Financial Reporting MCQs

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Notes to financial statements are beneficial in meeting the disclosure requirements of financial reporting. The notes should not be used to






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An objective of financial reporting is






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Kell Corp.’s $95,000 net income for the quarter ended September 30, year 1, included the following after-tax items: A $60,000 extraordinary gain, ...






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Vilo Corp. has estimated that total depreciation expense for the year ending December 31, year 1, will amount to $60,000, and that year 1 year-end b...






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On June 30, year 1, Mill Corp. incurred a $100,000 net loss from disposal of a business segment. Also, on June 30, year 1, Mill paid $40,000 for pro...






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During the first quarter of year 2, Tech Co. had income before taxes of $200,000, and its effective income tax rate was 15%. Techs year 1 effective...






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During the first quarter of year 2, Tech Co. had income before taxes of $200,000, and its effective income tax rate was 15%. Techs year 1 effective...






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Advertising costs may be accrued or deferred to provide an appropriate expense in each period for Interim financial reporting Year-end financial re...






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A planned volume variance in the first quarter, which is expected to be absorbed by the end of the fiscal period, ordinarily should be deferred at t...






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Due to a decline in market price in the second quarter, Petal Co. incurred an inventory loss. The market price is expected to return to previous lev...






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An inventory loss from a market price decline occurred in the first quarter. The loss was not expected to be restored in the fiscal year. However, i...






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For external reporting purposes, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for Interim financial rep...






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For interim financial reporting, the computation of a companys second quarter provision for income taxes uses an effective tax rate expected to be ...






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For interim financial reporting, a companys income tax provision for the second quarter of year 1 should be determined using the






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ASC Topic 270, Interim Reporting, states that interim financial reporting should be viewed primarily in which of the following ways?






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Conceptually, interim financial statements can be described as emphasizing






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Wilson Corp. experienced a $50,000 decline in the market value of its inventory in the first quarter of its fiscal year. Wilson had expected this de...






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Which of the following statements is true regarding interim reporting for companies that prepare their financial statements in accordance with IFRS?...






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Noble Corporation prepares its financial statements in accordance with IFRS. If Noble prepares interim financial statements, which statements are re...






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Which of the following describes IFRSs requirements regarding interim financial statements?






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The following information pertains to Aria Corp. and its operating segments for the year ended December 31, year 1: Sales to unaffiliated customers ...






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Grum Corp., a publicly owned corporation, is subject to the requirements for segment reporting. In its income statement for the year ended December ...






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Grum Corp., a publicly owned corporation, is subject to the requirements for segment reporting. In its income statement for the year ended December ...






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Enterprise-wide disclosures include disclosures about Geographic areas Allocated costs






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An enterprise must disclose all of the following about each reportable segment if the amounts are used by the chief operating decision maker, except...






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In financial reporting for segments of a business, an enterprise shall disclose all of the following except






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In financial reporting for segments of a business enterprise, segment data may be aggregated






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The method used to determine what information to report for business segments is referred to as the






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Taylor Corp., a publicly owned corporation, assesses performance and makes operating decisions using the following information for its reportable se...






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Rocket Corporation prepares its financial statements in accordance with IFRS. For segment reporting purposes, which tests must Rocket apply to deter...






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What are the Statements of Financial Accounting Concepts intended to establish?






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According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on






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According to the FASB conceptual framework, the relevance of providing information in financial statements is subject to the constraint of






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The enhancing qualitative characteristics of financial reporting are






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According to the FASB conceptual framework, which of the following is an enhancing quality that relates to both relevance and faithful representatio...






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According to the FASB conceptual framework, the process of reporting an item in the financial statements of an entity is






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Under FASB Statement of Financial Accounting Concepts 5, which of the following items would cause earnings to differ from comprehensive income for a...






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Under FASB Statement of Financial Accounting Concepts 5, comprehensive income excludes changes in equity resulting from which of the following?






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The fundamental qualitative characteristic of faithful representation has the components of






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According to the FASB conceptual framework, which of the following statements conforms to the realization concept?






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What is the underlying concept that supports estimating a fixed asset impairment charge?






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What is the concept that supports the issuance of interim reports?






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According to the FASB conceptual framework, an entity’s revenue may result from






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According to the FASB conceptual framework, which of the following is an essential characteristic of an asset?






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According to the FASB conceptual framework, which of the following attributes would not be used to measure inventory?






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According to SFAC 7, Using Cash Flow Information and Present Value in Accounting Measurements, the most relevant measurement of an entity’s liabil...






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Which of the following is not covered by SFAC 7, Using Cash Flow Information and Present Value in Accounting Measurements?






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In calculating present value in a situation with a range of possible outcomes all discounted using the same interest rate, the expected present valu...






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Which of the following statements regarding interest methods of allocations is not true?






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Which of the following is not an objective of using present value in accounting measurements?






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On December 31, year 1, Brooks Co. decided to end operations and dispose of its assets within three months. At December 31, year 1, the net realizab...






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Which of the following accounting literature is not included in the FASB Accounting Standards Codification?






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On October 1, year 1, Acme Fuel Co. sold 100,000 gallons of heating oil to Karn Co. at $3 per gallon. Fifty thousand gallons were delivered on Decem...






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Amar Farms produced 300,000 pounds of cotton during the year 1 season. Amar sells all of its cotton to Brye Co., which has agreed to purchase Amar...






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Lin Co., a distributor of machinery, bought a machine from the manufacturer in November year 1 for $10,000. On December 30, year 1, Lin sold this ma...






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Under a royalty agreement with another company, Wand Co. will pay royalties for the assignment of a patent for three years. The royalties paid shoul...






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Clark Co.’s advertising expense account had a balance of $146,000 at December 31, year 1, before any necessary year-end adjustment relating to the...






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An analysis of Thrift Corp.’s unadjusted prepaid expense account at December 31, year 2, revealed the following: • An opening balance of $1,500 ...






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In year 1, Super Comics Corp. sold a comic strip to Fantasy, Inc. and will receive royalties of 20% of future revenues associated with the comic str...






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The premium on a three-year insurance policy expiring on December 31, year 3, was paid in total on January 1, year 1. The original payment was initi...






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On January 1, year 1, Sip Co. signed a five-year contract enabling it to use a patented manufacturing process beginning in year 1. A royalty is paya...






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Jersey, Inc. is a retailer of home appliances and offers a service contract on each appliance sold. Jersey sells appliances on installment contracts...






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Jersey, Inc. is a retailer of home appliances and offers a service contract on each appliance sold. Jersey sells appliances on installment contracts...






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Compared to the accrual basis of accounting, the cash basis of accounting understates income by the net decrease during the accounting period of Ac...






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White Co. wants to convert its year 1 financial statements from the accrual basis of accounting to the cash basis. Both supplies inventory and offic...






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Before year 2, Droit Co. used the cash basis of accounting. As of December 31, year 2, Droit changed to the accrual basis. Droit cannot determine th...






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Gant Co., which began operations on January 1, year 1, appropriately uses the installment method of accounting. The following information pertains t...






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On December 31, year 1, Mill Co. sold construction equipment to Drew, Inc. for $1,800,000. The equipment had a carrying amount of $1,200,000. Drew p...






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On January 2, year 1, Blake Co. sold a used machine to Cooper, Inc. for $900,000, resulting in a gain of $270,000. On that date, Cooper paid $150,00...






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For financial statement purposes, the installment method of accounting may be used if the






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According to the installment method of accounting, gross profit on an installment sale is recognized in income






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Income recognized using the installment method of accounting generally equals cash collected multiplied by the






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It is proper to recognize revenue prior to the sale of merchandise when I. The revenue will be reported as an installment sale. II. The revenue wil...






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Wren Co. sells equipment on installment contracts. Which of the following statements best justifies Wren’s use of the cost recovery method of reve...






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According to the cost recovery method of accounting, gross profit on an installment sale is recognized in income






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On December 31, year 1, Rice, Inc. authorized Graf to operate as a franchisee for an initial franchise fee of $150,000. Of this amount, $60,000 was ...






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Each of Potter Pie Co.’s twenty-one new franchisees contracted to pay an initial franchise fee of $30,000. By December 31, year 1, each franchisee...






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In which of the following examples of real estate transactions would the seller not transfer the usual risks and rewards of ownership? I. The buyer...






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Esker Inc. specializes in real estate transactions other than retail land sales. On January 1, year 1, Esker consummated a sale of property to Kame ...






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Which of the following is one of the conditions that must exist for a company to recognize revenue on separate units under a multiple-deliverables a...






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The milestone method of accounting may be used to recognize revenue for






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The milestone method of revenue recognition provides that if a substantive milestone is achieved, what amount of revenue is recognized?






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Which of the following organizations is responsible for setting International Financial Reporting Standards?






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According to the IASB Framework for the Preparation and Presentation of Financial Statements, the fundamental qualitative characteristic of relevanc...






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According to the IASB Framework, the financial statement element that is defined as increases in economic benefits during the accounting period in th...






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According to the IASB Framework, the two criteria required for incorporating items into the income statement or statement of financial position are ...






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If the outcome of rendering services cannot be estimated reliably, IFRS requires the use of which revenue recognition method?






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Which of the following is not one of the criteria for revenue recognition for sales of goods under IFRS?






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Upon first-time adoption of IFRS, an entity may elect to use fair value as deemed cost for






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Under IFRS, which of the following is the first step within the hierarchy of guidance to which management refers, and whose applicability it conside...






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On July 1, year 2, a company decided to adopt IFRS. The company’s first IFRS reporting period is as of and for the year ended December 31, year 2....






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How should a first-time adopter of IFRS recognize the adjustments required to present its opening IFRS statement of financial position?






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On January 1, year 1, Bray Company purchased for $240,000 a machine with a useful life of ten years and no salvage value. The machine was depreciate...






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On January 1, year 1, Warren Co. purchased a $600,000 machine, with a five-year useful life and no salvage value. The machine was depreciated by an ...






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On January 1, year 1, Warren Co. purchased a $600,000 machine, with a five-year useful life and no salvage value. The machine was depreciated by an ...






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On January 2, year 3, to better reflect the variable use of its only machine, Holly, Inc. elected to change its method of depreciation from the stra...






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The effects of a change in accounting principle should be recorded on a prospective basis when the change is from the






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On January 1, year 3, Roem Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change res...






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Which of the following would receive treatment as a cumulative effect on an accounting change on the income statement? LIFO to weighted-average . . ...






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On August 31, year 3, Harvey Co. decided to change from the FIFO periodic inventory system to the weighted-average periodic inventory system. Harvey...