Day 25

Question 1

What is the difference between Authorized, issued, and outstanding shares?

Answer 1

Authorized - total number of shares the company is allowed to issue
Issued - total number of shares ACTUALLY issued
Outstanding - total issued shares IN THE HANDS OF SHAREHOLDERS

Question 2

Cash provided from Operating Activities is computed as:

Answer 2

Net Income
PLUS Depr Exp
LESS Gain on Sale of Equipment
PLUS Loss on Sale of Equipment
= Cash from Operating Activities

MCQ-01234

Question 3

How are deferred tax assets and Liabilities reported on the BS?

Answer 3

As NON-CURRENT

MCQ-00847

Question 4

When must a Filler and a Non-Filer evaluate subsequent events for their FS?

Answer 4

A Filer must consider subsequent events up to the Issue Date (FS are widely distributed to users)

A Non-Filer must consider subsequent events up to the date the FS are Available (the date FS are available to be issued)

MCQ-04880

Question 5

ABC was sued for $50k and accrued the liability on Year 1. In year 2 ABC received a favorable judgement and the plaintiff was required to pay ABC $30k of expenses. The case is being appealed what amount is reported as an asset and liability?

Answer 5

$0 & $0

Contingent gain is not reported

The $50k loss is no longer probable and not reported

MCQ-00764

Question 6

ABC changed it’s inventory from LIFO to FIFO, how is this reported?

Answer 6

Accounting Principle Change - Retrospectively

Report the cumulative effect of the change as an adjustment to beginning Retained Earnings, net of tax

MCQ-05068

Question 7

Conditions to capitalize interest:

Answer 7

1. Expenditures for building have been made
2. Interest cost are being incurred
3. Permits have been filled

All 3 have to be met

MCQ-01896

Question 8

MCQ-00113

Lower of cost definitions

Question 9

ABC has 3,000 $100 par value 5% preferred stock at the end of year 1. In year 2 ABC did not declare a dividend. In year 3 a $10k cash dividend was paid. ABC should report dividends in arrears on the FS as?

Answer 9

$20k disclosure

Dividends are not reported as a liability until they are DECLARED

MCQ-01561

Question 10

During an acquisition how are acquisition costs treated?

Answer 10

They are expensed immediately

Question 11

What is the formula for the Dividends Payout Ratio

Answer 11

Dividends per Share / EPS

Question 12

In preparing its interim FS, assuming that no changes in acctg principle were implemented, ABC would apply GAAP:

Answer 12

Used in the most recent annual report

If an Acctg Principle was changed ABC would not use GAAP

MCQ-04466

Question 13

When preparing Interim FS, income tax expense is _______ using the _______ tax rate _______ to apply to the entire year.

Answer 13

When preparing Interim FS, income tax expense is estimated using the EFFECTIVE tax rate expected to apply to the entire year.

MCQ-05464

Question 14

Bonus Method - Recognize Intercapital Transfer Rules:

Answer 14

1. Determine total Capital and Interest to the new partner
2. If Interest is LESS THAN amount $contributed$ = Bonus to Old Partners
3. If Interest is MORE THAN amount $contributed$ = Bonus to New Partner

B = Bonus = Balance in total capital account determines allocation

MCQ-00872

Question 15

For a NFP, they received $200k with donor restrictions with specific requirements to acquire property. Where is this reported on the Stmt of Cash Flows?

Answer 15

Financing Activities

If you take out a loan to buy a Bldg, what is the loan? Financing Activities

MCQ-01255

Question 16

What contributed services are NFP required to report?

SOME

Answer 16

Specialized skills are required and possessed by donor
Otherwise needed by the organization
Measurable
Easily (at fair value)

MCQ-08714

Question 17

The excess of an Assets fair value over its book value is:

Answer 17

Amortized over the life of the asset

Additional amortization causes the Investor’s share of the Investee’s Net Income to DECREASE

MCQ-00288

Question 18

ABC estimates that 4% of sales for the warranty period. Total sales were $3 million and warranty costs incurred were $67,500. What amount should ABC report as warranty expense on its Income Statement?

Answer 18

3,000,000 × .04 = $120,000 = Warranty Expense

$120,000 - $67,500 = $52,500 Accrued Warranty

The entire liability for the warranty should be accrued in the year of sale to “match” the cost with the corresponding revenue

MCQ-01034

Question 19

An investor in CS received dividends in excess of the investor’s share of the investee’s earnings subsequent to the date of the investment. How will the investor’s investment account be affected by the dividends under the Fair Value and Equity Method?

Answer 19

Decrease and Decrease

Rule: Liquidating dividends reduce the carrying amount of the investment account under both methods

MCQ-00353

Question 20

For NFP - Barriers that indicate a Conditional Contribution include:

Answer 20

• Specific levels of service
• Specific outputs or outcomes
• Matching
• Outside event

MCQ-15553

Question 21

Pass Key: When preparing land for the construction of a building

Answer 21

Land Costs = Filling a hole and leveling

Building Costs = Digging a hole

MCQ-11089

Question 22

Using the direct write off method to account for Uncollectible AR. Cash collections equal sales adjusted for the deduction of what accounts?

Answer 22

• Accounts written off
• Increase in AR Balance deduction

MCQ-00269