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Wiley CPA Examination Review Outlines And Study Guides Volume 1 - 2012-2013 39th Edition Patrick R. Delaney, O. Ray Whittington - Solutions
Larimer Corporation prepares its financial statements in accordance with IFRS. Larimer acquired equipment by issuing 5,000 shares of its common stock. How should this transaction be reported on the statement of cash flows?a. As an outflow of cash from investing activities and inflow of cash from
Glenda Corporation prepares its financial statements in accordance with IFRS. Glenda must report finance costs on the statement of cash flowsa. In operating activities.b. Either in operating activities or financing activities.c. In financing activities.d. In investing activities or financing
Which of the following may not be disclosed on the income statement for a company that prepares its financial statements in accordance with IFRS?a. Gain or loss.b. Tax expense.c. Gain or loss from extraordinary items.d. Gain or loss from discontinued operations.
Largo Corporation prepares its financial statements in accordance with IFRS. Which of the following items is required disclosure on the income statement?a. Revenues, cost of goods sold, and advertising expense.b. Finance costs, tax expense, and income.c. Operating expenses, nonoperating expenses,
Galaxy Corporation prepares its financial statements in accordance with IFRS. Galaxy intends to refinance a$10,000 note payable due on February 20, 2011. The company expects the note to be refinanced for a period of five years. Under what circumstances can Galaxy report the note payable as a
What is the basis of accounting and at what amount are assets measured on the financial statements of a trust?Basis of accounting Measurementa. Cash Costb. Cash Fair valuec. Accrual Costd. Accrual Fair value D.13. International Financial Reporting Standards(IFRS)
Which financial statements should be presented for a trust?I. Statement of assets and liabilities.II. Statement of operations.III. Statement of cash flows.IV. Statement of changes in net assets.a. I only.b. I and II only.c. I, II, and IV.d. I, III and IV.
Crafty Inc is a publicly traded company. Recently, Crafty entered into a material long-term lease agreement.Which SEC form discloses information about material events?a. Form S-1b. Form 8-Kc. Form 10-Kd. Form 10Q D.11. Financial Statements of Trust
SEC’s regulation S-X describesa. The requirements for information and forms required by other regulations.b. The reporting requirements for asset backed securities.c. The form and content of financial statements to be filed with the SEC.d. A mandate that publicly traded companies disclose
A company is an accelerated filer that is required to file Form 10-K with the United States Securities and Exchange Commission (SEC). What is the maximum number of days after the company’s fiscal year-end that the company has to file Form 10-K with the SEC?a. 60 days.b. 75 days.c. 90 days.d. 120
A company is required to file quarterly financial statements with the United States Securities and Exchange Commission on Form 10-Q. The company operates in an industry that is not subject to seasonal fluctuations that could have a significant impact on its financial condition. In addition to the
Which of the following is the SEC form used by issuer companies to file as a quarterly report with the SEC?a. Form 10-Q.b. Form 8-K.c. Form 10-K.d. Form S-1.
Which of the following best describes the content of the SEC Form 10-Q?a. Quarterly audited 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
Which of the following is the SEC form used by issuer companies to file as an annual report with the SEC?a. Form 10-Q.b. Form 8-K.c. Form 10-K.d. Form S-1.
Which of the following disclosures should prospective financial statements include?Summary of significant accounting policies Summary of significant assumptionsa. Yes Yesb. Yes Noc. No Yesd. No No D.10. SEC Reporting Requirements
To achieve a reasonably objective basis, financial forecasts and projections should be prepared I. In accordance with GAAP.II. Using information that is in accordance with the plans of the entity.III. With due professional care.a. I and III.b. II and III.c. I, II, and III.d. I and II.
Prospective financial information is defined asa. Any financial information about the past, present, or future.b. Any financial information about the present or future.c. Any financial information about the future related to the day-to-day operations.d. Any financial information about the future.
Which of the following is false?a. Prospective financial information may be prepared for general or limited users.b. The responsible party is the only limited user.c. The financial projection may contain assumptions not necessarily expected to occur.d. The financial projection may be expressed as a
If a company uses the modified cash basis of accounting, the modifications from the pure cash basis should have substantial support. In this context substantial support requiresa. The financial statements have only minor modifications from GAAP.b. The modifications must be the same as those
In financial statements prepared on the income tax basis, how should the nondeductible portion of expenses such as meals and entertainment be reported?a. Included in the expense category in the determination of income.b. Included in a separate category in the determination of income.c. Excluded
Income tax basis financial statements differ from those prepared under GAAP in that income tax basis financial statementsa. Do not include nontaxable revenues and nondeductible expenses in determining income.b. Include detailed information about current and deferred income tax liabilities.c.
Which of the following accounting bases may be used to prepare financial statements in conformity with a comprehensive basis of accounting other than generally accepted accounting principles?I. Basis of accounting used by an entity to file its income tax return.II. Cash receipts and disbursements
Which of the following is required to be disclosed regarding the risks and uncertainties that exist?a. Factors causing an estimate to be sensitive.b. The potential impact of estimates about values of assets and liabilities when it is reasonably possible that the estimate will change in the near
Which of the following are examples of concentrations that create vulnerabilities and therefore would require disclosure of risks and uncertainties?I. Market in which an entity conducts its operations.II. Available sources of supply of materials used in operations of an entity.III. Volume of
Manhof Co. prepares supplementary reports on income from continuing operations on a current cost basis. How should Manhof compute cost of goods sold on a current cost basis?a. Number of units sold times average current cost of units during the year.b. Number of units sold times current cost of
Could current cost financial statements report holding gains for goods sold during the period and holding gains on inventory at the end of the period?Goods sold Inventorya. Yes Yesb. Yes Noc. No Yesd. No No
At December 31, 2010, Jannis Corp. owned two assets as follows:Equipment Inventory Current cost $100,000 $80,000 Recoverable amount $ 95,000 $90,000 Jannis voluntarily disclosed supplementary information about current cost at December 31, 2010. In such a disclosure, at what amount would Jannis
Kerr Company purchased a machine for $115,000 on January 1, 2010, the company’s first day of operations. At the end of the year, the current cost of the machine was$125,000. The machine has no salvage value, a five-year life, and is depreciated by the straight-line method. For the year ended
The following information pertains to each unit of merchandise purchased for resale by Vend Co.:March 1, 2010 Purchase price $ 8 Selling price $12 Price level index 110 December 31, 2010 Replacement cost $10 Selling price $15 Price level index 121 Under current cost accounting, what is the amount
During a period of inflation in which a liability account balance remains constant, which of the following occurs?a. A purchasing power gain, if the item is a nonmonetary liability.b. A purchasing power gain, if the item is a monetary liability.c. A purchasing power loss, if the item is a
When computing purchasing power gain or loss on net monetary items, which of the following accounts is classified as nonmonetary?a. Advances to unconsolidated subsidiaries.b. Allowance for uncollectible accounts.c. Unamortized premium on bonds payable.d. Accumulated depreciation of equipment.
In its financial statements, Hila Co. discloses supplemental information on the effects of changing prices.Hila computed the increase in current cost of inventory as follows:Increase in current cost (nominal dollars) $15,000 Increase in current cost (constant dollars) $12,000 What amount should
The following items were among those that appeared on Rubi Co.’s books at the end of 2010:Merchandise inventory $600,000 Loans to employees 20,000 What amount should Rubi classify as monetary assets in preparing constant dollar financial statements?a. $0b. $ 20,000c. $600,000d. $620,000
Lewis Company was formed on January 1, 2009. Selected balances from the historical cost balance sheet at December 31, 2010, were as follows:Land (purchased in 2009) $120,000 Investment in nonconvertible bonds (purchased in 2009, and expected to be held to maturity) 60,000 Long-term debt 80,000 The
A company that wishes to disclose information about the effect of changing prices should report this information ina. The body of the financial statements.b. The notes to the financial statements.c. Supplementary information to the financial statements.d. Management’s report to shareholders.
Which of the following are observable inputs used for fair value measurements?I. Bank prime rate.II. Default rates on loans.III. Financial forecasts.a. I only.b. I and II only.c. I and III only.d. I, II and III.D.6.f. Constant Dollar Accounting
When measuring fair value, which level has the highest priority for valuation inputs?a. Level 1.b. Level 2.c. Level 3.d. Level 4.
A change in valuation techniques used to measure fair value should be reported asa. A change in accounting principle with retrospective restatement.b. An error correction with restatement of the financial statements of previous periods.c. A change in accounting estimate reported on a prospective
The market approach valuation technique for measuring fair value requires which of the following?a. Present value of future cash flows.b. Prices and other relevant information of transactions from identical or comparable assets.c. The price to replace the service capacity of the asset.d. The
Valuation techniques for fair value that include the Black-Scholes-Merton formula, a binomial model, or discounted cash flows are examples of which valuation technique?a. Income approach.b. Market approach.c. Cost approach.d. Exit value approach.
Which of the following is not a valuation technique used in fair value estimates?a. Income approach.b. Residual value approach.c. Market approach.d. Cost approach.
The fair value of an asset at initial recognition isa. The price paid to acquire the asset.b. The price paid to acquire the asset less transaction costs.c. The price paid to transfer or sell the asset.d. The book value of the asset acquired.
Which of the following is an assumption used in fair value measurements?a. The asset must be in-use.b. The asset must be considered in-exchange.c. The most conservative estimate must be used.d. The asset is in its highest and best use.
Which of the following would meet the qualifications as market participants in determining fair value?a. A liquidation market in which sellers are compelled to sell.b. A subsidiary of the reporting unit interested in purchasing assets similar to those being valued.c. An independent entity that is
Which of the following is true for valuing an asset to fair value?a. The price of the asset should be adjusted for transaction costs.b. The fair value of the asset should be adjusted for costs to sell.c. The fair value price is based upon an entry price to purchase the asset.d. The price should be
Which of the following describes a principal market for establishing fair value of an asset?a. The market that has the greatest volume and level of activity for the asset.b. Any broker or dealer market that buys or sells the asset.c. The most observable market in which the price of the asset is
The fair value of an asset should be based upona. The replacement cost of an asset.b. The price that would be received to sell the asset at the measurement date under current market conditions.c. The original cost of the asset plus an adjustment for obsolescence.d. The price that would be paid to
Which of the following is a true statement regarding disclosures for subsequent events?a. Recognize a loss for all recognized and unrecognized subsequent events in the current year financial statements.b. Recognize a gain or loss for any recognized subsequent event in the current year financial
Colter Corp. has a fiscal year-end of December 31, 2010. On that date, Colter reported total assets of $600,000.On March 1, 2011, before the 2010 financial statements were issued, Colter lost $250,000 of inventory due to a fire.The inventory was a total loss and was uninsured. How should Colter
Swift Corp. prepares its financial statements for its fiscal year ending December 31, 2010. Swift estimates that its product warranty liability is $28,000 at December 31, 2010.On February 12, 2011, before the financial statements were issued, Swift received information about a product defect that
Which of the following information should be disclosed in the summary of significant accounting policies?a. Refinancing of debt subsequent to the balance sheet date.b. Guarantees of indebtedness of others.c. Criteria for determining which investments are treated as cash equivalents.d. Adequacy of
Which of the following information should be included in Melay, Inc.’s 2010 summary of significant accounting policies?a. Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.b. During 2010, the Delay component was sold.c. Business
What is the purpose of information presented in notes to the financial statements?a. To provide disclosures required by generally accepted accounting principles.b. To correct improper presentation in the financial statements.c. To provide recognition of amounts not included in the totals of the
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
Financial statements shall include disclosures of material transactions between related parties excepta. Nonmonetary exchanges by affiliates.b. Sales of inventory by a subsidiary to its parent.c. Expense allowance for executives which exceed normal business practice.d. A company’s agreement to
Which type of material related-party transaction requires disclosure?a. Only those not reported in the body of the financial statements.b. Only those that receive accounting recognition.c. Those that contain possible illegal acts.d. All those other than compensation arrangements, expense
Dean Co. acquired 100% of Morey Corp. prior to 2010.During 2010, the individual companies included in their financial statements the following:Dean Morey Officers’ salaries $ 75,000 $50,000 Officers’ expenses 20,000 10,000 Loans to officers 125,000 50,000 Intercompany sales 150,000 --What
During 2010, Jones Company engaged in the following transactions:Salary expense to key employees who are also principal owners Sales to affiliated enterprises$100,000 250,000 Which of the two transactions would be disclosed as relatedparty transactions in Jones’ 2010 financial statements?a.
In analyzing a company’s financial statements, which financial statement would a potential investor primarily use to assess the company’s liquidity and financial flexibility?a. Balance sheet.b. Income statement.c. Statement of retained earnings.d. Statement of cash flows.D.6.a. Disclosures
When preparing a draft of its 2010 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, which approximates market value on December 31 $24,000 Idle machinery 11,200 Cash surrender
The following changes in Vel Corp.’s account balances occurred during 2010:Increase Assets $89,000 Liabilities 27,000 Capital stock 60,000 Additional paid-in capital 6,000 Except for a $13,000 dividend payment and the year’s earnings, there were no changes in retained earnings for 2010.What was
Mirr, Inc. was incorporated on January 1, 2010, 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
Total current assets?a. $5,000,000b. $5,450,000c. $5,700,000d. $6,150,000 The following trial balance of Mint Corp. at December 31, 2010, has been adjusted except for income tax expense.Dr. Cr.Cash $ 600,000 Accounts receivable, net 3,500,000 Cost in excess of billings on longterm contracts
Total noncurrent liabilities?a. $1,620,000b. $1,780,000c. $2,320,000d. $2,480,000 The following trial balance of Mint Corp. at December 31, 2010, has been adjusted except for income tax expense.Dr. Cr.Cash $ 600,000 Accounts receivable, net 3,500,000 Cost in excess of billings on longterm contracts
Total retained earnings?a. $1,950,000b. $2,110,000c. $2,400,000d. $2,560,000 The following trial balance of Mint Corp. at December 31, 2010, has been adjusted except for income tax expense.Dr. Cr.Cash $ 600,000 Accounts receivable, net 3,500,000 Cost in excess of billings on longterm contracts
When a full set of general-purpose financial statements are presented, comprehensive income and its components shoulda. Appear as a part of discontinued operations, extraordinary items, and cumulative effect of a change in accounting principle.b. Be reported net of related income tax effect, in
Assume a company does not elect the fair value option for reporting financial assets and liabilities. Which of the following is not classified as other comprehensive income?a. An adjustment to pension liability to record the funded status of the plan.b. Subsequent decreases of the fair value of
Which of the following options for displaying comprehensive income is(are) allowed by FASB?I. A continuation from net income at the bottom of the income statement.II. A separate statement that begins with net income.III. In the statement of changes in stockholders’ equity.a. I only.b. II only.c.
Which of the following is true?a. Separate EPS amounts must be presented for both other comprehensive income and comprehensive income.b. Separate EPS amounts must be presented for other comprehensive income but not for comprehensive income.c. Separate EPS amounts must be presented for comprehensive
Which of the following changes during a period is not a component of other comprehensive income?a. Pension liability adjustment for funded status of plan.b. Treasury stock, at cost.c. Foreign currency translation adjustment.d. Reclassification adjustment, for securities gain included in net income.
If ($2,450) net of tax is the reclassification adjustment included in other comprehensive income in the year the securities are sold, what is the gain (loss) that is included in income from continuing operations before income taxes?Assume a 30% tax rate.a. $(2,450)b. $(3,500)c. $ 2,450d. $3,500
Searles does not elect the fair value option for recording financial assets and liabilities. What amount of comprehensive income should Searles Corporation report on its statement of income and comprehensive income given the following net of tax figures that represent changes during a
A company buys ten shares of securities at $1,000 each on January 15, 2010. The securities are classified as available-for-sale. The fair value of the securities increases to $1,250 per share as of December 31, 2010. The company does not elect to use the fair value option for reporting
A company buys ten shares of securities at $2,000 each on December 31, 2008. The securities are classified as available for sale. The company does not elect to use the fair value option for reporting its available-for-sale securities.The fair value of the securities increases to $2,500 on December
Which of the following changes during a period is not a component of other comprehensive income?a. Unrealized gains or losses as a result of a debt security being transferred from held-to-maturity to available-for-sale.b. Stock dividends issued to shareholders.c. Foreign currency translation
Accumulated other comprehensive income should be reported on the balance sheet as a component of Retained earnings Additional paid-in capitala. No Yesb. Yes Yesc. Yes Nod. No No
Which of the following is not an acceptable option of reporting other comprehensive income and its components?I. In a separate statement of comprehensive income.II. In a statement of earnings and comprehensive income.III. In a statement of changes in stockholders’ equity.a. I only.b. II only.c.
During 2010, the “other revenues and gains” section of Totman Company’s Statement of Earnings and Comprehensive Income contains $5,000 in interest revenue, $15,000 equity in Harpo Co. earnings, and $25,000 gain on sale of available-for-sale securities. Assuming the sale of the securities
What is the purpose of reporting comprehensive income?a. To report changes in equity due to transactions with owners.b. To report a measure of overall enterprise performance.c. To replace net income with a better measure.d. To combine income from continuing operations with income from discontinued
On January 1, 2011, Shine Co. agreed to sell a business component on March 1, 2011. The gain on the disposal should bea. Presented as an extraordinary gain.b. Presented as an adjustment to retained earnings.c. Netted with the loss from operations of the component as a part of discontinued
When a component of a business has been discontinued during the year, the loss on disposal shoulda. Include operating losses of the current period.b. Exclude operating losses during the period.c. Be an extraordinary item.d. Be an operating item.
When a component of a business has been discontinued during the year, this component’s operating losses of the current period should be included in thea. Income statement as part of revenues and expenses.b. Income statement as part of the loss on disposal of the discontinued component.c. Income
A component of Ace, Inc. was discontinued during 2011. Ace’s loss on disposal shoulda. Exclude the associated employee relocation costs.b. Exclude operating losses for the period.c. Include associated employee termination costs.d. Exclude associated lease cancellation costs.
On December 1, 2010, Greer Co. committed to a plan to dispose of its Hart business component’s assets. The disposal meets the requirements to be classified as discontinued operations. On that date, Greer estimated that the loss from the disposition of the assets would be $700,000 and Hart’s
On November 1, 2010, management of Herron Corporation committed to a plan to dispose of Timms Company, a major subsidiary. The disposal meets the requirements for classification as discontinued operations. The carrying value of Timms Company was $8,000,000 and management estimated the fair value
Which of the following criteria is not required for a component’s results to be classified as discontinued operations?a. Management must have entered into a sales agreement.b. The component is available for immediate sale.c. The operations and cash flows of the component will be eliminated from
On January 1, 2010, Deer Corp. met the criteria for discontinuance of a business component. For the period January 1 through October 15, 2010, the component had revenues of $500,000 and expenses of $800,000. The assets of the component were sold on October 15, 2010, at a loss for which no tax
Service Corp. incurred costs associated with relocating employees in a restructuring of its operations. How should the company account for these costs?a. Measured at fair value and recognized over the next two years.b. Measured at fair value and recognized when the liability is incurred.c.
Under ASC 220, Comprehensive Income, corrections of errors are reported ina. Other comprehensive income.b. Other income/(expense).c. Retained earnings.d. Stockholders’ equity.
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
In 2010, Teller Co. incurred losses arising from its guilty plea in its first antitrust action, and from a substantial increase in production costs caused when a major supplier’s workers went on strike. Which of these losses should be reported as an extraordinary item?Antitrust action Production
A transaction that is unusual in nature and infrequent in occurrence should be reported separately as a component of incomea. After cumulative effect of accounting changes and before discontinued operations.b. After cumulative effect of accounting changes and after discontinued operations.c. Before
In 2010, hail damaged several of Toncan Co.’s vans.Hailstorms had frequently inflicted similar damage to Toncan’s vans. Over the years, Toncan had saved money by not buying hail insurance and either paying for repairs, or selling damaged vans and then replacing them. In 2010, the damaged vans
An extraordinary item should be reported separately on the income statement as a component of income Net of income taxes Before discontinued operations of a component of a businessa. Yes Yesb. Yes Noc. No Nod. No Yes
During 2010, Peg Construction Co. recognized substantial gains from• An increase in value of a foreign customer’s remittance caused by a major foreign currency revaluation.• A court-ordered increase in a completed long-term construction contract’s price due to design changes.Should these
A material loss should be presented separately as a component of income from continuing operations when it isa. An extraordinary item.b. A discontinued component of the business.c. Unusual in nature and infrequent in occurrence.d. Not unusual in nature but infrequent in occurrence.
On January 1, 2010, Brecon Co. installed cabinets to display its merchandise in customers’ stores. Brecon expects to use these cabinets for five years. Brecon’s 2010 multistep income statement should includea. One-fifth of the cabinet costs in cost of goods sold.b. One-fifth of the cabinet
Thorpe Co.’s income statement for the year ended December 31, 2011, 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 noncurrent investments in stock classified as
Purl Corporation’s income statement for the year ended December 31, 2010, shows the following:Income before income tax and extraordinary item $900,000 Gain on life insurance coverage—included in the above $900,000 income amount 100,000 Extraordinary item—loss due to earthquake damage 300,000
Ocean Corp.’s comprehensive insurance policy allows its assets to be replaced at current value. The policy has a$50,000 deductible clause. One of Ocean’s waterfront warehouses was destroyed in a winter storm. Such storms occur approximately every four years. Ocean incurred$20,000 of costs in
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