Quiz 9-20B Wrong Answers

Question 0

An asset can be recorded only when the business is certain that it will…

Answer 0

Derive a benefit from the expenditure

Question 1

Calling bonds at an unamortized premium produces a…

Answer 1

Gain from retirement of bonds

Question 2

Expenditures for startup activities, including organization costs, accounting treatment?

Answer 2

Expensed as incurred

Question 3

The amortization of a bond discount is the difference between…

Answer 3

Cash interest and interest expense

Question 4

Cash paid for interest on a bond discount, where does it go in the statement of cashflows, with indirect method being used?

Answer 4

Addition to net income in operating activities section

Question 5

Amortization of a discount on bonds payable results in…

2) because more expense has been deducted in computing income than the amount of cash paid for interest, the difference (captured in the change in the bond discount account) must be…

Answer 5

Interest expense greater than cash interest

2) added to income to reconcile cash provided or used from
Operating activities

Question 6

Under the cost method, when stock was repurchased at $20 and the treasury stock was reissued for $12, what must happen before retained earnings is reduced?

Answer 6

Additional paid in capital recorded from when the stock was first
Issued must be reduced in full

Question 7

Permanent differences between taxable income and pre tax accounting income affect only…

Answer 7

Current reconciliation of book income to taxable income

Question 8

Permanent differences do not affect either…

Answer 8

Interperiod or intra period income tax allocation

Question 9

Risk of accounting loss

Answer 9

Amount of write off that a company would record if any party

To agreement failed to perform the terms of contract

Question 10

Off balance sheet risk occurs when the amount of accounting loss…

Answer 10

Exceeds the amount of associated asset or liability recorded
On the balance sheet

Question 11

The maximum amount of accounting loss associated with trade accounts receivable occurs if…

Answer 11

No amount of current asset is collected

Question 12

The calculation of the income recognized in he third year of a 5 year construction contract accounted for using the percentage completion method includes the ratio of…

Answer 12

Total costs incurred to date to total estimated costs

Question 13

What 2 items should be disclosed in a company’s financial statements related to deferred taxes?

Answer 13

1 types and amounts of existing temporary differences

2 nature and amount of each type of operating loss and tax credit
Carry forward

Question 14

An entity shall disclose the amounts and expiration dates of…

Answer 14

Operating loss and tax credit carry forwards for tax purposes

Question 15

What is the journal entry to record a discount on notes payable for cash received?

Answer 15

Cash. Xxx
Discount on notes payable. Xxx
Notes payable. Xxx

Question 16

For construction of qualifying assets…

Answer 16

There is no interest expense on a note payable during construction

All the interest is capitalized during each year of construction

Question 17

If a computer software arrangement has an agreement to deliver
Software that requires significant production, modification or customization of software, what method of accounting should be used to recognize revenue from the contract?

Answer 17

Contract accounting (percentage completion)

Question 18

Percentage completion must generally be used if company can make reasonably dependable estimates of…4

Answer 18

1 Extent of progress towards completion
2 contract revenues
3 contract costs
4 both buyer and seller can expect to satisfy obligations

Question 19

Income tax expense current is the…

2) equation

Answer 19

Tax currently payable

2) income tax expense current = taxable income x tax rate

Question 20

The service cost component is the portion of pension expense that represents…

Answer 20

An estimate of the increase in pension benefits payable (particularly
The increase in the PBO) as result of employee services rendered
In current period

Question 21

Interest expense equation

Answer 21

Interest expense = principal x coupon rate x time

Question 22

IFRS requires that inventories be valued at…

Answer 22

Lower of cost or net realizable value

Question 23

Under IFRS, if net realizable value falls below cost, then inventory must be…

Answer 23

Written down to net realizable value

Question 24

Under IFRS, if net realizable value increases back above cost, then a…

Answer 24

Recovery of writedown must occur and inventory must be written
Back up to cost

Question 25

Under IFRS for inventory, replacement cost…

Answer 25

Is not used

Question 26

When calculating the asset retirement obligation in the year’s balance sheet are discounted cashflows used? Are undiscounted cashflows used?

Answer 26

Only undiscounted cashflows are used

Question 27

When a company owns 15% of another company and has a receivable using the cost method of accounting with that company they own 15% of, how should the receivable be reported on the balance sheet?

Answer 27

Same as 20-50% ownership

The total receivable should be reported separately

Question 28

What does FASB ASC 718-10-30-2 require for a method of accounting for stock based compensation plans?

Answer 28

Fair value method

Question 29

Income tax expense for the second quarter equation

Answer 29

Income tax expense for 2nd quarter =
(Total income for quarters 1 and 2) x (effective rate)
- income tax expense recorded at the end of the 1st quarter

Question 30

When the fair value of the land approximates the balance due on the note, neither the debtor or creditor record…

Answer 30

A gain or loss on the settlement of debt

Question 31

What is the fair value of the land when it approximates the balance of the defaulted note payable…

Answer 31

All Cash payments made - interest expense

Question 32

Insurance premiums are nondeductible, so they are…

Answer 32

Added back into taxable income

Question 33

Under the book value method, the carrying value of bonds is…

2) example journal entry, convertible $1,000,000 bonds with a carrying value of 1.3M and a market value of 1.4M convertible into 50,000 shares of common stock $1 par, with a market price of $30.

Answer 33

Removed and replaced by stockholder’s equity in exactly the same
Total amount

2) bonds payable. 1,000,000
Premium on B/P. 300,000
Common stock 50,000
PiC (plug). 1,250,000

Question 34

If a company in ch. 11 bankruptcy pays $400,000 cash and issues 80,000 shares at $1.25, what is the net increase in stockholder’s equity when the company owes unsecured creditors $1,200,000?

Answer 34

Amount owed to creditors. 1,200,000
Less: cash. (400,000)
Less: common stock issued at FV. (100,000)
________________________________
= gain on restructuring. 700,000
Add: common stock issued at FV. 100,000
_________________________________
= Increase in Stockholder’s Equity. 800,000

Question 35

The effect of the change on the deferred tax asset or liability at the beginning of the year of change should be included in…

Answer 35

Income from continuing operations for the period that includes
The enactment date