Question 1

A company changed its method of inventory pricing from last-in,first-out to first-in,first-out during the current year.Generally accepting accounting principles require that this change in accounting method be reported by:

Accepted Answer

A)  Accounting for the effects of the change in the current and future periods.
B)  Showing the cumulative effect of the change in the current year's financial statements and pro forma effects on prior year's financial statements in an appropriate footnote
C)  Disclosing the reason for the change in the "significant accounting policies" footnote for the current year but not restating prior year financial statements
D)  Applying retroactively the new method in restatements of prior years and appropriate footnote disclosuresE) C) and D)
F) B) and C)

Question 2

Define and discuss the accounting treatment for extraordinary items.

Accepted Answer

In APB Opinion No.30,"Reporting the Results of Operations," extraordinary items were defined as events and transactions that are distinguished by both their unusual nature and their infrequency of occurrence.These characteristics were originally defined as follows.
-Unusual nature.-the event or transaction should possess a high degree of abnormality and be unrelated or only incidentally related to ordinary activities.
-Infrequency of occurrence.-the event or transaction would not reasonably be expected to recur in the foreseeable future.Question: given the ASC,should we remove footnotes to original sources? In APB Opinion No.30,several types of transactions were defined as not meeting these criteria.These included write-downs and write-offs of receivables,inventories,equipment leased to others,deferred research and development costs,or other intangible assets; gains or losses in foreign currency transactions or devaluations; gains or losses on disposals of segments of a business; other gains or losses on the sale or abandonment of property,plant,and equipment used in business; effects of strikes; and adjustments of accruals on long-term contracts.The position expressed in Opinion No.30 was,therefore,somewhat of a reversal in philosophy; some items previously defined as extraordinary in APB Opinion No.9 were now specifically excluded from that classification.The result was the retention of the extraordinary item classification on the income statement.However,the number of revenue and expense items allowed to be reported as extraordinary was significantly reduced.

Question 3

A transaction that is material in amount,unusual in nature,but not infrequent in occurrence should be presented separately as a an)

Accepted Answer

A)  Component of income from continuing operations,but not net of applicable income taxes
B)  Component of income from continuing operations,net of applicable income taxes
C)  Extraordinary item,net of applicable income taxes
D)  Prior period adjustment,but not net of applicable income taxesE) C) and D)
F) A) and B)

Question 4

Discuss the all inclusive vs.current operating performance views of income.

Accepted Answer

An important distinction between revenue...

Question 5

The phrase events and transactions that are distinguished by both their unusual nature and their infrequency of occurrence describes:

Accepted Answer

A)  Changes in accounting principles
B)  Prior period adjustments.
C)  Extraordinary items
D)  Prior period adjustmentsE) B) and D)
F) B) and C)

Question 6

Discuss the concept of simple vs.complex capital structures and how it relates to the reporting of earnings per share.

Accepted Answer

Under the provisions of APB Opinion No.1...

Question 7

The return on assets ratio is comprised of

Accepted Answer

A)  Profit margin and debt to total assets ratio.
B)  Profit margin and asset turnover ratio.
C)  Times interest earned and debt to stockholders' equity ratio.
D)  Profit margin and free cash flow.E) B) and D)
F) B) and C)

Question 8

Which of the following is not an example of an error?

Accepted Answer

A)  A change from an accounting practice that is not generally acceptable to a practice that is generally acceptable.
B)  Mathematical mistakes.
C)  A change from LIFO to FIFO inventory costing
D)  The incorrect classification of costs and expenseE) A) and C)
F) A) and D)

Question 9

Which of the following is not an income statement element?

Accepted Answer

A)  Asset
B)  Gain
C)  Revenue
D)  ExpenseE) C) and D)
F) B) and C) A

Question 10

An extraordinary item should be reported separately as a component of income

Accepted Answer

A)  After discontinued operations of a component of a business
B)  Before discontinued operations of a component of a business
C)  After cumulative effect of accounting changes and after discontinued operations of a component of a business
D)  After cumulative effect of accounting changes and before discontinued operations of a component of a businessE) A) and D)
F) A) and C)

Question 11

A measure of a company's profitability is the

Accepted Answer

A)  Current ratio
B)  Current cash debt coverage ratio
C)  Return on assets ratio
D)  Debt to total assets ratioE) B) and C)
F) C) and D)

Question 12

If year one sales equal $800,000,year two equal $840,000 and year three equals $896,000 the percentage to be assigned for year two in a sales trend analysis,assuming that year 1 is the base year,is

Accepted Answer

A)  100%
B)  89%
C)  105%
D)  112%E) All of the above
F) None of the above C

Question 13

Define comprehensive income.What is the purpose of reporting comprehensive income?

Accepted Answer

Comprehensive income is defined as "the ...

Question 14

Discuss the four income statements elements defined by SFAC No.2.

Accepted Answer

The income statement elements are define...

Question 15

Discuss the economic consequences of financial reporting.

Accepted Answer

Income measurement and financial reporti...

Question 16

Which of the following is an example of an extraordinary item in reporting results of operations?

Accepted Answer

A)  A loss incurred because of a strike by employees
B)  The write-off of deferred research and development costs believed to have no future benefit
C)  A gain resulting from the devaluation of the U.S.dollar
D)  A gain resulting from the state exercising its right of eminent domain on a piece of land used as a parking lotE) A) and B)
F) A) and C)

Question 17

The disposal of a significant component of a business is called

Accepted Answer

A)  A change in accounting principle
B)  An extraordinary item
C)  An other expense
D)  Discontinued operationE) A) and D)
F) C) and D)

Question 18

Which of the following is characteristic of a change in an accounting estimate?

Accepted Answer

A)  It usually need not be disclosed
B)  It does not affect the financial statements of prior periods
C)  It should be reported through the restatement of the financial statements
D)  It makes necessary the reporting of pro forma amounts for prior periodsE) B) and C)
F) A) and B)

Question 19

Which of the following items,if material in amount would normally be considered an extraordinary item for reporting results of operations?

Accepted Answer

A)  Utilization of a net operating loss carryforward
B)  Gains or losses on disposal of a segment of a business
C)  Adjustments of accruals on long-term contracts
D)  Gains or losses from a fireE) B) and D)
F) All of the above

Question 20

An example of the correction of an error in previously issued financial statements is a change

Accepted Answer

A)  From the completed contract to the percentage-of-completion method of accounting for long-term construction-type contracts.
B)  In the depletion rate,based on new engineering studies of recoverable mineral resources.
C)  From the sum-of-years-digits to the straight-line method of depreciation for all plant assets.
D)  From the installment basis of recording sales to the accrual basis,when collection of the sales price has been and continues to be reasonably assuredE) None of the above
F) B) and D)

Exam 6: Financial Statement I: the Income Statement

A company changed its method of inventory pricing from last-in,first-out to first-in,first-out during the current year.Generally accepting accounting principles require that this change in accounting method be reported by:

Correct Answer
verified

Define and discuss the accounting treatment for extraordinary items.

A transaction that is material in amount,unusual in nature,but not infrequent in occurrence should be presented separately as a an)

Correct Answer
verified

Discuss the all inclusive vs.current operating performance views of income.

Correct Answer
verified
An important distinction between revenue...
View Answer

The phrase events and transactions that are distinguished by both their unusual nature and their infrequency of occurrence describes:

Correct Answer
verified

Discuss the concept of simple vs.complex capital structures and how it relates to the reporting of earnings per share.

Correct Answer
verified
Under the provisions of APB Opinion No.1...
View Answer

The return on assets ratio is comprised of

Correct Answer
verified

Which of the following is not an example of an error?

Correct Answer
verified

Which of the following is not an income statement element?

Correct Answer
verified
A

An extraordinary item should be reported separately as a component of income

Correct Answer
verified

A measure of a company's profitability is the

Correct Answer
verified

If year one sales equal $800,000,year two equal $840,000 and year three equals $896,000 the percentage to be assigned for year two in a sales trend analysis,assuming that year 1 is the base year,is

Correct Answer
verified
C

Define comprehensive income.What is the purpose of reporting comprehensive income?

Correct Answer
verified
Comprehensive income is defined as "the ...
View Answer

Discuss the four income statements elements defined by SFAC No.2.

Correct Answer
verified
The income statement elements are define...
View Answer

Discuss the economic consequences of financial reporting.

Correct Answer
verified
Income measurement and financial reporti...
View Answer

Which of the following is an example of an extraordinary item in reporting results of operations?

Correct Answer
verified

The disposal of a significant component of a business is called

Correct Answer
verified

Which of the following is characteristic of a change in an accounting estimate?

Correct Answer
verified

Which of the following items,if material in amount would normally be considered an extraordinary item for reporting results of operations?

Correct Answer
verified

An example of the correction of an error in previously issued financial statements is a change

Correct Answer
verified

Exam 6: Financial Statement I: the Income Statement

A company changed its method of inventory pricing from last-in,first-out to first-in,first-out during the current year.Generally accepting accounting principles require that this change in accounting method be reported by:

Correct AnswerverifiedShow Answer

Define and discuss the accounting treatment for extraordinary items.

A transaction that is material in amount,unusual in nature,but not infrequent in occurrence should be presented separately as a an)

Correct AnswerverifiedShow Answer

Discuss the all inclusive vs.current operating performance views of income.

Correct AnswerverifiedAn important distinction between revenue...View AnswerShow Answer

The phrase events and transactions that are distinguished by both their unusual nature and their infrequency of occurrence describes:

Correct AnswerverifiedShow Answer

Discuss the concept of simple vs.complex capital structures and how it relates to the reporting of earnings per share.

Correct AnswerverifiedUnder the provisions of APB Opinion No.1...View AnswerShow Answer

The return on assets ratio is comprised of

Correct AnswerverifiedShow Answer

Which of the following is not an example of an error?

Correct AnswerverifiedShow Answer

Which of the following is not an income statement element?

Correct AnswerverifiedA

An extraordinary item should be reported separately as a component of income

Correct AnswerverifiedShow Answer

A measure of a company's profitability is the

Correct AnswerverifiedShow Answer

If year one sales equal $800,000,year two equal $840,000 and year three equals $896,000 the percentage to be assigned for year two in a sales trend analysis,assuming that year 1 is the base year,is

Correct AnswerverifiedC

Define comprehensive income.What is the purpose of reporting comprehensive income?

Correct AnswerverifiedComprehensive income is defined as "the ...View AnswerShow Answer

Discuss the four income statements elements defined by SFAC No.2.

Correct AnswerverifiedThe income statement elements are define...View AnswerShow Answer

Discuss the economic consequences of financial reporting.

Correct AnswerverifiedIncome measurement and financial reporti...View AnswerShow Answer

Which of the following is an example of an extraordinary item in reporting results of operations?

Correct AnswerverifiedShow Answer

The disposal of a significant component of a business is called

Correct AnswerverifiedShow Answer

Which of the following is characteristic of a change in an accounting estimate?

Correct AnswerverifiedShow Answer

Which of the following items,if material in amount would normally be considered an extraordinary item for reporting results of operations?

Correct AnswerverifiedShow Answer

An example of the correction of an error in previously issued financial statements is a change

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An important distinction between revenue...
View Answer

Correct Answer
verified

Correct Answer
verified
Under the provisions of APB Opinion No.1...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified
Comprehensive income is defined as "the ...
View Answer

Correct Answer
verified
The income statement elements are define...
View Answer

Correct Answer
verified
Income measurement and financial reporti...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified