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Flashcards in TREPD Deck (102):
1

ASC Topic 825 for the fair value option election applies to all of the following items except for

a. Held-to-maturity investments.

b. Warranties that can be settled by paying third party.

c. Leases.

d. Firm commitments that involve financial instruments. 

 Leases.

2

Which of the following is the SEC form used by issuer companies to file as an annual report with the SEC?

a. Form S-I.

b. Form 10-Q.

c. Form 10-K.

d. Form 8-K

Form 10-K

3

Which of the following items does not require fair value measurement for reporting on the balance sheet?

a. Treasury stock.

c. Goodwill.

c. Business combinations.

d. Asset impairments.

Treasury stock. 

4

How should an unusual event not meeting the current criteria for an extraordinary item be disclosed in the financial statements?

Shown as a separate item in operating revenues or expenses and supplemented by footnote if deemed appropriate. 

5

SEC's regulation S-X describes  

The form and content of financial statements to be filed with the SEC.

6

According to ASC Topic 820, stock market quotation from the New York Stock Exchange is considered what level of valuation input for determining fair value measurement? 

Level 1

7

In accordance with ASC Topic 255, the Consumer Price Index for All Urban Consumers is used to compute information on a

Constant dollar basis. 

8

A transaction that is unusual in nature and infrequent in occurrence should be reported 

After discontinued operations of a segment of a business.

9

Which of the following facts concerning plant assets should be disclosed in the summary of significant accounting policies?

a. Depreciation expense amount

b. Neither

c. Composition

d. Composition and Depreciation expense amount

Neither

10

In Dart Co.'s year 2 single-step income statement, as prepared by Dart's controller, the section titled "Revenues" consisted of the following .

Salas                                              $250,000  

Purchase discounts                              3,000

Recovery of accounts written off         10,000

Total revenues                                  263,000

In its year 2 single-step income statement, what amount should Dart report as total revenues?

$250,000

11

ASC Topic 255 requires that the current cost for inventories be measured as the

Lower of current cost or recoverable amount. 

12

Nutmeg Corporation prepares its financial statements in accordance with IFRS. hich of the following items is required disclosure on the income statement?

a. Operating expenses, nonoperating expenses, and extraordinary items.

b. Revenues, cost of goods sold, and advertising expense.  

c. Finance costs, tax expense, and income.

d. Gross profit, operating profits, and net profits.

Finance costs, tax expense, and income.

13

Which of the following is correct concerning financial statement disclosure of accounting policies?

a. Disclosures should duplicate details disclosed elsewhere in the financial statements.

b. The format and location of accounting policy disclosures are fixed by generally accepted accounting principles.

c. Disclosures should be limited to principles and methods peculiar to the industry' in which the company operates.

d. Disclosure of accounting policies is an integral part of the financial statements.

Disclosure of accounting policies is an integral part of the financial statements.

14

Harris Inc. received $50,000 from the sale of available-for-sale securities in year 2. The securities were acquired in year I at a cost of $62,000, and had a market value of $55,000 at December 31, year I. Harris does not elect the fair value option to report any of its financial assets. Ignoring income taxes, how would this information affect other comprehensive income (loss) for year I and year 2?

    year I      year 2  

a. $(7,000)  $ (5,000)

b. $(7,000)  $ 7,000

c. $0           $(12,000) 

d. $(7,000)  $ 12,000

$(7,000)  $ 7,000 

15

According to ASC Topic 250, the cumulative effect of changing to new accounting principle should be included in net income of

a. Neither

b. Future periods

c. Future periods and The period of change

d. The period of change 

Neither

16

The following expenses were among those incurred by Sayre Company during year I.

Accounting and legal fees                  $160,000 

Interest                                                   60,000

Loss on sale of office equipment            25,000

Rent for office space                            200,000

One-quarter of the rented premises is occupied by the sales department. How much of the expenses listed above should be included in Sayre's general and administrative expenses for year I?

$310,000

17

Which of the following should be disclosed in the summary of significant accounting policies?

a. Basis of consolidation.

b. Composition of plant assets.

c. Maturity dates of long-term debt.

d. Pro forma effect of retroactive application of an accounting change. 

 Basis of consolidation. 

18

 ASC Topic 220, Comprehensive income, applies to which of the following entities?

I. Enterprises that develop full set of financial statements which report cash flows, results of operations, and financial position.

II. All enterprises even if no items classified as other comprehensive income exist for the periods presented.

III.  Not-for-profit organizations that follow the reporting requirements of ASC Topic 95B (SFAS 117). 

I

19

A company reports the following information as of December 31 :

Sales revenue                              $800,000

Cost of goods sold                         600,000

Operating expenses                        90,000

Unrealized holding gain on

available-for-sale securities,

net of tax                                          30,000

What amount should the company report as comprehensive income as of December 31? 

$140,000

20

Which of the following are acceptable methods for reporting comprehensive income under IFRS?

I. One comprehensive income statement.

Il. Two statements: an income statement and comprehensive income statement.

III. In the statement of owners' equity.

I and II only

21

The following changes in account balances of the Marvel Corporation during year 2 are presented below:

                                           Increase

Assets                                 $356,000

Liabilities                                108,000

Capital stock                          240,000

Additional paid-in capital          24,000

Assuming there were no charges to retained earnings other than for dividend payment of $52,000, the net income for year 2 should be 

 $36,000

22

Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest of Envoy's operations. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation? 

When Envoy classifies it as held-for-sale.

23

Which of the following is an accepted valuation technique for fair value estimates?

a. The consistent approach.

b. The residual value approach.

c. The conservative approach.

d. The cost approach. 

The cost approach. 

24

The comparative balance sheets for Wellington Inc. reported the following information at December 31, year I and year 2:

                                            December 31

                                       year 2            Year 1

Retained earnings           $210,000       $140,000

Accumulated other            

comprehensive income       30,000          35,000

Wellington declared cash dividends of $20,000 in year 2. The decrease in accumulated other comprehensive income for year 2 was due to unrealized losses on available-for-sale securities. For the year ended December 31, year 2, What was Wellington's comprehensive income? 

$85,000

25

When computing information on historical cost-constant dollar basis, which of the following is classified as nonmonetary?

a. Unamortized premium on bonds payable.

b. Accumulated depreciation of equipment.

c. Advances to unconsolidated subsidiaries.

d. Allowance for doubtful accounts. 

Accumulated depreciation of equipment.

26

According to ASC Topic 820, which level has the lowest priority for valuation purposes?

a. Level 3

b. Level I

c.  Level 4

d. Level 2 

Level 3 

27

Which of the following items is not classified as aother comprehensive income?

a. Minimum pension liability equity adjustment for a defined-benefit pension plan

b. Foreign currency translation adjustments

c. Extraordinary gains from extinguishment of debt

d. Unrealized gains for the year on available-for-sale marketable securities.

Extraordinary gains from extinguishment of debt 

28

A company changes from the double-declining balance method of depreciation for previously recorded assets to the straight-line method. According to ASC Topic 250, the effect of the change should be reported separately as a

Component of income from continuing operations on prospective basis. 

29

During year I Kerr Company sold a parcel of land used as a plant site. The amount Kerr received was $100,000 in excess of the land's carrying amount. Kerr's income tax rate for year I was 30%. In its year I income statement, Kerr should report a gain on sale of land of 

$100,000 

30

Comprehensive income can be displayed in the financial statements in

I. A separate statement that begins with other comprehensive income.

II. A separate statement that begins with net income.

III. A continuation of net income presented at the bottom of the income statement.

IV Part of the statement of changes in stockholders' equity.

II and III

31

The cumulative effect of an accounting change should generally be given retrospective application for a

a. Change in accounting principle and  Change in accounting entity

b. Change in accounting principle

c. Change in accounting entity

d. Neither

Change in accounting principle and  Change in accounting entity

32

Users of prospective financial information can include

I. General users with whom the responsible party is not negotiating directly.

Il. The responsible party.

Ill. Third parties with whom the responsible party is negotiating directly.

I, II, and III

33

Which of the following statements is correct regarding reporting comprehensive income?

a. A separate statement of comprehensive income is required. 

b. Accumulated other comprehensive income is reported in the stockholders' equity section of the balance sheet.

c. Comprehensive income is reported in the year-end statements but not in the interim statements.

d. Comprehensive income must include all changes in stockholders' equity for the period.

Accumulated other comprehensive income is reported in the stockholders' equity section of the balance sheet. 

34

On January I, year 2, Dart, Inc. entered into an agreement to sell the assets and product line of its Jay Division, considered a segment of the business. The sale was consummated on December 31, year 2, and resulted in a gain on disposition of $400,000. The division's operations resulted in losses before income tax of $225,000 in year 2 and $125,000 in year I. Dart's income tax rate is 30% for both years. In a comparative statement of income for year 2 and year I, Dart should report a gain (loss) from discontinued operations for the years year 2 and year I of

   year 2             year I 

a. $ 122,500      $0

b. $ 122,500      $(87,500)

c. $(157,500)      $(87,500)

d. $(157,500)      $0

$ 122,500      $(87,500)

35

Assume the fair value option for financial assets and liabilities is not elected. Which of the following would not be an item classified separately under other comprehensive income?

a. Foreign currency items. 

b. Gains (losses) on sale of treasury stock.

d. Unrealized gains (losses) on available-for-sale securities.

d. Adjustments to record funded status of pension plans.

Gains (losses) on sale of treasury stock. 

36

Which of the following describes how comprehensive income should be reported?

a. May be reported in a separate statement or in a combined statement of income and comprehensive income.

b. Should not be reported in the financial statements but should only be disclosed in the footnotes.

c. Must be reported in a separate statement, as part of a complete set of financial statements.

d. May be reported in a combined statement of income and comprehensive income or disclosed within statement of stockholders' equity; separate statements of comprehensive income are not permitted. 

May be reported in a separate statement or in a combined statement of income and comprehensive income. 

37

In single period statements, which of the following should be reflected as an adjustment to the opening balance of retained earnings?

a. Effect of a failure to provide for uncollectible accounts in the previous period.

b. Results from the disposal of a discontinued segment.

c. Effect of a decrease in the estimated useful life of depreciable equipment.

d. Cumulative effect of change from an accelerated method to straight-line depreciation.

Effect of a failure to provide for uncollectible accounts in the previous period.

38

Neely Co. disclosed in the notes to its financial statements that a significant number of its unsecured trade account receivables are with companies that operate in the same industry. This disclosure is required to inform financial statement users of the existence of 

Concentration of credit risk.

39

According to ASC Topic 820, the market that has the greatest volume and level of activity is the

The principal market. 

40

Comprehensive income is defined as 

 Net income plus other comprehensive income. 

41

According to ASC Topic 820, the fair value of an asset should be based upon

The price that would be received to sell the asset. 

42

When preparing draft of its year 2 balance sheet, Mont, Inc. reported net assets totaling $875,000.  Included in the asset section of the balance sheet were the following:

Treasury stock of Mont, Inc. at cost      $24,000

 Idle machinery                                        11,200

Cash surrender value of life insurance

on corporate executives                          13,700  

At what amount should Mont's net assets be reported in the December 31, year 2 balance sheet?

$851,000

43

Gordon, Inc. is engaged in the process of restructuring its business. As a part of the restructuring, Gordon is going to pay onetime termination benefits to involuntarily terminated employees. Which of the following is true about the accounting for this cost?

a. The cost should be recorded as prior period adjustment.

b. The cost should be recorded when the employees are paid.

c. A liability for the cost should be recorded when the liability has been incurred.

d. The cost should be amortized over the expected average life of the remaining employees.

 A liability for the cost should be recorded when the liability has been incurred.

44

Which of the following is an appropriate cost approach for determining fair value measurements?

a. Using present value techniques to discount cash flows.

b. Using the current replacement cost of the asset.

c. Using the undiscounted cash flows from the asset.

d. Using relevant information from recent transactions.

Using the current replacement cost of the asset. 

45

Coffey Corp.'s trial balance of income statement accounts for the year ended December 31, year I, was as follows:

                                                             Debit             Credit

Net sales                                                                    $1,600,000

Cost of goods sold                               $ 960,000

Selling expenses                                     265,000

Administrative expenses                          150,000

Interest expense                                       25,000

Loss from discontinued operation             40,000

Extraordinary gain                                                             10,000

                                                            $1,400,000     $1,610,000

Coffey's income tax rate is 30%. Coffey prepares multiple-step income statement for year I. Net income is 

$140,000

46

Which of the following must be included in company's summary of significant accounting policies in the notes to the financial statements?

a. Summary of long-term debt outstanding.

b. Revenue recognition policies.

c. Description of current year equity transactions.

d. Schedule of fixed assets.

Revenue recognition policies. 

47

Which of the following statements is true regarding developing fair value measurements for financial statement purposes?

a. It assumes an appraisal by a licensed appraiser.

b. It assumes the most conservative use of the asset.

c. It assumes the highest and best use of the asset.

d. It assumes the asset is held for sale in the normal course of business.

It assumes the highest and best use of the asset. 

48

Which of the following is the SEC form used by issuer companies to file as quarterly report with the SEC?

a. Form 8-K.

b. Form S-1.

c. Form 10-K.

d. Form 10-Q.

 Form 10-Q.

49

During period of inflation, an account balance remains constant. When supplemental statements are being prepared, purchasing power gain is reported if the account is a

 Monetary liability. 

50

Where on the statement of financial position (balance sheet) should accumulated other comprehensive income be reported?

As separate item under stockholders' equity. 

51

What is the purpose of reporting comprehensive income? 

To report a measure of overall enterprise performance

 

52

Which of the following best describes the content of the SEC Form 10-Q?

a. Quarterly reviewed financial information and other information about the company.

b. Annual audited financial information and nonfinancial information about the company.

c. Disclosure of material events that affect the company.

d. Quarterly audited financial information and other information about the company.

 Quarterly reviewed financial information and other information about the company. 

53

In period of rising general price levels, Pollard Corp. discloses income on current cost basis in accordance with ASC Topic 255, Changing Prices. Compared to historical cost income from continuing operations, which of the following conditions increases Pollard's current cost income from continuing operations?

a. Current cost of land is greater than historical cost.

b. Current cost of cost of goods sold is less than historical cost.

c. Current cost of equipment is greater than historical cost.

d. Ending net monetary assets are less than beginning net monetary assets. 

Current cost of cost of goods sold is less than historical cost. 

54

Coffey Corp.'s trial balance of income statement accounts for the year ended December 31, year I, was as follows:

                                                             Debit             Credit

Net sales                                                                    $1,600,000

Cost of goods sold                               $ 960,000

Selling expenses                                     235,000

Administrative expenses                          150,000

Interest expense                                       25,000

Loss from discontinued operation             40,000

Extraordinary gain                                                             10,000

                                                            $1,410,000     $1,610,000

Coffey's income tax rate is 30%. Coffey prepares a multiple-step income statement for year I. Income from operations before income tax is 

 $230,000 

55

Which of the following statements is true regarding the fair value option for valuing financial assets and liabilities?

a. The fair value option can be applied to a portion of a financial instrument.

b. Unrealized gains and losses from reporting items using the fair value option are reported in other comprehensive income for the period.

c. The fair value option cannot be applied to insurance contracts.

d. The fair value option can be elected on an instrument-by-instrument basis.

The fair value option can be elected on an instrument-by-instrument basis.

56

Which of the following is not reason to prepare prospective financial information?

a. To meet the requirements of GAAP.

b. To aid in preparation of the budget.

c. To aid in considering a change in accounting or operations.

d. To obtain external financing.

To meet the requirements of GAAP.

57

Which of the following is an appropriate income approach for developing fair value measurements?

a. Using the undiscounted cash flows from the asset.

b. Using the current replacement cost of the asset.

c. Using the relevant information from recent transactions.

d. Using present value techniques to discount cash flows. 

Using present value techniques to discount cash flows.

58

According to ASC Topic 820, which of the following is an assumption used in fair value measurements of nonfinancial assets?

a. The asset is in its highest and best use.

b. The asset is being held for sale.

c. The asset must be conservatively valued.

d. The asset is currently in use.

The asset is in its highest and best use. 

59

Which of the following is included in other comprehensive income? a. Unrealized holding gains and losses on trading securities.

b. Foreign currency translation adjustments.

c. The difference between the accumulated benefit obligation and the fair value of pension plan assets.

d. Unrealized holding gains and losses that result from a debt security being transferred into the held-to-maturity category from the available-for-sale category.

 Foreign currency translation adjustments. 

60

Jordan Co. had the following gains during the current period:

Gain on disposal of business segment   $500,000

Foreign currency translation gain              100,000

What amount of extraordinary gain should be presented on Jordan's income statement for the current period? 

$0

61

Mirr, Inc. was incorporated on January I, year I, with proceeds from the issuance of $750,000 in stock and borrowed funds of $110,000. During the first year of operations, revenues from sales and consulting amounted to $82,000, and operating costs and expenses totaled $64,000. On December 15, Mirr declared a $3,000 cash dividend, payable to stockholders on January 15, year 2. No additional activities affected owners' equity in year I. Mirr's liabilities increased to $120,000 by December 31, year I. On Mirr's December 31, 2011 balance sheet, total assets should be reported at 

 $885,000

62

On July I, year I, an erupting volcano destroyed Coastal Corporation's operating plant, resulting in a loss of $1,500,000 of which only $500,000 was covered by insurance. Coastal's income tax rate is 30%. How should this event be shown in Coastal's income statement for the year ended December 31, year I? 

As an extraordinary loss of $700,000, net of $300,000 income tax. 

63

Information with respect to Bruno Co.'s cost of goods sold for year I is as follows:  

                                            Historical Cost     Units

Inventory, 1/1/Y1                    $1,060,000          20,000

Production during year I        5.580,000          90,000

                                              6,640,000          110,000

Inventory,  12/31/Y1                 2,520,000          40,000         

Cost of goods sold                   4,120,000          70,000

 Bruno estimates that the current cost per unit of inventory was $58 at January I, year I, and $72 at December 31, year I. In Bruno's supplementary information restated into average current cost, the cost of goods sold for year I should be 

$4,550,000

64

 Which of the following accounting bases may be used to prepare financial statements in conformity with comprehensive basis of accounting other than generally accepted accounting principles?

I. Basis of accounting used by an entity to file its income tax return.

Il. Cash receipts and disbursements basis of accounting.

Both I and II

65

Financial statements shall include disclosures of material transactions between related parties except

Sales of inventory by a subsidiary to its parent. 

66

The correction of an error in the financial statements of prior period should be reflected, net of applicable income taxes, in the current 

Retained earnings statement as an adjustment of the opening balance.

67

Which of the following statements is true regarding the fair value option for valuing financial assets and liabilities?

a. The fair value option must be applied to all interests in the same entity.

b. The fair value option can be applied to a portion of a financial instrument.

c. The fair value option cannot be revoked until the next balance sheet date.

d. The fair value option must be applied to all instruments in that classification.

The fair value option must be applied to all interests in the same entity.

68

Warren Corporation prepares its financial statements in accordance with IFRS. Which of the following may never be disclosed on Warren's income statement?

a. Tax expense.

b. Gain or loss from extraordinary items.

c. Gain or loss.

d. Gain or loss from discontinued operations.

Gain or loss from extraordinary items. 

69

The following costs were incurred by Toll Co., a manufacturer, during year I:

Accounting and legal fees                         $ 30,000

Freight-in                                                     180,000

Freight-cut Officers' salaries                         160,000

Insurance                                                       85,000

Sales representatives' salaries                       215,000

What amount of these costs should be reported as general and administrative expenses for year I?

 $275,000 

70

An extraordinary gain should be reported as direct increase to which of the following?

a. Income from discontinued operations, net of tax.

b. Net income. 

c. Income from continuing operations, net of tax.

d. Comprehensive income. 

Net income.

71

Which SEC form discloses information about material events?

a. Form 10-K

b. Form S-I

c. Form 10-Q

d. Form 8-K 

Form 8-K

72

Loy Corp. purchased a machine in year I when the average Consumer Price Index (CPI) was 180. The average CPE was 190 for year 2, and 200 for year 3. Loy prepares supplementary constant dollar statements (adjusted for changing prices). Depreciation on this machine is $200,000 a year. In Loy's supplementary constant dollar statement for year 3, the amount of depreciation expense should be stated as

$222,222 

73

Dex Co. has entered into a joint venture with an affiliate to secure access to additional inventory. Under the joint venture agreement, Dex will purchase the output of the venture at prices negotiated on an arm's-length basis. Which of the following is(are) required to be disclosed about the related-party transaction?

I. The amount due to the affiliate at the balance sheet date.

Il. The dollar amount of the purchases during the year. 

Both I and II

74

Which of the following is reported as interest expense?

a. Deferred compensation plan interest.

b. Pension cost interest.

c. Amortization of discount of a note.

d. Interest incurred to finance software development for internal use.

 Amortization of discount of a note. 

75

Which of the following is not normally an example of an exit activity?

a. Sale or termination of a line of business.

b. Changes in management structure.

c. Outsourcing a customer service.

d. Relocation of business activities from one location to another. 

Outsourcing a customer service. 

76

Watson Company acquired available-for-sale securities at a cost of $150,000 in year I. At December 31, year I, the securities had a market value of $172,000. In year 2, Watson sold all of its available-for-sale securities for $185,000. Watson does not elect the fair value option for reporting its available-for-sale securities.  As a result of the information presented, what amount of gain should be reported in Watson's net income for year I and year 2? Ignore income taxes.

   Income statement for year I    Income statement for year 2

a. $0                                          $13,000

b. $22,000                                $13,000

c. $0                                          $35,000

d. $22,000                                $35,000

$0                                          $35,000

77

ASC Topic 235, Notes to Financial Statements

Requires description of all significant accounting policies to be included as an integral part of the financial statements. 

78

 IAS I requires complete set of financial statements to be prepared annually. A complete set of financial statements includes

 Statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes. 

79

Which of the following facts concerning inventories should be disclosed in the summary of significant accounting policies?

a. Composition and Pricing 

b. Composition

c. Pricing

d. Neither

Pricing

80

Comprehensive income can be disclosed in various formats. Which of the following is an acceptable format for disclosing comprehensive income?

I. At the bottom of the income statement, continue from net income and add other comprehensive income to arrive at comprehensive income for the year.

II In a separate statement, start with net income and add other comprehensive income to arrive at comprehensive income for the year.

Ill. In the statement of stockholders' equity, net income is adjusted for other comprehensive income to arrive at comprehensive income for the year.

IV. After retained earnings in the stockholders' equity section of the statement of financial position, start with net income and add other comprehensive income to arrive at comprehensive income for the year.

I and II

81

Which of the following items, if material, should be presented in the income statement separately as component of income, net of applicable income taxes?

a. Earthquake loss. 

b.  Write-off of goodwill.

c. Losses from translation of foreign currencies.

d. Losses due to strike. 

Earthquake loss. 

82

Which of the following should be disclosed in summary of significant accounting policies?

a. Basis of profit recognition on long-term construction contracts.

b. Future minimum lease payments in the aggregate and for each of the five succeeding fiscal years.

c. Composition of sales by segment.

d. Depreciation expense.

Basis of profit recognition on long-term construction contracts. 

83

The fair value option election applies to all of the following items except for

a. Long-term notes payable.

b. Held-to-maturity investments.

c. Warranties that can be settled by paying third party.

d. Pensions. 

Pensions

84

Thorpe Co.'s income statement for the year ended December 31, year 3, reported net income of $74,100. The auditor raised questions about the following amounts that had been included in net income:

Unrealized loss on decline in market value of available-for-sale marketable equity securities   $(5,400)

Gain on early retirement of bonds payable 33,000

Adjustment to profits of prior years for errors in depreciation (net of $3,750 tax effect)  (7,500)

Loss from fire (net of $7,000 tax effect)   (14,000)

Thorpe did not elect the fair value option for reporting any of its financial assets. The loss from the fire was an infrequent but not unusual occurrence in Thorpe's line of business. Thorpe's December 31, year 3 income statement should report net income of 

$87,000

85

Which of the following should be disclosed in the summary of significant accounting policies?

a. Maturity dates of long-term debt.

b. Composition of plant assets.

c. Methods of amortizing intangibles.

d. Rent expense amount. 

 Methods of amortizing intangibles.

86

Which one of the following areas does not require disclosures about the risks and uncertainties that exist?

a. Nature of operations.

b. Current vulnerability due to concentrations

c. Current vulnerability due to a possible recession.

d. Use of estimates in preparation of financial statements.

Current vulnerability due to a possible recession. 

87

According to ASC 820, the market that maximizes the price received for the asset is the

 Most advantageous market. 

88

Which of the following is false?

a.Reclassification adjustments shall be made in order to avoid double counting of items included in other comprehensive income and also in net income.

b. The components of other comprehensive income may be displayed before tax-related effects with the aggregate income tax effects shown as one amount.

c. Other comprehensive income includes revenues, expenses, gains, and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. 

d.  Components of other comprehensive income may not be shown net of tax-related effects. 

Components of other comprehensive income may not be shown net of tax-related effects.

89

Which of the following items is eligible for the fair value election under ASC Topic 825?

a. Available-for-sale investments.

b. Share-based payments.

c. Leases.

d. Pension liability.

 Available-for-sale investments.

90

Which of the following is an appropriate market approach for determining fair value measurements?

a. Using present value techniques to discount cash flows.

b. Using relevant information from recent transactions.

c. Using the current replacement cost of the asset.

d. Using the undiscounted cash flows from the asset.

 Using relevant information from recent transactions. 

91

The effect of a material transaction that is infrequent in occurrence but not unusual in nature should be presented separately as component of income from continuing operations when the transaction results in a

a. Gain or Loss

b. Gain

c. Neither

d. Loss

Gain or Loss

92

The following condensed statement of income of Helen Corporation, diversified company, is presented for the years ended December 31, year 2 and year I :

                                      year 2                year 1

Net sales                       $10,000,000      $9,600,000

Cost of sales                     6,200,000        6,000,000

Gross profit                       3,800,000        3,600,000

Operating expenses         2,200,000        2,400,000

Operating income             1,600,000         1,200,000

Gain on sale of division       900,000

                                         2,500,000         1,200,000

Provision for income taxes 1,000000            480,000

Net income                        $1,500,000      $ 720, 000

On January I, year 2, Helen entered into an agreement to sell for $3,200,000 the assets and product line of one of its separate operating divisions. The sale was consummated on December 31, year 2, and resulted in gain on disposition of $900,000. This division's contribution to Helen's reported income before income taxes for each year was as follows:

year 2 loss $(640,000) loss

year 1 loss  $(500,000) loss

Assume an income tax rate of 40%. In the preparation of revised comparative statement of income, Helen should report income from continuing operations after income taxes for year 2 and year I, respectively, amounting to 

$1,344,000 and $1,020,000

93

During year I, a hurricane destroyed Barston's factory and the company incurred a $2,000,000 loss. Barston is located in a geographic area where hurricanes have not occurred in over 100 years. Barston plans to rebuild the plant within the next 18 months. If Barston prepares its financial statements in accordance with IFRS, how should the loss be disclosed? 

Expense or loss from hurricane. 

94

If losses in the amount of $2,750 (net of tax) on available-for-sale securities have been previously included in other comprehensive income, what amount would be the reclassification adjustment when the securities are sold? Assume a 30% tax rate. 

$2,750

95

Under IFRS, interest and dividends received may be reported on the statement of cash flows as

Either operating or investing activities.

96

Ball Corporation had the following infrequent gains during year I:

A $240,000 gain on sale of plant facility; Ball continues similar operations at another location.

A $90,000 gain on repayment of long-term note denominated in foreign currency.

A $190,000 gain on reacquisition and retirement of bonds.

In its year I income statement, how much should Ball report as total infrequent gains which are not considered extraordinary?

$520,000

97

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the earnings statement as a gain or loss on disposal reported as

An amount after continuing operations and before extraordinary items.

98

Taft Inc. began operations in year I. For the year ended December 31, year I, the company reported the following information:

Net income                                   $300,000 

Dividends paid on common stock 40,000

Unrealized loss from

available-for-sale securities            (42,000)

Credit translation adjustments          17,000

Taft does not elect the fair value option for reporting its financial assets. Taft Inc. has comprehensive income in year I of 

$275,000

99

Which of the following should be disclosed in summer,' of significant accounting policies?

I. Management's intention to maintain or vary the dividend payout ratio.

Il. Criteria for determining which investments are treated as cash equivalents.

Ill. Composition of the sales order backlog by segment. 

II only

100

Which of the following best describes the content of the SEC Form 10-K?

a. Annual audited financial information and nonfinancial information about the company. 

b. Disclosure of material events that affect the company.

c. Quarterly reviewed financial information and other information about the company.

d. Quarterly audited financial information and other information about the company.

Annual audited financial information and nonfinancial information about the company. 

101

What is reclassification adjustment as used when reporting comprehensive income? 

Adjustment made to avoid double counting items. 

102

Smith Company reports under IFRS. A note payable is classified as current in Smith's statement of financial position. Under what conditions can the note payable be classified as noncurrent instead of current?

 If Smith has executed an agreement to refinance the note as long-term, before the statement of financial position date.