中级财务会计书籍.docx

1. According to the FASB and IASB conceptual frameworks， the primary users of financial reports include all of the following， except：

a.
Investors。

b.
Regulators。

c。
Lenders.

d。
Creditors.
2. According to the FASB and IASB conceptual frameworks， useful information must exhibit the fundamental qualitative characteristics of：

a。
Comparability and materiality.

b。
Faithful representation and relevance。

c。
Understandability and timeliness。

d。
Neutrality and verifiability。
3. What is the underlying concept governing the recording of gain contingencies？

a.
Consistency。

b.
Conservatism.

c.
Reliability。

d.
Relevance.
4. According to the FASB conceptual framework， which of the following attributes would not be used to measure inventory？

a.
Historical cost.

b.
Net realizable value.

c。
Replacement cost。

d。
Present value of future cash flows。
5. According to the FASB and IASB conceptual frameworks, the objective of general purpose financial reporting is to：

a。
Comply with the need for conservatism.

b.
Report on how effectively and efficiently management has used the entity's resources.

c.
Provide financial information that is useful to primary users.

d。
Comply with generally accepted accounting principles.
6. According to the FASB and IASB conceptual frameworks, completeness is an ingredient of：
Relevance Faithful Representation
a。 Yes Yes
b. No No
c. No Yes
d。 Yes No
7. What is the underlying concept that supports the immediate recognition of a contingent loss？

a。
Conservatism。

b。
Consistency.

c。
Matching。

d。
Substance over form。
8. According to the FASB conceptual framework， the process of reporting an item in the financial statements of an entity is：

a。
Matching.

b。
Recognition。

c。
Allocation。

d。
Realization。
9. The joint FASB and IASB conceptual framework project is intended to establish：

a.
A comprehensive set of financial statement disclosures。

b.
A common set of objectives and concepts for use in developing standards of financial accounting and reporting。

c。
The structure of the FASB CodificationTM。

d。
A common set of generally accepted accounting principles。
10. Financial information provided in general purpose financial reports does not include information about：

a。
The claims against the entity。

b。
The resources of the entity。

c.
How effectively and efficiently the entity's governing board has discharged its responsibility to use the entity’s resources.

d.
How effectively and efficiently the entity’s shareholders’ have discharged their responsibility to use the entity's resources.
11. On December 2, Year 1， Flint Corp。's board of directors voted to discontinue operations of its frozen food division and to sell the division's assets on the open market as soon as possible。 The division reported net operating losses of $20，000 in December and ＄30，000 in January。 On February 26， Year 2， sale of the division's assets resulted in a gain of ＄90,000。 Assuming that the frozen foods division qualifies as a component of the business and ignoring income taxes, what amount of gain/loss from discontinued operations should Flint recognize in its income statement for Year 2？

a。
$0

b。
＄90,000

c。
＄40，000

d.
＄60,000
12. At December 31, Year 2, Off—Line Co。 changed its method of accounting for demo costs from writing off the costs over two years to expensing the costs immediately. Off-Line made the change in recognition of an increasing number of demos placed with customers that did not result in sales. Off—Line had deferred demo costs of ＄500，000 at December 31， Year 1， ＄300，000 of which were to be written off in Year 2 and the remainder in Year 3。 Off—Line’s income tax rate is 30％。 In its Year 3 financial statements， what amount should Off—Line report as cumulative effect of change in accounting principle？

a.
＄200,000

b。
$350,000

c.
＄0

d。
＄500,000
13. How should the effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate be reported？

a。
By footnote disclosure only.

b。
By restating the financial statements of all prior periods presented。

c。
As a correction of an error。

d。
As a component of income from continuing operations.
14. In September， Koff Co。’s operating plant was destroyed by an earthquake. Earthquakes are rare in the area in which the plant was located。 The portion of the resultant loss not covered by insurance was ＄700，000. Koff’s income tax rate for 1996 was 40%. In its year-end income statement, what amount should Koff report as extraordinary loss under U。S。 GAAP？

a。
＄280，000

b.
＄0

c.
＄700，000

d。
＄420,000
15. During January Year 3， Doe Corp. agreed to sell the assets and product line of its Hart division. The sale was completed on January 15, Year 4 and resulted in a gain on disposal of $900,000。 Hart’s operating losses were ＄600，000 for Year 3 and ＄50，000 for the period January 1 through January 15, Year 4。 Disregarding income taxes， what amount of net gain （loss) should be reported in Doe’s comparative Year 4 and Year 3 income statements？

Year 3
Year 4

a.
$(600,000)
＄850,000

b。
＄(650，000）
＄900,000

c.
＄0
$250,000

d.
＄250，000
＄0
16. On April 30, Deer Corp。 approved a plan to dispose of a component of its business。 For the period January 1 through April 30， the component had revenues of ＄500,000 and expenses of ＄800,000。 The assets of the component were sold on October 15 at a loss. In its income statement for the year ended December 31, how should Deer report the component's operations from January 1 to April 30?

a。
＄500,000 and ＄800，000 should be included with revenues and expenses， respectively， as part of continuing operations.

b.
＄300，000 should be reported as part of the loss on disposal of a component and included as part of continuing operations。

c。
$300，000 should be reported as an extraordinary loss.

d.
$300，000 should be reported as a loss from operations of a component and included in loss from discontinued operations。
17. In open market transactions, Gold Corp。 simultaneously sold its long—term investment in Iron Corp. bonds and purchased its own outstanding bonds. The broker remitted the net cash from the two transactions. Gold's gain on the purchase of its own bonds exceeded its loss on the sale of the Iron bonds. Assume the transaction to purchase its own outstanding bonds is unusual in nature and has occurred infrequently. Under U.S。 GAAP， Gold should report the：

a。
Effect of its own bond transaction gain in income before extraordinary items， and report the Iron bond transaction as an extraordinary loss。

b。
Net effect of the two transactions as an extraordinary gain。

c.
Effect of its own bond transaction as an extraordinary gain, and report the Iron bond transaction loss in income before extraordinary items.

d。
Net effect of the two transactions in income before extraordinary items。
18. During the current year， both Raim Co. and Cane Co. suffered losses due to the flooding of the Mississippi River. Raim is located two miles from the river and sustains flood losses every two to three years。 Cane， which has been located 50 miles from the river for the past 20 years, has never before had flood losses。 How should the flood losses be reported in each company’s income statement under U。S。 GAAP?

Raim
Cane

a。
As an extraordinary item
As a component of income
from continuing operations

b。
As a component of income
from continuing operations
As a component of income
from continuing operations

c.
As an extraordinary item
As an extraordinary item

d。
As a component of income
from continuing operations
As an extraordinary item
19. Lore Co. changed from the cash basis of accounting to the accrual basis of accounting during the current year. The cumulative effect of this change should be reported in Lore's current year financial statements as a：

a。
Prior period adjustment resulting from the correction of an error。

b。
Component of income after extraordinary item。

c。
Prior period adjustment resulting from the change in accounting principle.

d。
Component of income before extraordinary item.
20. Which of the following should be included in general and administrative expenses？

Interest
Advertising

a。
No
Yes

b。
No
No

c。
Yes
No

d.
Yes
Yes
21. Under U。S. GAAP， a material loss should be presented separately as a component of income from continuing operations when it is：

a.
Not unusual in nature but infrequent in occurrence。

b.
A cumulative effect type change in accounting principle。

c。
Unusual in nature and infrequent in occurrence.

d。
An extraordinary item。
22. On October 1， 20X4， Host Co. approved a plan to dispose of one of the company’s operating segments。 Host expected that the sale would occur on April 1， 20X5 at an estimated gain of ＄350,000。 The segment had actual and estimated operating losses as follows：
1/1/X4 to 9/30/X4
$(300，000)
10/1/X4 to 12/31/X4
（200，000）
1/1/X5 to 3/31/X5
(400,000)
In its 20X4 income statement, what should Host report as a loss from discontinued operations before income taxes?

a。
＄550，000

b.
＄900,000

c。
$200,000

d。
＄500,000
23. During Year 2， Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted-average method。 Inventory balances under each method were as follows：

FIFO
Weighted
average
January 1， Year 2
$71,000
＄77,000
December 31, Year 2
79，000
83，000
Orca’s income tax rate is 30%。
Orca should report the cumulative effect of this accounting change as a(n):

a。
Adjustment to beginning retained earnings。

b。
Component of income from continuing operations。

c。
Extraordinary item。

d.
Component of income after extraordinary items。
24. On October 1， Year 1, Wand， Inc。 committed itself to a formal plan to sell its Kam division’s assets early in Year 2. On that date， Wand estimated that the fair value of the component’s assets was ＄25,000 less than the carrying value。 Wand also estimated that Kam would incur operating losses of ＄100,000 for the period of October 1， Year 1 through December 31, Year 1 and $50,000 for the period January 1， Year 2 through February 28， Year 2。 All estimates proved to be materially correct。 Disregarding income taxes, what should Wand report as loss from discontinued operations in its comparative Year 1 and Year 2 income statements？

Year 1
Year 2

a。
＄125,000
$50，000

b.
$0
$175，000

c。
＄100,000
$75,000

d。
＄175,000
$0
25. Under U。S. GAAP， a transaction that is unusual in nature and infrequent in occurrence should be reported separately as a component of income:

a.
After discontinued operations of a segment of a business。

b。
Before cumulative effect of accounting changes and before discontinued operations of a segment of a business。

c.
After cumulative effect of accounting changes and before discontinued operations of a segment of a business。

d。
After cumulative effect of accounting changes and after discontinued operations of a segment of a business。
26. Rock Co。's U.S。 GAAP financial statements had the following balances at December 31：
Extraordinary gain
＄50，000
Foreign currency translation gain， net of tax
100,000
Net income
400，000
Unrealized gain on available-for—sale equity securities， net of tax
20,000
What amount should Rock report as comprehensive income for the year ended December 31?

a。
$520,000

b.
＄420,000

c.
$570,000

d.
＄400，000
27. Which of the following items is not classified as ”other comprehensive income?”

a。
Extraordinary gains from extinguishment of debt.

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

c。
Foreign currency translation adjustments.

d。
Minimum pension liability equity adjustment for a defined—benefit pension plan.
28. A company that uses IFRS reports the following information as of December 31:

Pension gain
$ 175,000

Foreign currency translation loss
120，000

Revaluation surplus from revaluation of fixed assets
50，000

Unrealized gain on available—for—sale security
32,000

Unrealized loss on trading security
20，000

Revaluation loss from revaluation of intangible assets
18，000
What amount should the company report as other comprehensive income as of December 31?

a。
$55，000

b。
＄137,000

c。
$99，000

d.
＄17，000
29. Which of the following is included in other comprehensive income?

a。
Foreign currency translation adjustments。

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

c.
Unrealized holding gains and losses on trading securities.

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。
30. Which of the following is true regarding the presentation of comprehensive income.

Must be shown on
the face of the
income statement
Related tax effects
for components
must be disclosed

a。
Yes
No

b.
No
Yes

c.
No
No

d。
Yes
Yes
31. What is the purpose of reporting comprehensive income?

a。
To provide a consolidation of the income of the firm's segments.

b。
To provide information for each segment of the business.

c。
To reconcile the difference between net income and cash flows provided from operating activities.

d.
To summarize all changes in equity from nonowner sources。
32. Which of the following is a component of other comprehensive income？

a.
Minimum accrual of vacation pay。

b.
Cumulative currency-translation adjustments.

c。
Unrealized gain or loss on trading securities。

d。
Changes in market value of inventory。
33. Riggs, Co. adopted IFRS two years ago and wants to report the following items on its financial statements:
· Pension net gain of ＄20，000
· Unrealized gain on trading securities of $16，000
· Foreign currency translation loss of $17，000
· Gain from the effective portion of a cash flow hedge of $11,000
· Revaluation gain of $5,000
The total for Other Comprehensive Income from the items above will be：

a.
$30,000

b.
$19，000

c。
＄35，000

d。
＄14,000
34. The reporting of comprehensive income would include or display：

a。
Proceeds from sale of stock.

b。
Comprehensive income per share。

c.
Dividends。

d.
Net income.
35. Palmyra Co。 has net income of ＄11，000, a positive $1，000 net cumulative effect of a change in accounting principle， a $3，000 unrealized loss on available—for—sale securities, a positive $2,000 foreign currency translation adjustment， and a ＄6，000 increase in its common stock。 What amount is Palmyra’s comprehensive inco