Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

(S.O. 1) The balance sheet contributes to financial reporting by providing a basis for all of the following except computing rates of return.evaluating the capital structure of the enterprise.determining the increase in cash due to operations.VOw> assessing the liquidity and financial flexibility
(S.O. 9) The AICPA has recommended that the word "reserve" be used only to describe an appropriation of retained earnings.
(S.O. 8) Notes are commonly used to disclose the existence and amount of any preferred stock dividends in arrears.
(S.O. 8) Contracts and negotiations of significance, in addition to contingencies, are disclosed in footnotes to the financial statements.
(S.O. 8) It is recommended that there be a disclosure for all significant accounting principles and methods that involve selection from among alternatives or those that are peculiar to a given industry.
(S.O. 8) A contingent liability and an estimated liability are treated in the same manner for financial statement reporting purposes.
(S.O. 6) To arrive at cash provided by operations, an increase in accounts receivable must be deducted from net income, and an increase in accounts payable must be added back to net income.
(S.O. 6) The sale of 12,000 shares of its common stock by Xerax Company for $22,000 cash would be classified as an investing activity due to the increased investment by company shareholders.
(S.O. 6) Determination of cash flows from operating activities requires predicting the amount of cash the entity will collect from customers who purchase the entity's product on account.
Lire (S.O. 4) The primary purpose of the statement of cash flows is to provide relevant information about the cash receipts and cash payments of an enterprise during a period.
(S.O. 2) The stockholders' equity accounts used by a corporation are the same as those used in. . . . A accounting for a partnership or proprietorship.
(S.O. 2) Long-term liabilities are obligations that are not reasonably expected to be liquidated within iB
(S.O. 2) Available-for-sale investments are debt securities that the enterprise has the positive intent and ability to hold to maturity.
(S.O. 2) If cash is restricted for purposes other than the liquidation of current obligations, it should not be classified as a current asset.oe > WU tOM N
(S.O. 2) Current assets include only assets expected to be sold within one year or the operating cycle, whichever is longer.
(S.O. 2) The three general classes of items included in the balance sheet are assets, liabilities, and equity.
(S.O. 2) Price level adjusted information should be disclosed i in the balance Sheet whenever the (inflation rate is above 10%. Pai. oe
(S.O. 2) According to the conceptual framework project, individual balance sheet items should be separately reported and classified in sufficient detail to permit users to assess the amounts, 5, timing, and uncertainty of future cash flows.
(S.O. 1) Liquidity is the ability of an enterprise to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities.
(S.O. 1) The balance sheet reflects a corporation's results of operations for a specified period of time.
(S.O. 4,5, 6, 7 and 8) Presented below is financial information of the Mickey Corporation for 2012. 7 Beginning Retained Rarningsy 1/1/12. heel oe)... ccc vereieee eee ceenee eee $ 950,000 Gain on the sale of investments (normal recurring) ............ceeeeseeseeseeeeeessesseeeeeeees 110,000 SK
(S.O. 4) The following accounts are taken from the adjusted trial balance of Tamara Company as of December 31, 2012. )Common Stock (100,000 shares) — $ 300,000 Purchases $ 485,600 Transportation-in COGS. 4 12,600 ¥ Sales Returns 15,900 Rent Revenue 28,500 Purchase Discounts 12,100 Administrative
(S.O. 5) The following items are presented on financial statements:@ Extraordinary items.Material gains or losses, not considered extraordinary items.Changes in estimates.Changes in principle.Correction of errors.SA mMDOiscOonWti nued operations.Instructions: For each of the items listed above,
(S.O. 4) Schmitt, Inc., a retail store, has the following data for the year ended December 31, 2012:Sales ds .vecsnvectst ie See RTE a Re ie oe $90,000 Extraordinary loss dué'toiurricane (ores ere ee terre ree eee 5,000 Income tax saving on extraordinary lOss ye ctscscsces eerste eee nace ence
(S.O. 3 and 4) Kubitz Co. had the following amounts in its income statements:2011 2012 2013 Ss itaSed lesa led a Aes
(S.O. 6) Which of the following is not a generally practiced method of presenting the income statement? aie eae Dalles A. The consolidated statement of income.B. The multiple-step income statement.C, Including gains and losses from discontinued operations of a segment of a business in determining
(S.O.4) The concept that reports extraordinary items in the income statement is called:— a Pe). ee phase-out period concept.prior period adjustment concept.current operating performance concept.all-inclusive concept.
(S.O. 4) Changing the basis of inventory pricing from FIFO to average cost is an example of a(n):A. Extraordinary item. -B. Change in principle.Cc. Change in estimate.D. Discontinued operation.
(S.O. 4) CorrectOifo ernrosrs :A. should oo be reflected in the current year’s financial statements if a company presents prior years’ financial statement for comparative oS even if the error effected prior years.B:C; should only be disclosed in a footnote so readers will be aware of the
(8.0.4) When a company changes from one accounting principle to another accounting principle:A. the company does not have to disclose anything about it.B. the current income statement should include only footnote disclosure so readers will be aware of the change.G: a retrospective adjustment should
(S.O. 4) In general, the basic difference between the concepts of revenues and gains concerns:the materiality of the item being considered.whether the event giving rise to the item relates to the typical activity of the enterprise.whether the item is taxable in the current year.TOw>t he effect on
S.O. 4) Which of the following shoulme d be rreepopr ted on the income statsemeenmt easn an OexSCt roaoorrdisna ry iteim ?The gain on disposal of a segment of a business.The writedown of receivables deemed uncollectible.The loss from volcanic activity.SG OW The gain from a sale of equipment.
(S.O. 4)é In order to be classified as an exgbterra eordcincairpyac hi st em in the income statement, an event or transaction should be unusual in nature and infrequent; but it need not be material.unusual in nature and material; but it need not be infrequent.infrequent and material; but it need
(S.O. 4) Which of the following should not be reported on the income statement as an extraordinary item? :A The write-off of major assets as a result of new environmentlaalws prohibiting their use.B. The write-off of a large receivable resulting from a customer's bankruptcy proceedings.e A large
(S.O. 4) An income statement shows "income before income taxes and extraordinary items" in the amount of $685,000. The income taxes payable for the year are $360,000, including $120,000 that is applicable to an extraordinary gain. Thus, the "income before extraordinary items" is:A. $445,000.B.
(S.O. 4) To be classified on an income statement as an extraordinary item, the transaction or event must be material in nature and Unusual Occur Infrequently A. Yes Yes B. No Yes C; Yes No D. No No
(S.O. 4) Which of the following asset disposals would qualify as a disposal of a segment?Phasing out of a product line or class of service.Changes occasioned by a technological improvement.Sale by an auto parts manufacturer of one of its five parts- manufacturing subsidiaries.Sale by a
(S.O. 4) Any gain or loss experienced by a concern, whether oneey or indirectly related to operations, contributes to the long-run profitability and €hould be include the computation of net income. Those who favor such a philosophy adhere to the———ae, Current Operating All-Inclusive
(S.O. 3) One of the primary benefits of the multiple- step income statement over the single- le-step income statement is that the A. multiple-step income statement shows gross margin and recognizes different types of costs and expenses.B. multiple-step income statement shows last year's figures in
(S.O. 3) The occurrence that most likely would have no effect on 2012 net income is the:A. sale in 2012 of an office building contributed by a stockholder in 1966.B. collection in 2012 of a dividend from an investment.er correction of an error in the financial statements of a prior period
(S.O. 3) During the year 2012, Siska Corporation had the following information available related to 7 its income statement:Disbursements for purchases $630,000 Increase in trade accounts payable 80,000 Decrease in merchandise inventory 25,000 Cost of goods sold for 2012 amounted to A. $735,000 B
(S.O. 1) Which of the following would represent the least likely use of an income statement prepared for a business enterprise?A. Use by customers to determine a company's ability to provide needed goods and:services.B Use by labor unions to examine earnings closely as a basis for salary
(S.O. 8) According to the FASB, displaying comprehensive income as a part of the statement of stockholders’ equity is one of the acceptable ways of presenting comprehensive income items.
(S.O. 7) The statement of retained earnings shows the total change in stockholders' equity for a specified period.
(S.O. 7) The statement of retained earnings provides a reconciliation of the retained earnings account from the beginning of the year to the end of the year.
(S.0O. 6) The presentation of earnings per share is affected by the existence of prior period adjustments.
(S.O. 6) Because of it importance, earnings per share is required to be disclosed on the face of the income statement.
((S.0.,5) Intraperiod tax allocation causes a reduction in total income tax expense for the period. in which it is used. di Rees
(S.O. 4) A correction of an error should not be made to prior year statements even if shown for comparative purposes and the effect of the error took place in those prior years.
(S.O. 4) A change in accounting principle is considered appropriate only when it is demonstrated that the newly adopted principle is preferable to the old one.
(S.O. 4) The effect on net income of adopting a new accounting principle should be disclosed as a separate item following extraordinary items in the income statement.
(S.O. 4) An example of an extraordinary loss would be when a corporation has received significant losses because of the effects of a strike.
(S.O. 4) An example of an extraordinary loss, reported as a separate item in the income statement, is a large write-down of accounts receivable caused by the unexpected bankruptcy of a major customer.
(S.O. 4) Extraordinary items are events and transactions that are distinguished by their unusual nature and the infrequency of their occurrence. ————
(S.O. 4) The results of operations of a segment that has been or will be disposed of need fio? be separated from the results of continuing operations as long as the gain or loss from the disposal is shown separately. me 7.
(S.O. 4) Phasing out of a product line or class of service is a disposal of assets that qualifies as a disposal of a segment of a business.
(S.O. 4) A manufacturer of computer hardware who sells all computer manufacturing facilities located in foreign countries can record the transaction as a disposal of a segment.
(S.O. 4) The advocates of the current operating performance concept include extraordinary items in the calculation of net income.
(S.O. 3) From a bank loan officer's point of view, the single-step income statement is preferable to the multiple-step income statement.
(S.O. 3) The multiple-step income statement recognizes a separation of operating transactions from nonoperating transactions and matches costs and expenses with related revenues.
(S.O. 2) The primary advantage of the single-step format lies in the simplicity of presentation and the absence of any implication that one type of revenue or expense item has, priority over another.
(S.O. 1) One of the limitations of the income statement is that items that cannot be measured reliably are not reported in the income statement.
(S.O. 10) The work sheet for Sharko Co. consisted of eight pairs of debit and credit columns. The dollar amount of one item appeared in both the credit column of the income statement section and the debit column of the balance sheet section. Assuming the periodic method, that item is:net income for
(S.0O.9) A reversing entry should never be made for an adjusting entry that:accrues unrecorded revenue.adjusts expired costs from an asset account to an expense account.accrues unrecorded expenses.GAS adjusts unexpired costs from an expense account to an asset account.
Which of the following statements is not true as it pertains to the accounting process?A. The established system for recording transactions and other events as they occur is referred to as double entry accounting.Bb. Events are of two types: (1) external and (2) internal. Accountants record events
(S.O. 7) Which of the following statements best describes the purpose of closing entries?A. To facilitate posting and preparing a trial balance.is: To determine the amount of gain or loss for the period.G To reduce the balances of revenue and expense accounts to zero so that they may be used to
(S.O.5) The Murphy Company sublet a portion of its warehouse for five years at an annual rental of$24,000, beginning on May 1, 2012. The tenant, Sheri Charter, paid one year's rent in advance, which\) Murphy recorded as a credit to unearned rental income. Murphy reports on a calendar-year basis.
(S.O.5) An accrued expense can best be described as an amount:Paid and not currently matched with earnings. (Not paid and currently matched with earnings.Not paid and not currently matched with earnings.COm> Paid and currently matched with earnings.
(S.O. 5) A prepaid expense can best be described as an amount:A. Paid and currently matched with earnings.B: Paid and not currently matched with earnings.C. Not paid and not currently matched with earnings.D. Not paid and currently matched with earnings.
(S.O. 5) Which of the following is an example of an accrued liability?A. Supplies purchased at the beginning of the year and debited to an expense account.B Property taxes incurred during the year, to be paid in the first quarter of the subsequent year.; Depreciation expense.LD: Rent earned during
(S.0. 5) Amadjusting entry should never include” AYGYUSTUNG CNTY A. a debit to expense and a credit to a liability. +A \) palkance shear CLCCOWUN- B. “adebitto expense andac reditt ore venue.»G. a debit to a liability and a credit to revenue. 2.) INCOME? STOATL MU D. a debit to revenue and a
(S.O. 5) During the first year of Wisnewski Co.'s operations, all purchases were recorded as assets.Store supplies in the amount of $6,540 were purchased. Actual year-end store supplies inventory amounted to $2,150. The adjusting entry for store supplies will:increase net income $4,390. O < bH O
(S.O. 5) Which of the following journal entries is appropriate when a company receives payment in advance for goods or services?A. Debit cash and credit an expense account.B. Credit cash and debit a revenue account.C. Debit cash and credit a liability account or a revenue account.D. Credit cash and
(S.0. 4) Which of the following is not a principal purpose of an unadjusted trial balance?A. It proves that debits and credits of equal amounts are in the ledger.B. It is the basis for any adjustments to the account balances.Cs It supplies a listing of open accounts and their balances.1: It proves
(S.O. 2) A trial balance prepared at year end showed Puccineli Co.'s debit total exceeding the credit total by $6,300. This discrepancy could have been caused by: ets A. the balance of $47,000 in accounts receivable being entered in the trial balance as$40,700.B. an error in adding the Sales
(S.O. 2) The difference between the accounting process and the accounting cycle is:A. the accounting process results in the preparation of financial statements, whereas the accounting cycle is concerned with recording business transactions.the accounting cycle represents the steps taken to
(5.0.2) "Tetccounteairn ey4g98r1)em usqtruemaairtniai boalannce s”A. “throughout eachs tepi nt hea ccounting cycle: *B. only when journal entries are recorded.Cc. only at the time the trial balance is prepared.D. only when formal financial statements are prepared.
(S.O. 9) Reversing entries are made at the end of the accounting cycle to correct errors in the original recording of transactions.
(S.O. 7) The post-closing trial balance consists of asset, liability, stockholders' equity, revenue and expense accounts.
(S.O. 7) The account "interest expense" is credited during the closing process.
(S.O. 7) It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period.
(S.O. 7) The Income Summary account used during the closing process is shown in the stockholders”!equity section of the balance sheet.
(S:0.5) Proper matching of revenues and expenses requires that bad debts be recorded as an expense of the period in which the sale was made.
(S.O. 5) An adjustment for salaries and wages expense, earned but unpaid at year end, is an example of an accrued liability.
(S.O.5) Adjusting entries result from compliance with the accrual system of accounting.
(S.O.5) Adjusting entries are used to correct errors that occur during the posting process.
(S.O.5) Adjusting entries are an optional step in the accounting process.
(S.O. 4) One purpose of a trial balance is to prove that debits and credits of an equal amount are in the general ledger.
(S.O. 4) ifan entity fails to post one of its journal entries to its general ledger, the trial balance will not show an equal amount of debit and credit balance accounts.
(S.O. 4) A general journal may be used by any entity in recording its transactions, whereas Special journals may be used only by entities whose transactions meet certain requirements.
(S.O. 2) Double-entry accounting is the process that leads to_the basic equality in accounting expressed by the formula: assets = liabilities + stockholders’ equity.
(S.O. 2) An example of an internal event would be a flood that destroyed a portion of an entity's inventory.
(S.O. 2) In general, debits refer to increases in account balances, and credits refer to decreases.
(S.O. 1) Real (permanent) accounts are revenue A expense accounts and are periodically closed.
S.O. 8) What is the constraint that supports considering that the benefits of the information outweigh the sacrifices to provide the information?A. Cost.B. Prudence.Cc Consistency.D. Conservatism.
(S.O. 7) In complying with the full disclosure principle, an accountant must determine the amount of disclosure necessary. How much disclosure is enough?ik Information sufficient for a person without any knowledge of accounting to understand the statements.B. All information that might be of
(S.O. 7) The concept referred to by the "expense recognition" principle is that current liabilities have the same period of existence as the current assets.that all cash disbursements for a period be matched to cash receipts for the period.that net income should be reported on a quarterly
(S.0. 7) Which of the following is a correct statement regarding the expense recognition principle?A. Expenses are recognized when they make a contribution to revenue.B Costs can be charged to the current period as an expense simply because no connection with revenue can be determined.CG. In
(S.O. 7) Under the revenue recognition principle, revenue is generally recognized when (1) realized or realizable and (2):A. when earned. @B. the merchandise has been ordered.CF all expenses have been identified.D the accounting process is virtually complete.
(S.O. 6) During the lifetime of an entity accountants produce financial statements at artificial points in time in accordance with the concept of:Objectivity Periodicity A. No No B. ies No G; No Nes D. ies Yes

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Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

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