Solved by verified expert :1. Current liabilities are normally recorded at the amount expected to be paid rather than at their present value. This practice can be supported by GAAP according to the concept of: (Points : 5)MatchingMaterialityConsistencyConservatism2. If a company has a 51% chance that a customer will win a law suite against them for damages between $5-$15 million how is this recognized under both GAAP and IFRS (Points : 5)GAAP no liability would be recognized but under IFRS a liability would be recognizedGAAP a liability would be recognized but under IFRS no liability would be recognizedGAAP no liability would be recognized and under IFRS no liability would be recognizedGAAP a liability would be recognized and under IFRS a liability would be recognized3. A $500,000 bond issue sold for 98. Therefore, the bonds: (Points : 5)Sold at a discount which is recorded along with a debit to cash and a credit to bonds payableSold at a premium which is recorded along with a debit to cash and a credit to bonds payableSold at a discount which is recorded along with a debit to bonds payable and a credit to cashSold at a premium which is recorded along with a debit to bonds payable and a credit to cash4. Debt issue costs under GAAP requires (Points : 5)That debit issue costs are netted against the debt to lower bonds payableThe debit issue costs are netted against the debt to increase bonds payableA debit to the asset account debt issue costs which is amortized over the term of the debtA credit to the liability account debt issue costs which is amortized over the term of the debt5. GAAP requires that if a company elects to report bonds at fair value they (Points : 5)Must report the changes as an increase or decrease to bonds payableMust report the changes as an increase or decrease to discount on bonds payableMust report the changes in fair value to the unrealized holding gain or loss account and the fair value adjustment accountThere is no such option under GAAP only IFRS6. A ___ lease our includes a noncancelable lease term and an agreement for a bargain purchase option (Points : 5)CapitalOperatingEquityBargain7. Under IFRS a capital lease (Points : 5)Requires all gains and losses in the fair value of the lease to be recognized at the end of each fiscal yearCan only be issued if it give the lessee the exclusive right to the property for a period of more than 3 yearsAgrees to give the lessee use of the asset for the term of the leaseDoes not exist under IFRS8. Accounting for income taxes is consistent with the ____concept of accounting (Points : 5)Adequate disclosureUnit of measureAccrualHistorical costs9. All of the following will create a deferred tax asset EXCEPT (Points : 5)Estimated warranty costs, tax deductible when paidOperating loss carry forwardBad debt expense when using the allowance method for accounting and direct write off for taxInterest received on municipal bonds10. Deferred tax assets and liabilities are classified on the balance sheet (Points : 5)As current or noncurrent depending on how the related assets or liability is classifiedAs current assets or liabilities since taxes are assumed to be paid within 1 yearAs current assets but noncurrent liabilities since there is no guarantee taxes will actually be paid in the future depending on company earningsAs noncurrent assets and liabilities since future earnings are unreliable11. Which of the following would increase the employer’s periodic pension expense in the year the event occurs? (Points : 5)Amortization of net gainsService costsBenefits paid to retireesExpected return on plan assets12. Pension expense for service and interest costs under GAAP and IFRS: (Points : 5)Are treated the sameAre amortized over the future periods for GAAP but are expensed for IFRSAre amortized over the future periods for IFRS but are expensed for GAAPAre expensed under GAAP but are not accounted for until the pension plan is paid out for IFRS13. ABC declared and paid cash dividends in January of the current year to its common shareholders. The dividend (Points : 5)Will be added to the numerator of the earnings per share fraction for the current yearWill be added to the denominator of the earnings per share fraction for the current year.Will be subtracted from the numerator of the earnings per share fraction for the current year.Has no effect on the earnings per share for the coming year14. Treasury stock will (Points : 5)Increase stockholder’s equityDecrease stockholder’s equityHave no effect on stockholder’s equityIncrease the par value of common stock while decreasing the value of preferred stock15. Which of the following is an example of a change in accounting principle? (Points : 5)A change in inventory costing methodsA change in the estimated useful life of a depreciable assetA change in the actuarial life expectancies of employees under a pension plan.Consolidating a new subsidiary16. When calculating EPS stock dividends distributed in June are (Points : 5)Calculated retrospectivelyCalculated from June to the end of the yearCalculated from the beginning of the year until the distribution occurredNot used for EPS calculations since they are not cash dividends17. Which of the following is not required by generally accepted accounting principles? (Points : 5)Cash flow per shareEarnings per shareStatement of cash flowsDisclosure notes18. As a staff accountant, you discovered that due to a change in accounting rules, you realize that you now need to report consolidated financial statements for a new entity. This change should be reported (Points : 5)ProspectivelyRetrospectivelyOnly if asked by your supervisors to prepare consolidated statements for the new entityNo reporting is required since it is a new entity19. Statement of cash flows contains all of the following EXCEPT (Points : 5)Operating activitiesCash activitiesInvesting activitiesFinancing activates20. Which of the following would not be an ethical dilemma (Points : 5)You find out that items included in year end inventory are damaged and your supervisor tells you to correct the situation next year.You sell your receivables at the end of the year in an effort to generate cash and improve the cash flows statementA change in an accounting estimate that is accounted for prospectivelyYour company issues higher stock dividends due to cash flow problems and explains to the shareholders that it is in order to give them a better return.
