QUESTION 1

Explain why GAAP does not allow direct cancellation or removal of bad accounts.

QUESTION 2

When selling fixed assets with finite (limited) useful lives in exchange for cash

the seller recognizes a gain or loss for the difference between the cash received and the fair value of the asset sold.

the seller recognizes a gain or loss for the difference between the cash received and the book value of the asset sold.

the seller recognizes losses, but not gains.

the seller recognizes a gain or loss for the difference between the cash received and the historical cost of the asset sold.

QUESTION 3

The overriding principle for all depreciation methods is that the method must be:

Conservative and economic

Systematic and rational

Consistent and conservative

Significant and material

QUESTION 4

The capitalized cost of equipment excludes

Maintenance

Sales tax

Shipping

Installation

QUESTION 5

Which of the following statements is not true about IFRS investment accounting?

IFRS allows proportional consolidation of investments when two or more investors have joint control.

IFRS is more restrictive than US GAAP regarding when an investor can choose the fair value option

IFRS requires an investee's accounting policies to be adjusted to correspond with those of the investor when the equity method is applied.

IFRS does not allow the use of the equity method when two or more investors have joint control.

QUESTION 6

In the statement of cash flows, the inflows and outflows of purchases and sales of negotiable securities are considered

Investment activities

Financial Activities

Financing activities that do not affect cash.

Operational activities

QUESTION 7

The difference between the historical cost of an asset given in an exchange of nonmonetary assets and its fair value determines the gain or loss reported for its disposal.

True

False

QUESTION 8

The depreciation of MACRS (modified accelerated cost recovery system) used for taxes is more similar to the double depreciation method on the decreasing balance than to the straight line method.

True

False

QUESTION 9

In accordance with the equity method, the cash dividends received are considered a reduction in the net assets of the investee and must be recorded as an increase in the investment account.

True

False

QUESTION 10

The basic principle used to value an asset acquired in a nonmonetary exchange is to value it at fair value of the asset (s) given up.

True

False

QUESTION 11

If Pop Company owns 25% of the voting shares of Son Company, then Pop Company would normally record the dividends received from Son Company as investment income.

True

False

QUESTION 12

On January 1, 2019, Mo's Company purchased $100,000 of 12% bonds at face value. The bonds are to be held to maturity. The bonds pay interest semiannually on July 1 and January 1. At December 31, 2019, the bonds were quoted at $90,000.

Required:

Prepare the appropriate journal entry to record the acquisition of the bonds.

Show all the interest expenses entries required for 2019.

How and for how much will the investment on bonds be reported on the Balance Sheet?

QUESTION 13

Explain the differences in the accounting treatment of repairs and maintenance, additions, improvements, and rearrangements.