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understanding financial accounting

Questions and Answers of Understanding Financial Accounting

Iron Ingots Inc. reported 1997 earnings per share of \$3.26 and had no extraordinary items. In 1998, earnings per share on income before extraordinary items was \(\$ 2.99\), and earnings per share on
Rodger Robotics Inc. has been in operation for three years. All of its manufacturing equipment, which has a useful life of 10 to 12 years, has been depreciated on a straight-line basis. During the 4
It is a necessary condition of there being puddles on the ground that it had previously rained. True or false.^
It is a sufficient condition of there being puddles on the ground that it had previously rained. True or false.^
Rules of accounting practice give conditions that suffice for propriety. True or false.^
Which of the following rules refer to cases that could not in principle be explicitly enumerated.^a. “No species of beetle is endothermic.”b. “Independence is affected if a close relative is an
Consider the rule; “A member should refuse an engagement with an enterprise if his or her spouse does audit-sensitive work for the enterprise.” Which of the following adds nothing to this.^a.
Which of the following is not an example of proportionate or due diligence.^a. Assessing the risk of fraud when carrying out an audit.b. Withdrawing from an engagement when a conflict of interest
Ignorance of ethical principles can sometimes excuse a bad action. True or false.?
Which of the following is an internal principle.?a. ET Section 54, Article III—Integrity.b. A member’s incorrect understanding of ET Section 54, Article III.c. A particular interpretation
Complete the following sentence from Aristotle. “And when one is talking about matters that are_true and beginning with premises of that sort, it’s enough if our conclusions are like that
Complete the following sentence from Aristotle. “Thus; whenever the law would speak in a general way, but something not comprehended in the generalization takes plaee, for the reason mentioned,
U.S. V. Simon in some respects bears an uncanny resemblance to:a. The Enron scandal.b. The Tyco scandal.c. The WorldCom scandal.d. None of the above.
Which of the following activities is not ethically neutral.?a. Paying one’s monthly billsb. Driving to workc. Talking with friendsd. All of the above
Which of the following is not a major theory of ethics.?a. Consequentialismb. Kantianismc. Virtue ethicsd. Modern ethics
Which of the following is not a reason why consequentialism is unsatisfactory.?a. Consequentialism regards all moral reasoning as instrumental, means-end reasoning.b. Consequentialism holds that
Which of the following sorts of actions would be especially difficult to evaluate using the Categorical Imperative?a. Whether to cheat on one’s taxes.b. How to resolve an argument with one’s
Complete the sentence: Something is good if_.a. Someone likes or desires it.b. People think that it is good.c. It has traits those that enable it to carry out its task well.d. It brings happiness to
The characteristic work of a thing should be understood as:a. What people use it for.b. What it alone can do.c. What it can do better than other things.d. What it does constantly and without
True of false: It is possible to acquire the virtues simply by taking a course in ethics.
Which of the following would be the typical way of acquiring integrity?a. Taking a course on integrity.b. Acting with integrity in small matters.c. Learning a definition of integrity.d. Seeing good
When (as in the example in the text) a farmer joins a militia dedicated to the common defense, his membership in the association involves reciprocity, because in exchange for the protection that the
Our term ‘ethics’ is derived from the Greek word for:a. habitb. moralityc. divine worshipd. law
True or false: According to the court in Feit v. Leasco, an omission is material only if, had the information been included, a substantial number of investors who relied on that information would
Which of the following is a pair of commensurable goods.^a. safety, earringsb. diamonds, musicc. knowledge, justiced. televisions, earrings
The Latin name for a good that is incommensurably higher than an instrumental good is;a. cui bonob. pro bonoc. bonum honestumd. bonum augmentum
The virtue which involves a practitioner’s recognition of the demands of professionalism is:a. integrityb. high-mindednessc. honestyd. sense of duty
True or false. To claim that the profession of accounting is self¬ regulating is the claim that rules for members should be promulgated by the AICPA and not by any external or governmental authority.
An example of the extreme degree of professionalism required of accountants is:a. working for relatively low salariesb. safeguarding of outstanding business successc. prestigious title
An accountant’s ‘distinctive’ or ‘characteristic work’ is:a. securing the conditions of trustb. telling it how it isc. uncovering fraudd. adhering to GAAP
Which of the following is not a distinctive virtue of an accountant?a. Competenceb. Due Carec. Sense of the Public Interestd. Humility
Which of the following is an internal factor that can compromise independence?a. bad digestionb. anxietyc. greedd. distractedness
Intellectual objectivity should be distinguished from_.a. intellectual subjectivityb. verbal objectivityc. intellectual competenced. independence of the intellect
The distinctive virtues of an accountant are best acquired in:a. noteworthy accomplishmentsb. new circumstancesc. small mattersd. college coursese. all of the abovef. a. and b. onlyg. b. and c.
True or false. The ‘worker product immunity’ denied in U.S. v. Arthur Young would be inconsistent with the presumed independence of an auditor.
The basic cause of Enron’s collapse was:a. bad investmentsb. accounting improprietiesc. a sour economyd. regulation of the energy market
The value of debts shifted off-balance sheet by Enron using SPEs was about:a. 1.2 billion dollarsb. 500 million dollarsc. 40 billion dollarsd. 100 billion dollars
Enron’s use of SPEs may be likened to what sort of confidence game.^a. a shell gameb. a pyramid schemec. a Ponzi schemed. a Nigerian letter
Which of the following did Enron’s CEO Jeff Skilling not offer to McLean by way of assurances.^a. Mark-to-market accounting implies restricted cash-flow at times.b. Fluctuations in the energy
Complete the following line from the Sherron Watkins ‘whistleblower letter’: “To the layman on the street, it will look like we recognized funds flow of $800mm from merchant asset sales in 1999
Which of the following was not a topic of the February 2001 Andersen conference call about its Enron engagement.^a. whether Enron’s off-balance sheet debt was material.b. whether Enron’s SPEs
True or false. Sherron Watkins’ ‘whistleblower letter’ went above and beyond what would be expected of a CPA acting as a professional.
True or false. That an entity cannot be regarded as independent if it fails to have 3% equity, implies that it is independent if it does have 3% equity.
That Andersen signed off on Enron SPEs that in fact had less than 3% outside equity is an illustration of the principle that:a. Less is more.b. Always the more conservative course of action is
It is speculated above that the first bad step of Andersen’s Enron auditors was signing off on:a. extensive use of mark-to-market accountingb. an SPE for Enron’s office buildingc. excessive
What event made possible the founding of the company that was later to become WorldCom.?a. a man walks on the moonb. the transcontinental railwayc. the breakup ofAT&Td. the fall of the Soviet Empire
Who was the internal auditor who presented evidence of WorldCom fraud to the Audit Committee in April 2002.?a. Sherron Watkinsb. Kim Emighc. Cythia Cooperd. Tony Minert
What E/R number was the industry analysts’ target for WorldCom.?a. 24%b. 50%c. 12%d. 42%
Approximately how much of accrual funds was improperly released in 1999-2000?a. 60 billionb. 3.3. billionc. 1 billiond. 800 million
A judgment that happens to coincide with one’s own self-interest is an _judgment.a. interestedb. interestingc. arrestingd. impartial
What euphemism did WorldCom internal accountants use for capitalized line costs?a. accounting ‘fluffb. non-cash adjustmentsc. mystery acquisitionsd. Scott Sullivan’s goody bag
What was the small step of cooperation with the Nazis that Dutch physicians refused to take?a. saluting Hitler with “Sieg Heil!”b. wearing the Swastikac. rehabilitating of the sick for useful
How did Andersen describe its relationship to WorldCom?a. ‘detached observer’b. ‘societal watchdog’c. ‘long-term partner’d. ‘conscience’
True or false: Andersen said it would reject the traditional audit approach in auditing WorldCom?
True or false: In the course of its audits, Andersen consulted the General Ledger of WorldCom.
What reward did Socrates receive for devoting his life to exhorting his fellow citizens to care about being virtuous?a. the death penaltyb. absolute political powerc. exiled. publicly provided meals
What was Plato’s verdict on the question of whether virtue can be taught?a. Virtue cannot be taught.b. Virtue can be taught if virtue is a kind of knowledge.c. Virtue can be taught only by
Which of the following is not a reason given above for why it seems that classroom learning could not impart virtue?a. You can’t teach someone to be a good athlete by classroom learning, and
Which of the following is consistent with the view that ethics can be taught?a. We act ethically only when it is in our interest to do so.b. Power corrupts, and absolute power corrupts absolutely.c.
That the ethical ideals of Arthur Andersen were not preserved or transmitted to successive generations of aecountants within the firm that he founded, whereas technical accounting skill was, might be
In order to answer the question, “Can ethics be taught.^”, we must first answer the question of:a. What ethics is.b. What the meaning of ‘is’ is.c. Whether ethics and teaching are distinct.d.
Which of the following is not a basic component of ethieal aeeounting.?a. culture.b. charaeter.c. savvy.d. idealism.
Which of the following is not a way in which the aecounting profession can foster idealism in accounting.?a. Recover the humanistic dimension of accounting.b. Screen more carefully aspirants to the
The phrase ‘tone at the top’ indicates which component of ethical accounting.?a. Understandingb. Idealismc. Characterd. Culture
Which of the following is not a ‘small thing’ in whieh probity and scrupulous honesty should be expected in an aecountant.?a. Use of expense accounts.b. Claims for tax deductions.c. Billing
Kirk Wholesale Supply owns stock in Xerox Corporation, which it intends to hold indefinitely because of some negative tax consequences if sold. Should the investment in Xerox be classified as a
Ann Adler is confused about losses and gains on the sale of debt investments. Explain to Ann (a) how the gain or loss is computed, and (b) the statement presentation of the gains and losses.
Clio Company sells Cross's bonds costing \(\$ 40,000\) for \(\$ 45,000\), including \(\$ 3,000\) of accrued interest. In recording the sale, Clio books a \(\$ 5,000\) gain. Is this correct? Explain.
To acquire Mega Corporation stock, R. L. Duran pays \(\$ 65,000\) in cash plus \(\$ 1,500\) broker's fees. What entry should be made for this investment, assuming the stock is readily marketable?
Malon Corporation uses the equity method to account for its ownership of \(35 \%\) of the common stock of Flynn Packing. During 1996 Flynn reported a net income of \(\$ 80,000\) and declares and pays
Wendy Walner is the controller of G-Products, Inc. At December 31, the company's investments in trading securities cost \(\$ 74,000\) and have a fair value of \(\$ 70,000\). Indicate how Wendy would
Using the data in question 13 , how would Wendy report the data if the investment were long-term and the securities were classified as available-forsale?
Reo Company's investments in available-for-sale securities at December 31 shows total cost of \(\$ 192,000\) and total fair value of \(\$ 210,000\). Prepare the adjusting entry.
Weller Company pays \(\$ 320,000\) to purchase all the outstanding common stock of Wood Corporation. At the date of purchase the net assets of Wood have a book value of \(\$ 290,000\). Weller's
Phelps Corporation purchased debt investments for \(\$ 41,500\) on January 1, 1996. On July 1, 1996, Phelps received cash interest of \(\$ 2,075\). Journalize the purchase and the receipt of
On August 1, McLain Company buys 1,000 shares of ABC common stock for \(\$ 35,000\) cash plus brokerage fees of \(\$ 600\). On December 1 , the stock investments are sold for \(\$ 38,000\) in cash.
Harmon Company owns 30\% of Hook Company. For the current year Hook reports net income of \(\$ 150,000\) and declares and pays a \(\$ 50,000\) cash dividend. Record Harmon's equity in Hook's net
Cost and fair value data for the trading securities of Michele Company at December 31,1996 , are \(\$ 62,000\) and \(\$ 59,000\), respectively. Prepare the adjusting entry to record the securities at
Duggen Corporation holds available-for-sale stock securities costing \(\$ 72,000\) as a long-term investment. At December 31, 1996, the fair value of the securities is \(\$ 65,000\). Prepare the
Saber Corporation has the following long-term investments: common stock of Sword Co. ( \(10 \%\) ownership) held as available-for-sale securities, cost \(\$ 108,000\), fair value \(\$ 113,000\);
Provo Company acquires \(100 \%\) of the common stock of Stanton Company for \(\$ 180,000\) cash. On the acquisition date, Stanton's ledger shows Common Stock \(\$ 120,000\) and Retained Earnings
Data for the Provo and Stanton companies are given in BE13-9. Instead of paying \(\$ 180,000\), assume that Provo pays \(\$ 200,000\) to acquire the \(100 \%\) interest in Stanton Company. Complete
Piper Corporation had the following transactions pertaining to debt investments:Jan. 1 Purchased \(6010 \%, \$ 1,000\) Harris Co. bonds for \(\$ 60,000\) cash plus brokerage fees of \(\$ 900\).
Malea Company had the following transactions pertaining to stock investments:Feb. 1 Purchased 800 shares of ABC common stock (2\%) for \(\$ 8,200\) cash plus brokerage fees of \(\$ 200\).July 1
McCormick Inc. had the following transactions pertaining to investments in common stock:Jan. 1 Purchased 1,000 shares of Starr Corporation common stock ( \(5 \%\) ) for \(\$ 70,000\) cash plus \(\$
On January 1 Ranier Corporation purchased a \(25 \%\) equity in Bellingham Corporation for \(\$ 150,000\). At December 31 Bellingham declared and paid a \(\$ 60,000\) cash dividend and reported net
Presented below are two independent situations:1. Karen Cosmetics acquired \(10 \%\) of the 200,000 shares of common stock of Bell Fashion at a total cost of \(\$ 12\) per share on March 18, 1996. On
At December 31, 1996, the trading securities for Nielson, Inc., are as follows:\section*{Instructions}(a) Prepare the adjusting entry at December 31, 1996, to report the securities at fair value.(b)
Data for investments in stock classified as trading securities are presented in E13-6. Assume instead that the investments are classified as available-for-sale securities with the same cost and fair
Felipe Company has the following data at December 31, 1996:The available-for-sale securities are held as a long-term investment.\section*{Instructions}(a) Prepare the adjusting entries to report each
On January 1, Swiss Corporation acquires \(100 \%\) of Arco Inc. for \(\$ 200,000\) in cash. The condensed balance sheets of the two corporations immediately following the acquisition are as
Data for the Swiss and Arco corporations are presented in E13-9. Assume that instead of paying \(\$ 200,000\) in cash for Arco Inc., Swiss Corporation pays \(\$ 215,000\) in cash. Thus, at the
The following transactions related to long-term bonds occurred for Lund Corporation: 1996 Jan. 1 Purchased \(\$ 50,000\) RAM Corporation \(10 \%\) bonds for \(\$ 50,000\).July 1 Received interest on
In January 1996, the management of Reed Company concludes that it has sufficient cash to purchase some temporary investments in debt and stock securities. During the year, the following transactions
On December 31, 1995, Harmon Associates owned the following securities that are held as long-term investments:On this date, the total fair value of the securities was equal to its cost. The
Cardinal Concrete acquired \(20 \%\) of the outstanding common stock of Edra, Inc., on January 1,1996 , by paying \(\$ 1,200,000\) for 50,000 shares. Edra declared and paid an \(\$ 0.80\) per share
The following are in Hi-Tech Company's portfolio of long-term available-for-sale securities at December 31, 1995:On December 31, the total cost of the portfolio equaled total fair value. Hi-Tech had
The following data, presented in alphabetical order, are taken from the records of Prepare a balance sheet. Oklahoma Corporation.\section*{Instructions}Prepare a balance sheet at December 31, 1996.
Neal Company purchased all the outstanding common stock of Wheaton Company on December 31, 1996. Just before the purchase, the condensed balance sheets of the two companies were as follows:Neal used
The following transactions related to long-term bonds occurred for Givarz Corporation.1996 Jan. 1 Purchased \(\$ 100,000\) Leslye Corporation \(9 \%\) bonds for \(\$ 100,000\).July 1 Received

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