ACCT Quiz

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Central Washington University *

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Accounting

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Feb 20, 2024

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1. The primary current source of generally accepted accounting principles for nongovernmental U.S. entities is the Financial Accounting Standards Board . 2. The FASB’s due process for setting accounting standards includes which of the following procedures? The FASB can seek information about accounting and reporting issues by holding public forums, usually based on an exposure draft . 3. Closing entries Are made following adjusting entries . 4. According to SFAC 8, Chapter 4, Elements of Financial Statements , which of the following is an essential characteristic of a liability? 5. Consistency of accounting information Requires similar events to be accounted for similarly in succeeding accounting periods . 6. A difference between real accounts and nominal accounts is that Real accounts may carry forward a nonzero balance from one accounting period to the next . 7. Which of the following is the annual report that is filed with the United States Securities and Exchange Commission? Form 10-K . 8. Which of the following documents is typically issued as part of the due-process activities of the Financial Accounting Standards Board (FASB) for amending the FASB Accounting Standards Codification? A proposed accounting standards update . 9. Accounting information that is capable of making a difference in a decision by helping users to confirm or correct expectations is Relevant . 10. Nominal accounts Provide temporary accumulations of certain account balances for the accounting period . 11. A company has the following items on its year-end trial balance: Net sales $500‚000 Common stock 100,000 Insurance expense 75,000 Wages 50,000 Cost of goods sold 100,000 Cash 40,000 Accounts payable 25,000 Interest payable 25,000 What is the company’s gross profit?

12. Which of the following transactions most likely qualifies as a discontinued operation? Planned and approved sale of a reporting segment . 13. In the current fiscal year, the Spin Company recognized items properly classified as components of other comprehensive income. In its annual financial statements, Spin must report comprehensive income in One continuous statement or two consecutive statements . 14. 15. A company sold a fully depreciated asset for $160,000, which resulted in an increase in taxes payable of $45,000. This transaction should be reported as A gain of $115,000 in the determination of income from continuing operations before income taxes on the income statement. Gain(net of tax) = 160000 - 45000 = $ 115000 . 16. GFF operates entity-owned stores and has agreements with franchises in the East, South, and West Regions. The group of stores in each region is a component of the entity. GFF has committed to a plan to sell the entity-owned stores in the East and South Regions. These stores are classified as held for sale. In the East but not the South Region, GFF will

receive future fees based on revenues from the stores and will continue to be significantly involved in post-sale operations. However, disposal of the stores in both regions will have a major effect on GFF’s operations and financial results. Accordingly, GFF reports the results of operations of which stores in discontinued operations? East Region South Region Yes No 17. Select the best order for the following items in income statements: 7 - 8 - 9 - 4 - 1 - 2 – 6. 1. Income from continuing operations 2. Discontinued operations 3. Prior-period adjustments 4. Taxes on income from continuing operations 5. Dividends 6. Net income 7. Revenues 8. Expenses 9. Income from continuing operations before income tax 18. An entity discontinues a component of the entity in a strategic shift and recognizes a loss on discontinued operations. Should the loss be reported net of the related tax effect, and should the loss be reported before income from continuing operations on the income statement? Net of Tax Before Income from Continuing Operations Yes No 19. In Dart Co.’s Year 2 single-step income statement, as prepared by Dart’s controller, the section titled “Revenues” consisted of the following: Sales $250,000 Purchase discounts 3,000 Collection of accounts written off that were not expected to be recovered 10,000 Total revenues $263,000 In its Year 2 single-step income statement, what amount should Dart report as total revenues? 250,000 . 20. The all-inclusive income statement concept Is generally more appropriate than the current operating concept . 21. On November 1, Year 4, Davis Co. discounted with recourse at 10% a 1-year, noninterest-bearing, $20,500 note receivable maturing on January 31, Year 5. What amount of contingent liability for this note must Davis disclose in its financial statements for the year ended December 31, Year 4? $20,500.

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22. On August 1, Year 1, Vann Corp.’s $500,000 1-year, noninterest-bearing note due July 31, Year 2, was discounted at Homestead Bank at 10.8%. Vann uses the straight-line method of amortizing bond discount. What carrying amount should Vann report for notes payable in its December 31, Year 1, balance sheet? $468,500. 23. Nefertiti Corporation had the following transactions in its first year of operations: Sales (90% collected in first year) $1,500,000 Credit loss write-offs 60,000 Disbursements for costs and expenses 1,200,000 Disbursements for income taxes 90,000 Purchases of fixed assets 400,000 Depreciation on fixed assets 80,000 Proceeds from issuance of common stock 500,000 Proceeds from short-term borrowings 100,000 Payments on short-term borrowings 50,000 What is the cash balance at the end of the first year? $210,000. 24. The following information pertains to Eire Co.’s accounts receivable at December 31, Year 2: Days Estimated Outstanding Amount % Uncollectible 0 - 60 $240,000 1% 61 - 120 180,000 2% Over 120 200,000 6% $620,000 25. During Year 2, Eire wrote off $14,000 in receivables and recovered $8,000 that was written off in prior years. Its December 31, Year 1, allowance for credit losses was $44,000. Under the aging method, what amount of allowance for credit losses should Eire report at December 31, Year 2? $18,000. 26. Hilltop Co.’s monthly bank statement shows a balance of $54,200. Reconciliation of the statement with company books reveals the following information: Bank service charge $ 10 Insufficient funds check 650 Checks outstanding 1,500 Deposits in transit 350 Check deposited by Hilltop and cleared by the bank for $125, but improperly recorded by Hilltop as $152 What is the net cash balance after the reconciliation? $53,050. 27. Usually, if the petty cash fund is not reimbursed just prior to year end and an appropriate adjusting entry is not made, Cash will be overstated and expenses understated .

28. Which method of recording credit loss expense accounts receivable is consistent with accrual accounting? Allowance Direct Write-Off Yes No 29. An analysis and aging of Hom Company’s accounts receivable at December 31 disclosed the following: Accounts receivable $850,000 Allowance for credit losses per books 50,000 Amounts deemed uncollectible 64,000 The net realizable value (NRV) of the accounts receivable at December 31 should be $786,000. 30. When the allowance method of recognizing credit losses on accounts receivable is used, the entry to record the write-off of a specific account Decreases both accounts receivable and the allowance for credit losses . 31. How should the discount included in the face amount of notes receivable be presented in the balance sheet? As deductions from the related receivables . 32. A company determined the following values for its inventory as of the end of the fiscal year: Historical cost $300,000 Current replacement cost 280,000 Selling price 308,000 Normal profit margin 13,000 Cost to sell 10,000 What amount should the company report as inventory on its year-end balance sheet under the following cost methods? Last-in, first-out (LIFO) First-in, first-out (FIFO) 308000-10000-13000 = 285000 308000-10000 = 298000 33. The accounting records of Seraphina Co. contain the following amounts on November 30, the end of its fiscal year: Cost Retail Beginning inventory $ 68,000 $100,000 Purchases 262,000 400,000 Net markups 50,000 Net markdowns 110,000 Sales 360,000 Seraphina’s ending inventory as of November 30, computed by the conventional retail method, is $48,000. 34. Under the retail inventory method, freight-in would be included in the calculation of the goods available for sale for which of the following?

Cost Retail Yes No 35. Lorraine Co. has determined its fiscal year-end inventory on a LIFO basis to be $400,000. Information pertaining to that inventory follows: Estimated selling price $408,000 Estimated cost of disposal 20,000 Normal profit margin 60,000 Current replacement cost 360,000 Lorraine records losses that result from applying the lower-of-cost-or-market (LCM) rule. At its year end, what should be the net carrying value of Lorraine’s inventory? $360,000. 36. Inventory may properly be stated above cost Only in exceptional cases. 37. The following information is available for the Silver Company for the 3 months ended March 31 of this year: Merchandise inventory, January 1 of this year $ 900,000 Purchases 3,400,000 Freight-in 200,000 Sales 4,800,000 The gross margin recorded was 25% of sales. What should be the merchandise inventory at March 31? $900,000. 38. Fact Pattern: Stockholm Co. accounts for its inventory using the last-in, first-out (LIFO) method. The data below concern items in Stockholm Co.’s inventory. The limits to the market measurement (i.e., the ceiling and the floor) that Stockholm Co. should use in the lower-of-cost-or-market (LCM) comparison of gear are $217 and $198. Per Unit Gear Stuff Wick Historical cost $190.00 $106.00 $53 Selling price 217.00 145.00 73 Cost to complete and sell 19.00 8.00 2 Current replacement cost 203.00 105.00 51 Normal profit margin 32.00 29.00 21 39. Under IFRS, inventory should be measured subsequent to initial recognition at the lower of cost and net realizable value. IFRS define net realizable value (NRV) as Estimated selling price in the ordinary course of business minus costs of completion and disposal.

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40. If the retail method is used to approximate a lower-of-average-cost-or-market (LACM) measurement, which of the following describes the proper treatment of net additional markups and markdowns in the cost-retail ratio calculation? Net markups should be included, and net markdowns should be excluded. 41. The original cost of an inventory item is above the replacement cost. The inventory item’s replacement cost is above the net realizable value. Under the lower-of-cost-or-market method, the inventory item accounted for using the retail inventory method should be valued at original cost.