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Wiley CPAexcel Exam Review Study Guide Financial Accounting And Reporting 2015 14th Edition O. Ray Whittington - Solutions

15. On May 1, 2010, the board of directors of Edgewood, Inc. approved a plan to sell its electronic component. The plan met the criteria to classify the component as “held for sale.” During 2010 the component had a loss from operations of $500,000. In addition, the carrying value of the
14. Kenny Company, a publicly traded company, adopted a defined benefit pension plan on January 1, 2009. The following data are available at December 31, 2010:Pension expense 2010 $103,000 Pension funding 2010 90,000 Fair value of plan assets 12/31/10 225,000 Accumulated pension obligation12/31/10
13. On December 30, 2009, Future, Incorporated paid $2,000,000 for land. At December 31, 2010, the current value of the land was $2,200,000. In January 2011, the land was sold for $2,250,000.Ignoring income taxes, by what amount should stockholders’ equity be increased for 2010 and 2011 as a
12. A review of the December 31, 2010 financial statements of Rhur Corporation revealed that under the caption “extraordinary losses,” Rhur reported a total of $260,000. Further analysis revealed that the$260,000 in losses was comprised of the following items:Rhur recorded a loss of $50,000
11. For interim financial reporting, an inventory loss from a market decline in the second quarter that is not expected to be restored in the fiscal year should be recognized as a lossa. In the fourth quarter.b. Proportionately in each of the second, third, and fourth quarters.c. Proportionately in
10. On January 2, 2008, a company established a sinking fund in connection with an issue of bonds due in 2015. At December 31, 2010, the independent trustee held cash in the sinking fund account representing the annual deposits to the fund and the interest earned on those deposits. How should the
9. In computing basic earnings per share, a company would include which of the following?a. Dividends on nonconvertible cumulative preferred stock.b. Dividends on common stock.c. Interest on convertible bonds.d. Number of shares of nonconvertible cumulative preferred stock.
8. When the allowance method of recognizing bad debt expense is used, the allowance for doubtful accounts would decrease when a(n)a. Specified account receivable is collected.b. Account previously written off is collected.c. Account previously written off becomes collectible.d. Specific
7. When treasury stock is purchased for cash at more than its par value, what is the effect on total stockholders’ equity under each of the following methods?Cost method Par value methoda. Increase Increaseb. Decrease Decreasec. No effect Decreased. No effect No effect
6. In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows fora. Operating activities.b. Borrowing activities.c. Lending activities.d. Financing activities.
5. Why is a reclassification adjustment used when reporting other comprehensive income?a. Adjustment made to reclassify an item of comprehensive income as another item of comprehensive income.b. Adjustment made to avoid double counting of items.c. Adjustment made to make net income equal to
4. Pica, a nongovernmental not-for-profit organization, received unconditional promises of $100,000 expected to be collected within one year. Pica received $10,000, prior to year-end. Pica anticipates collecting 90% of the contributions and has a June 30 fiscal year-end. What amount should Pica
3. Chase City imposes a 2% tax on hotel charges. Revenues from this tax will be used to promote tourism in the city. Chase should record this tax as what type of nonexchange transaction?a. Derived tax revenue.b. Imposed nonexchange revenue.c. Government-mandated transaction.d. Voluntary nonexchange
2. The Williamsburg Zoo, a private not-for-profit organization, established a $1,000,000 quasi endowment on July 1, 2010. On the zoo’s financial statement of financial position at December 31, 2010, the assets in this quasi endowment should be included in which of the following classifications?a.
1. For which of the following governmental entities that use proprietary fund accounting should a statement of cash flows be presented?Swimming pool Government utilitiesa. No Nob. No Yesc. Yes Yesd. Yes No
30. Larson prepares its financial statements in accordance with IFRS. Larson has several cash advances and loans from bank overdrafts. How should these items be reported on the statement of cash flows?a. Operating activities.b. Investing activities.c. Financing activities.d. Other significant
29. Under IFRS which of the following is the definition of a “provision”?a. A liability that is uncertain in timing or amount.b. A liability that has definitely been incurred.c. An asset that is uncertain as to its fair value.d. An asset that is certain as to value.
28. Initial direct costs incurred by the lessor under a sales-type lease should bea. Deferred and allocated over the economic life of the leased property.b. Expensed in the period incurred.c. Deferred and allocated over the term of the lease in proportion to the recognition of rental income.d.
27. The statement of cash flows classifies cash receipts and cash payments as arising from operating, investing, and financing activities. All of the following should be classified as investing activities excepta. Cash outflows to purchase manufacturing equipment.b. Cash inflows from the sale of
26. Footnotes to the financial statements are beneficial in meeting the disclosure requirements of financial reporting. The footnotes should not be used toa. Describe significant accounting policies.b. Describe depreciation methods employed by the company.c. Describe the principles and methods
25. Included in W. Cody’s assets at December 31, 2010, are the following:2,000 shares of Dart Corporation common stock purchased in 2008 for $100,000. The market value of the stock was $80 per share at December 31, 2010.A $500,000 whole life insurance policy having a cash value of $72,000 at
24. Platt Co. has been forced into bankruptcy and liquidated. Unsecured claims will be paid at the rate of$.50 on the dollar. Maga Co. holds a noninterest-bearing note receivable from Platt in the amount of$50,000, collateralized by machinery with a liquidation value of $10,000. The total amount to
23. On January 1, 2010, Derby Company lent $20,000 cash to Elliott Company. The promissory note made by Elliott did not bear interest and was due on December 31, 2011. No other rights or privileges were exchanged. The prevailing interest for a loan of this type was 12%. The present value of $1 for
22. On May 1, 2010, Lane Corp. bought a parcel of land for $100,000. Seven months later, Lane sold this land to a triple-A rated company for $150,000, under the following terms: 25% at closing, and a first mortgage note (at the market rate of interest) for the balance. The first payment on the
21. On January 1, 2010, Richmond, Inc. signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of $4,000,000. It was estimated that it would take three years to complete the project. Also on January 1, 2010, to finance the construction cost, Richmond
20. Moore Company carries product A in inventory on December 3, 2010, at its unit cost of $7.50.Because of a sharp decline in demand for the product, the selling price was reduced to $8.00 per unit. Moore’s normal profit margin on product A is $1.60, disposal costs are $1.00 per unit, and the
19. Empire Corporation owns an office building and leases the offices under a variety of rental agreements involving rent paid monthly in advance and rent paid annually in advance. Not all tenants make timely payments of their rent. Empire’s balance sheets contained the following information:2010
18. Companies A and B have been operating separately for five years. Each company has a minimal amount of liabilities and a simple capital structure consisting solely of voting common stock.Company A, in exchange for 40% of its voting stock, acquires 80% of the common stock of Company B. This was a
17. What was Ratio’s December 31, 2010 balance in retained earnings?a. $60,000 deficit.b. $60,000c. $132,000 deficit.d. $132,000
16. What was Ratio’s December 31, 2010 balance in trade accounts payable?a. $67,000b. $92,000c. $182,000d. $207,000
15. What was Ratio’s December 31, 2010 balance in the inventory account?a. $21,000b. $30,000c. $70,000d. $135,000
14. Boa Constructors, Inc. had an operating loss carryforward of $100,000 that arose from ordinary operations in 2010. There is no evidence that indicates the need for a valuation allowance. The income tax rate is 40%. For the year ended December 31, 2010, the tax benefit should be reported in the
13. The following items relate to the preparation of a statement of cash flows:2010 2009 2010 Cash $150,000 $100,000 Net sales $3,200,000 AR—net 420,000 290,000 CGS (2,500,000)Merchandise inventory 330,000 210,000 Expenses (500,000)AP 265,000 220,000 Net income $ 200,000 All accounts payable
12. The summary of significant accounting policies should disclose thea. Pro forma effect of retroactive application of an accounting change.b. Basis of profit recognition on long-term construction contracts.c. Adequacy of pension plan assets in relation to vested benefits.d. Future minimum lease
11. During a period of inflation, an account balance remains constant. With respect to this account, a purchasing power gain will be recognized if the account is aa. Monetary liability.b. Monetary asset.c. Nonmonetary liability.d. Nonmonetary asset.
10. A development stage enterprisea. Does not issue an income statement.b. Issues an income statement that only shows cumulative amounts from the enterprise’s inception.c. Issues an income statement that is the same as an established operating enterprise, but does not show cumulative amounts from
9. A nonmonetary asset was received by Company Y in a nonreciprocal transfer from Company Z that has commercial substance. The asset should be recorded by Y ata. Z’s recorded amount.b. Z’s recorded amount or the fair value of the asset received, whichever is higher.c. Z’s recorded amount or
8. Gilbert Corporation issued a 40% stock split-up of its common stock that had a par value of $10 before and after the split-up. At what amount should retained earnings be capitalized for the additional shares issued?a. There should be no capitalization of retained earnings.b. Par value.c. Market
7. When a company changes the expected service life of an asset because additional information has been obtained, which of the following should be reported?Pro forma effects of retroactive application Retrospective applicationa. Yes Yesb. No Yesc. Yes Nod. No No
6. Under Statement of Financial Accounting Concepts 8, the ability through consensus among measurers to ensure that information represents what it purports to represent is an example of the enhancing qualitative characteristic ofa. Relevance.b. Verifiability.c. Comparability.d. Confirmatory value.
5. Oz, a nongovernmental not-for-profit organization, received $50,000 from Ame Company to sponsor a play given by Oz at the local theater. Oz gave Ame 25 tickets, which generally cost $100 each. Ame received no other benefits. What amount of ticket sales revenue should Oz record?a. $0b. $2,500c.
4. A not-for-profit voluntary health and welfare organization received a $500,000 permanent endowment. The donor stipulated that the income must be used for a mental health program. The endowment fund reported $60,000 net decrease in market value and $30,000 investment income.The organization spent
3. Tree City reported a $1,500 net increase in fund balance for governmental funds. During the year, Tree purchased general capital assets of $9,000 and recorded depreciation expense of $3,000. What amount should Tree report as the change in net assets for governmental activities?a. $(4,500)b.
2. On the government-wide statement of net assets at December 31, 2010, under the governmental activities column, the information related to capital assets should be reported in the net assets section at which of the following amounts?a. $5,000,000b. $4,000,000c. $3,000,000d. $2,000,000
1. On the government-wide statement of net assets at December 31, 2010, under the governmental activities column, what amount should be reported for capital assets?a. $5,000,000b. $4,000,000c. $3,000,000d. $2,000,000
83. The statement of operations for a private, nonprofit hospital should include a performance indicator that indicates the results of operations for a period. Which of the following items would be included in a hospital’s performance indicator reported on the statement of operations?I. Proceeds
82. Unrealized gains on investments which are permanently restricted as to use by donors are reported by a private, nonprofit hospital on thea. Statement of operations.b. Statement of cash flows.c. Statement of changes in net assets.d. Statement of operations and statement of cash flows.
81. Which of the following financial statements of a private, nonprofit hospital reports the changes in unrestricted, temporarily restricted, and permanently restricted net assets for a time period?Balance sheet Statement of operationsa. Yes Yesb. Yes Noc. No Yesd. No No
80. Wilson Hospital, a nonprofit hospital affiliated with Wilson College, had the following cash receipts for the year ended December 31, 2012:Collections of health care receivables $750,000 Contribution from donor to establish a term endowment 250,000 Tuition from nursing school 50,000 Dividends
79. Tucker Hospital, a nonprofit hospital affiliated with Tucker University, received a donation of medical supplies during the year ended December 31, 2012. The supplies cost the vendor$10,000 and had a selling price of $15,000 on the date they were donated. The vendor did not place any
78. On the statement of operations for a nonprofit, nongovernmental hospital, which of the items below is included in the amount reported for “revenue and gains over expenses and losses” (the performance indicator)?I. Unrealized loss on other than trading securities. The securities are included
77. The governing board of Smithson Hospital, a nonprofit hospital affiliated with a religious organization, acquired 100 BMI Company bonds for $103,000 on June 30, 2012. The bonds pay interest on June 30 and December 30. On December 31, 2012, interest of $3,000 was received from BMI, and the fair
76. Swathmore Hospital, a nonprofit hospital affiliated with Swathmore University, received the following cash contributions from donors during the year ended December 31, 2011:Contributions restricted by donors for research $50,000 Contributions restricted by donors for capital acquisitions
75. Michael Hospital, a nonprofit hospital affiliated with a private university, reported the following information for the year ended December 31, 2012:Cash contributions received from donors for capital additions to be acquired in 2013$150,000 Proceeds from sales at hospital gift shop and snack
74. James Hospital, a nonprofit hospital affiliated with a private university, provided $200,000 of charity care for patients during the year ended December 31, 2012. The hospital should report this charity carea. As net patient service revenue of $200,000 on the statement of operations.b. As net
73. Kash Hospital, a private sector, not-for-profit organization, has gross patient service revenues of $750,000, charity care of$75,000, amounts disallowed by third-party payors of $63,000, and donor-unrestricted contributions of $110,000. What is the amount of net patient service revenue?a.
72. How are nonrefundable advance fees representing payments for future services to be accounted for by nonprofit continuing care retirement communities?a. As revenue.b. As a liability.c. As other financing sources.d. In a trust fund.
71. How is charity care accounted for on the financial statements of a not-for-profit private sector health care organization?a. As patient service revenue.b. As bad debt expense.c. As a separate component of revenue.d. Not included on the financial statements.
70. Which of the following would be acceptable as a performance indicator on a private sector health care entity’s statement of operations?a. Increase in unrestricted net assets.b. Net income.c. Increase in net assets.d. Excess of revenues over expenses.
69. When functional classifications are used by private sector health care organizations, they should be based ona. Net present value.b. Full cost allocations.c. Percentage allocations.d. Resale value.
68. If private not-for-profit health care entities do not use this expense classification on the operating statement, they must provide it in the notes.a. Natural.b. Character.c. Functional.d. Object.
67. Which of the following can be included in the performance indicator on the statement of operations for private sector health care organizations?a. Extraordinary items.b. Premium revenue from capitation agreements.c. Equity transfers.d. Contributions of long-lived assets.
66. Which of the following is not covered by the AICPA Audit and Accounting Guide, Health Care Organizations?a. Nursing homes.b. Home health agencies.c. Hospitals.d. Voluntary health and welfare organizations.
65. For private sector health care organizations, which of the following is included in patient service revenue?a. Contractual adjustments.b. Charity care.c. Significant revenue under capitation agreements (premium revenue).d. Unrestricted contributions.
64. Williams Hospital, a nonprofit hospital affiliated with a religious group, reported the following information for the year ended December 31, 2012:Gross patient service revenue at the hospital’s full established rates$980,000 Bad debts expense 10,000 Contractual adjustments with third-party
63. Elizabeth Hospital, a nonprofit hospital affiliated with a religious group, should prepare which of the following financial statements?Statement of changes in net assets Statement of operationsa. Yes Nob. No Yesc. Yes Yesd. No No
62. A not-for-profit organization receives an asset for which they have little or no discretion over the use of the asset. The organization should report the asset as a(n)a. Contribution.b. Agency transaction.c. Exchange.d. Conditional transfer.C. Health Care Organization Accounting—Private Sector
61. Depending on the extent of discretion that the not-for-profit recipient has over the use or subsequent disposition of the assets, gifts in kind may be treated as Agency transactions Contributionsa. No Nob. No Yesc. Yes Yesd. Yes No
60. Which of the following are considered to be capital additions in the statement of activity of a not-for-profit organization?I. Nonexpendable gifts, grants, and bequests restricted by donors to endowment funds.II. Legally restricted investment income on investments held in endowment funds that
59. Under which of the following cases should joint costs be allocated between fund-raising and the appropriate program or management and general function?a. An appeal for funds accompanied by a statement of the mission of the not-for-profit entity.b. An appeal for funds accompanied by a brochure
58. An arrangement where a donor makes an initial gift to a trust or directly to the not-for-profit organization, in which the not-forprofit organization has a beneficial interest but is not the sole beneficiary is known as aa. Donor-imposed condition.b. Donor-imposed restriction.c.
57. The Taft family lost its home in a flood in October 2012. In November of 2012, Mary Wilson donated cash to Goodbody Benevolent Society to purchase furniture for the Taft family. In December 2012, Goodbody purchased this furniture for the Taft family. How should Goodbody report the receipt of
56. Peter Smith made a cash donation in January 2012, to World-Wide Helpers, a nongovernmental, nonprofit organization that raises contributions for others. Peter specified the beneficiaries for his contribution, but provided variance power to World-Wide Helpers to use the donation for
55. A cash donation from a resource provider should be reported as contribution revenue by a recipient organization when which of the following exists?a. The recipient organization and beneficiary are not financially interrelated.b. The resource provider does not allow the recipient organization to
54. World-Wide Helpers Foundation, a nonprofit entity, received a cash donation in 2012 from Herold Smith. World-Wide Helpers Foundation is controlled by World-Wide Helpers, a nonprofit entity that raises resources for others. The resources of World-Wide Helpers Foundation are used for the benefit
53. Rose Smith made a cash donation for a specific purpose in December 2012, to United Ways, a nongovernmental, nonprofit organization that raises contributions for others. Assume United Ways was (1) not granted variance power by Rose Smith over her donation and (2) the beneficiaries of the
52. Jazz Planners, a private not-for-profit performing arts organization, has donor-restricted permanent endowment funds which include investments in equity securities. These equity securities all have readily determinable fair values because they are all traded on national security exchanges. Most
51. The governing board of Crestfallen, a private not-for-profit voluntary health and welfare organization, acquired equity securities of BMZ Company at a cost of $35,000 on May 1, 2012.The governing board used unrestricted net assets to acquire this investment, and it intends to use the income
50. How should a private not-for-profit hospital report its investments in debt securities that are classified as current assets and noncurrent assets on its statement of financial position(balance sheet)?Debt securities in current assets Debt securities in noncurrent assetsa. Fair value Amortized
49. Mary Egbart promised Columbus College, a private, not-for-profit college, that she would provide 80% of the funds needed to construct a new performing arts center, if the college could get the remaining 20% of the funds needed from other donors by July 1, 2012. The promise was made in 2011. At
48. Which of the following transactions or events would cause an increase in unrestricted net assets for the year ended December 31, 2012?I. A private not-for-profit voluntary health and welfare organization spent a restricted donation that was received in 2011. In accordance with the donor’s
47. During 2012, Margaret Billingsley, a prominent art collector, donated several items in her collection to the Darrwin Museum, a private, not-for-profit organization. Ms. Billingsley stipulated that her contribution be shown to the public, that it should be preserved, and not be sold. Darrwin’s
46. Benevolent Society, a private not-for-profit organization, should recognize contributed services on its statement of activities if which of the following conditions is(are) met?I. The contributed services create or enhance nonfinancial assets.II. The contributed services require specialized
45. Which of the following transactions would result in an increase in unrestricted net assets for the year ended December 31, 2012?I. A private, not-for-profit hospital earned interest on investments that were board-designated.II. A private, not-for-profit voluntary health and welfare organization
44. In the financial statements of not-for-profit organizations, reporting reclassifications are caused by which of the following?I. Expiration of donor-imposed conditions.II. Expiration of donor-imposed restrictions.a. I only.b. Both I and II.c. II only.d. Neither I nor II.
43. A private not-for-profit voluntary health and welfare organization received a cash donation in 2009 that contained a donor-imposed restriction that stipulated that the donation could not be spent until 2011. The voluntary health and welfare organization spent the donation in 2011 on
42. On November 30, 2011, Justin Barlow, an alumnus of Murry School, a private, not-for-profit high school, contributed $15,000, with the stipulation that the donation be used for faculty travel expenses during 2012. During 2012, Murry spent all of the donation in accordance with Mr. Barlow’s
41. A not-for-profit organization receives $150 from a donor. The donor receives two tickets to a theater show and an acknowledgment in the theater program. The tickets have a fair market value of $100. What amount is recorded as contribution revenue?a. $0b. $50c. $100d. $150
40. For a private, not-for-profit organization, when is a donor’s conditional promise to give considered to be unconditional?a. When the condition is partially met.b. When the possibility that the condition will not be met is remote.c. When the conditional promise is made.d. When cash or other
39. Darlin Hospital, a private not-for-profit hospital, had the following cash receipts for the year ended December 31, 2012:Patient service revenue $300,000 Gift shop revenue 25,000 Interest revenue restricted by donor stipulation for acquisition of equipment 50,000 As a result of these cash
38. On December 30, 2012, the Board of Trustees of Henry Museum, a private not-for-profit organization, designated $4,000,000 of unrestricted net assets for the construction of an addition to its building. What effect does this designation have on the museum’s unrestricted and temporarily
37. On December 20, 2012, United Appeal, a private not-for-profit voluntary health and welfare organization, received a donation of computer equipment valued at $25,000 from a local computer retailer. The equipment is expected to have a useful life of three years. The donor placed no restrictions
36. Child Care Centers, Inc., a not-for-profit organization, receives revenue from various sources during the year to support its day care centers. The following cash amounts were received during 2012:$2,000 restricted by the donor to be used for meals for the children.$1,500 received for
35. During the year ended December 31, 2012, the James Community Foundation, a private not-for-profit organization, received the following contributed services:I. Anderson & Anderson, attorneys-at-law, contributed their services which involved advice related to the foundation’s regular
34. On December 5, 2012, Jones Heating and Air Conditioning Service repaired the heating system in the building occupied by Good Hope, a private not-for-profit voluntary health and welfare organization. An invoice for $1,500 was received by Good Hope for the repairs on December 15, 2012. On
33. Which of the following private, nonprofit entities is required to report expenses both by function and by natural classification?a. Hospitals.b. Colleges and universities.c. Voluntary health and welfare organizations.d. Performing arts organizations.
32. During the year ended December 31, 2012, a not-for-profit performing arts entity received the following donor-restricted contribution and investment income:Cash contribution of $100,000 to be permanently invested.Cash dividends and interest of $6,000 to be used for the acquisition of theater
31. During 2011, an alumnus of Smith College, a private not-forprofit college, transferred $100,000 to the college with the stipulation that it be spent for library acquisitions. However, the alumnus specified that none of the cash transferred could be spent until the college had matched the entire
30. Rosary Botanical Gardens, a private not-for-profit organization, established a $500,000 quasi endowment on September 1, 2012.On the garden’s statement of financial position at December 31, 2012, the assets in this quasi endowment should be included in which of the following classifications?a.
29. Which of the following classifications is required for reporting of expenses by all not-for-profit organizations?a. Natural classification in the statement of activities or notes to the financial statements.b. Functional classification in the statement of activities or notes to the financial

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