1. Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

a) salaries payable decrease

b) gain on the sale of land

c) loss on the sale of equipment

d) accounts receivable increase

2. The financial statement presentation of a change in reporting entity is most similar to the reporting of a:

a) A change in accounting principles.

b) Change in accounting estimate.

c) Discontinued business operation.

d) Correction of a material error discovered after the year the error was made.

3. Using the percentage-of-completion method of accounting for long-term contracts, the percentage of completion used to recognize gross profit in the first year usually is determined by measuring:

a) Costs incurred in the first year, divided by estimated remaining costs to complete the project.

b) Costs incurred in first year, divided by estimated total costs of the completed project.

c) Costs incurred in first year, divided by estimated gross profit.

d) None of the above is correct.

4. Merchandise sold FOB destination indicates that:

a) The seller holds title until the merchandise is received at the buyer's location.

b) The buyer is responsible for delivery of the merchandise to the destination.

c) The full order is back ordered to its destination.

d) The buyer pays the freight to the destination.

5. Which of the following is not true about EPS? (Points : 1)

a) It must be reported by all corporations whose stock is publicly traded.

b) It must be reported separately for discontinued operations.

c) It must be reported separately for extraordinary items.

d) All of the above are true.

6. An extraordinary event for financial reporting purposes is both:

a) Unusual and material.

b) Infrequent and significant.

c) Material and infrequent.

d) Unusual and infrequent

7. Under the realization principle, revenue should not be recognized until the earnings process is deemed virtually complete and:

a) Revenue is realized.

b) Any receivable is collected.

c) Collection is reasonably certain.

d) Collection is absolutely assured.

8. Bert's Meat Market sells quarters and sides of beef on the installment basis. Losses on receivables are very difficult to predict, and meat products cannot be repossessed. The revenue recognition method used by Bert would be:

a) Point of sale.

b) Installment sales.

c) Cost recovery.

d) Completed contract.

9. Shady Lane's income taxes payable account decreased from $14 million to $12 million during 2006. If its income tax expense was $80 million, what would be shown as an operating cash flow under the direct method?

a) A cash outflow of $12 million.

b) A cash outflow of $78 million.

c) A cash outflow of $80 million.

d) A cash outflow of $82 million.

10. Indiana Co. began a construction project in 2006 that will provide it $150 million when it is completed in 2008. During 2006, Indiana incurred $36 million of costs and estimates an additional $84 million of costs to complete the project.

In 2007, Indiana incurred costs of $58.5 million and estimated an additional $40.5 million in costs to complete the project. Using the percentage-of-completion method, Indiana:

a) Recognized $15 million gross profit on the project in 2007.

b) Recognized $13.5 million gross profit on the project in 2007.

c) Recognized $6 million gross profit on the project in 2007.

d) Recognized $1.5 million gross profit on the project in 2007.

Answer rating: 100% (QA)

1 b gain on the sale of land 2 a A change in accounting principles 3 a Costs incurred in the fir... View the full answer