modification or customization of software, what method of accounting should be used to recognize revenue from the contract?

Contract accounting (percentage completion)


Percentage completion must generally be used if company can make reasonably dependable estimates of...4

1 Extent of progress towards completion
2 contract revenues
3 contract costs
4 both buyer and seller can expect to satisfy obligations


Income tax expense current is the...

2) equation

Tax currently payable

2) income tax expense current = taxable income x tax rate


The service cost component is the portion of pension expense that represents...

An estimate of the increase in pension benefits payable (particularly
The increase in the PBO) as result of employee services rendered
In current period


Interest expense equation

Interest expense = principal x coupon rate x time


IFRS requires that inventories be valued at...

Lower of cost or net realizable value


Under IFRS, if net realizable value falls below cost, then inventory must be...

Written down to net realizable value


Under IFRS, if net realizable value increases back above cost, then a...

Recovery of writedown must occur and inventory must be written
Back up to cost


Under IFRS for inventory, replacement cost...

Is not used


When calculating the asset retirement obligation in the year's balance sheet are discounted cashflows used? Are undiscounted cashflows used?

Only undiscounted cashflows are used


When a company owns 15% of another company and has a receivable using the cost method of accounting with that company they own 15% of, how should the receivable be reported on the balance sheet?

Same as 20-50% ownership

The total receivable should be reported separately


What does FASB ASC 718-10-30-2 require for a method of accounting for stock based compensation plans?

Fair value method


Income tax expense for the second quarter equation

Income tax expense for 2nd quarter =
(Total income for quarters 1 and 2) x (effective rate)
- income tax expense recorded at the end of the 1st quarter


When the fair value of the land approximates the balance due on the note, neither the debtor or creditor record...

A gain or loss on the settlement of debt


What is the fair value of the land when it approximates the balance of the defaulted note payable...

All Cash payments made - interest expense


Insurance premiums are nondeductible, so they are...

Added back into taxable income


Under the book value method, the carrying value of bonds is...

2) example journal entry, convertible $1,000,000 bonds with a carrying value of 1.3M and a market value of 1.4M convertible into 50,000 shares of common stock $1 par, with a market price of $30.

Removed and replaced by stockholder's equity in exactly the same
Total amount

2) bonds payable. 1,000,000
Premium on B/P. 300,000
Common stock 50,000
PiC (plug). 1,250,000


If a company in ch. 11 bankruptcy pays $400,000 cash and issues 80,000 shares at $1.25, what is the net increase in stockholder's equity when the company owes unsecured creditors $1,200,000?

Amount owed to creditors. 1,200,000
Less: cash. (400,000)
Less: common stock issued at FV. (100,000)
= gain on restructuring. 700,000
Add: common stock issued at FV. 100,000
= Increase in Stockholder's Equity. 800,000


The effect of the change on the deferred tax asset or liability at the beginning of the year of change should be included in...

Income from continuing operations for the period that includes
The enactment date