INTERMEDIATE ACCT. (QUIZ CHAP 1-6)

Question 1

Which of the following is not an acceptable presentation of current liabilities?

a. Listing current liabilities in the order of maturity

b. Listing current liabilities according to amount

c. Offsetting current liabilities against current assets

d. Showing current liabilities in the order of liquidation

Answer 1

c. Offsetting current liabilities against current assets

Question 2

Which is not a characteristic of a liability?

a. Present obligation

b. Arises from past event

c. Results in a transfer of economic resource

d. Liquidation is reasonably expected to require use of current asset

Answer 2

D

Question 3

Which does not meet the definition of a liability?

a. The signing of an employment contract at fixed salary

b. An obligation to provide goods or services in the future

c. A note payable with no specified maturity date

d. An obligation that is estimated in amount

Answer 3

A

Question 4

The most relevant measurement of liabilities at initial recognition should always reflect

a. The expectation of the management

b. Historical cost

c. The credit standing of the entity

d. The single most likely minimum possible amount

Answer 4

C

Question 5

What is the relationship between and liability?

a.Present value is used to measure certain liabilities

b. Present value is not used to measure liabilities

c. Present value is used to measure all liabilities

d. Present value is used to measure current liabilities

Answer 5

A

Question 6

If a long-term debt becomes callable due to the violation of a loan covenant

a. The debt may continue to be classified as noncurrent

b. The debt should be reclassified as current

c. Cash must be reserved to pay the debt

d. Retained earnings must be restricted

Answer 6

B

Question 7

Classifying liabilities as either current or noncurrent helps creditors assess

a. Profitability
b. The relative risk of an entity’s liabilities
c. The degree of an entity’s liabilities
d. The amount of an entity’s liabilities

Answer 7

B

Question 8

An entity received an advance payment for special order goods that are to be manufactured and delivered within six months, How should the advance payment be reported?

a. Deferred charge

b. Contra asset account

c) Current liability

d. Noncurrent liability

Answer 8

C

Question 9

The most common type of liability is

a. One that comes into existence due to a loss contingency

b. One that must be estimated

c. One that comes into existence due to a gain contingency

d. One to be paid in cash and for which the amount and timing known

Answer 9

D

Question 10

What is the classification of debt callable by the creditor?

a. Noncurrent liability

b Current liability

c. Current liability if the creditor intends to call the debt within one year

d. Current liability if it is probable that the creditor will call the debt within one year

Answer 10

B

Question 11

It is an event that creates a legal or constructive obligation because the entity has no other realistic alternative but to settle the obligation.

a. Obligating event

b. Past event

c. Subsequent event

d. Current event

Answer 11

A

Question 12

When a range of possible outcomes, and each point in that range is as likely as any other, the range to be used is

a. Minimum

b. Maximum

c. Midpoint

d. Weighted average

Answer 12

C

Question 13

For which of the following should a provision be recognized?

a. Future operating losses

b. Obligations under insurance contracts

c. Reduction in fair value of financial instruments

d. Obligations for plant decommissioning costs

Answer 13

D

Question 14

A legal obligation is an obligation that is derived from all of the following, except

a. Legislation

b. A contract

c. Other operation of law

d. An established pattern of past practice

Answer 14

D

Question 15

What is the correct definition of provision?

a. A possible obligation arising from past event

b. A liability of uncertain timing or amount

c. liability which cannot be easily measured

d. An obligation to transfer funds to an entity

Answer 15

B

Question 16

How should contingent liability be reported in the financial statements when it is reasonably possible?

a. As a deferred liability
b. As an accrued liability
c. As a disclosure only
d. As an account payable

Answer 16

C

Question 17

A contingent liability

a. Has a most probable value of zero but may require a payment if a given future event occurs

b. Definitely exists as a liability

c. Is reported as current liability

d. Is not disclosed in the financial stataments

Answer 17

A

Question 18

The likelihood that the future event will or will not occur can be expressed by a range of outcome. Which range means that the future event occurring is very slight?

a. Probable

b. Reasonably possible

c. Certain

d. Remote

Answer 18

D

Question 19

General or unspecified contingencies should

a. Be accrued in the financial statements and disclosed

b. Not be accrued and need not be disclosed

c. Not be accrued but should be disclosed

d. Be accrued but need not be disclosed

Answer 19

B

Question 20

Disclosure usually is not required for

a. Contingent gain that is probable and measurable

b. Contingent loss that is possible and measurable

c. Contingent loss that is probable and cannot be reliably measured

d. Contingent loss that is remote and measurable

Answer 20

D

Question 21

Interest expense is

a. The effective rate times the carrying amount of the bond during the interest period.

b. The stated rate times the face amount of the bond

c. The effective rate times the face amount of the bond

d. The stated interest rate times the carrying amount

Answer 21

A

Question 22

For a bond issue which sells for less than face amount, the market rate of interest is

a. Dependent on rate stated on the bond

b. Equal to rate stated on the bond

c. Less than rate stated on the bond

d. Higher than rate stated on the bond

Answer 22

D

Question 23

How should the entity calculate the net proceeds to be received from bond issuance?

a. Discount the bonds at the stated rate of interest

b. Discount the bonds at the market rate of interest

c. Discount the bonds at the stated rate of interest and deduct band issuance cost

d. Discount the bonds at the market rate of interest and deduct bond issuance cost

Answer 23

D

Question 24

Under international accounting standard, the valuation method used for bonds payable is

a. Historical cost

b. Discounted cash flow valuation at current yield rate

c. Maturity amount

d. Discounted cash flow valuation at yield rate at issuance

Answer 24

D

Question 25

When bonds are sold between interest dates, any accrued interest is credited to

a. Interest payable

b. Interest revenue

c. Interest receivable

d. Bonds payable

Answer 25

A

Question 26

The amortization of discount on bonds payable

a. Decreases the face amount of bonds payable

b. Decreases the amount of interest payable

c. Decreases the carrying amount of bonds payable

d. Increases the carrying amount of bonds payable

Answer 26

D

Question 27

When bonds are sold at a premium, at each interest payment date, the interest expense

a. Remain constant

b. Is equal to the change in carrying amount

c. Increases

d Decreases

Answer 27

D

Question 28

When bonds are sold at a discount, at each interest payment date, the Interest expense

a. Increases

b. Decreases

c. Remains the same

d. Is equal to the change in carrying amount

Answer 28

A

Question 29

What is the market rate of interest for a bond issue which sells for more than face amount?

a. Less than rate stated on the bond

b. Equal to rate stated on the bond

c. Higher than rate stated on the bond

d. Independent of rate stated on the bond

Answer 29

A.

Question 30

If bonds are issued at a premium, this indicates that

a. The yield rate of interest exceeds the nominal rate

b. The nominal rate of interest exceeds the yield rate

c. The yield and nominal rates coincide

d. No necessary relationship exists between the two rates

Answer 30

B

Question 31

What is the stand-alone selling price of free product coupons?

a. Nothing

b. Fair value less cost of disposal

c. Selling price of free product

d. Selling price of free product adjusted for expected redemption

Answer 31

D

Question 32

The nonredemption of gift certificates is called

a. Breakage

b. Forfeiture

c. Rebate

d. Waiver

Answer 32

A

Question 33

Which of the following is a characteristic of the accrual of warranty but not the sale of warranty?

a. Warranty liability

b. Warranty expense

c. Unearned warranty revenue

d. Warranty revenue

Answer 33

A

Question 34

What is the classification of the estimated warranty liability in a three-year warranty?

a. Noncurrent

b. Current

c. Partly current and partly noncurrent

d. No need for disclosure

Answer 34

C

Question 35

The cost of customer premium offer should be charged to expense

a. When the related product is sold

b. When the premium offer expires

c. Over the life cycle of the product

d. When the premium is claimed

Answer 35

A

Question 36

Which of the following best describes the accrual approach of accounting for warranty cost?

a. Expensed when paid

b. Expensed when warranty claims are certain

c. Expensed based on estimate in year of sale

d. Expensed when incurred

Answer 36

C

Question 37

Providing a monetary rebate program

a. Is accounted for similarly to a premium offer

b. Creates an expense for the seller in the period of sale

c. Creates a liability for the seller at the time of sale

d. Is normally not recognized

Answer 37

C

Question 38

The accounting concept that requires recognition of a liability for customer premium offer is

a. Time period

b. Prudence

c. Historical cost

d. Matching principle

Answer 38

D

Question 39

The accrual approach in accounting for warranty

a. Is required for income tax reporting

b. Is frequently justified on the basis of expediency

c. Finds the expense account being charged when the seller performs in compliance with the warranty

d. Should be used whenever the warranty is an integral and inseparable part of the sale

Answer 39

D

Question 40

What is the accounting for the transaction price of a contract of
Sale with customer coupons for free product, discount or rebate?

a. Entirely as product sales revenue

b. Allocated to customer options equal to stand alone selling and the balance to product sales

c. Allocated between product sales revenue and coupons based on stand
alone selling price

d. Entirely as coupon revenue

Answer 40

C