10) On the statement of cash flows in which the operating activities section is prepared under the indirect method, depreciation is treated as an adjustment to reported net earnings because depreciation A. is a direct inflow of cash from investing activities. B. Reduces reported net earnings and involves an inflow of cash. C. Reduces reported net earnings but does not involve an outflow of cash. D. Is an inflow of cash to a reserve account for replacement of assets. 11) Which of the following requires an adjustment to the opening balance of retained earnings in the earliest period of the comparative financial statements presented? A. A change in the estimated useful life of machinery B. A change in the expected residual value of a property C. A change from straight line to declining balance depreciation Page 2 of 7 D. A change from First-in, First-out (FIFO) to weighted average inventory cost flow assumption 12) which of the following serves as the justification for the recognition of expired cost? A Cause and effect association C. Immediate recognition of an expense B. Systematic and rational allocation D. Minimization of income tax liability 13) Each of the following errors will overstate net income of current year, except A. Equipment purchased in a prior year was expensed C. Accrued wages were not recorded at current year-end B. Current year end ending inventory was overstated D. PPE purchased in the current year was expensed 14) In double-entry bookkeeping system which of the following may be used as basis for recognizing income and expenses? Cash basis Modified cash basis Accrual basis A. YES YES YES B. NO YES NO C. YES NO NO D. YES NO NO 15) Which of the following statements about income and expense recognition is (are) true? 1 The gross profit on sales computed under modifies cash basis is the same as the computed under accrual basis. || Both cash and modified cash basis will yield the same amount of operating expenses in the income statement. Ill In recording day-to-day transactions and events, all entities must follow accrual basis of accounting. A. Only I is true B. and I are true C. ll and Ill are true D. All statements are true Problems (2 points each) 16) Mia Company provided the following information related to operating segments: Segment Sales to customers Intersegment sales One 5,000,000 3,000,000 Two 8,000,000 4,000,000 Three 4.000.000 Four 43.000.000 16.000.000 Combined 60,000,000 23,000,000 Elimination (23.000.000) Consolidated 60.000.000 What is the total revenue that should be disclosed for the reportable segments? Total revenue 8,000,000 12,000,000 4,000,000 59.000.000 83,000,000 (23,000,000) 60.000.000