Question 1

1. Sullivan Software sells packages of a software program and one year's worth of technical support for $500. Its packaging lists the $500 sales price as comprised of a software program at a price of $450 and technical support with a price of $100, with a $50 discount for the package deal. All of Sullivan's sales are for cash, and there are no returns. Sullivan sells the software program separately for $475 and offers a year of technical support separately for $75. Sullivan should recognize revenue for the two parts of the arrangement as follows:

   	Recognize the entire $500 when the customer pays cash to buy the package.
   	Recognize the portion of the $500 attributable to the software program when the customer pays cash to buy the package; defer the portion attributable to technical support and recognize over the support period.
   	Defer the entire $500 and recognize over the support period.
   	Recognize the entire $500 upon conclusion of the support period.

1.3334 points

Question 2

1. Tammy wants to buy a car that costs $10,000 and wishes to know the amount of the monthly payments, which will be made at the first of the month, with interest of 12% on the unpaid balance. She should use a table for the:

   	Present value of 1.
   	Present value of an ordinary annuity of 1.
   	Present value of an annuity due of 1.
   	Future value of an annuity due of 1.

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Question 3

1. Intraperiod income tax presentation is primarily a matter of:

   	Valuation.
   	Going concern.
   	Periodicity.
   	Allocation.

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Question 4

1. Which of the following is not a required segment reporting disclosure according to U.S. GAAP?

   	Segment profit or loss.
   	Segment assets.
   	Segment liabilities.
   	General information about the operating segment.

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Question 5

1. Which of the following is not a required disclosure for related-party transactions?

   	The nature of the relationship.
   	A description of the transactions.
   	The amounts due from or to related parties.
   	The impact of the transactions on current year's income.

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Question 6

1. "VSOE" is necessary to separately recognize revenue in multiple-element contracts for:

   	All service contracts.
   	All product contracts.
   	All contracts that involve at least one non-software element.
   	Software contracts.

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Question 7

1. Which of the following is not true about EPS?

   	It must be reported by all corporations whose stock is publicly traded.
   	It must be reported separately for discontinued operations.
   	It must be reported on operating income.
   	None of the other answers is correct.

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Question 8

1. Comprehensive income is the change in equity from:

   	Owner transactions.
   	Nonowner transactions.
   	Owner or nonowner transactions.
   	Capital transactions.

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Question 9

1. CPAs are licensed by:

   	The AICPA.
   	The SEC.
   	The federal government.
   	State governments.

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Question 10

1. Gains are:

   	Inflows from selling a product or service to a customer.
   	Increases in equity resulting from transfers of assets to the company from owners.
   	Increases in equity from peripheral transactions of an entity.
   	None of these is correct.

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Question 11

1. When accounting for revenue over time for a long-term contract, the percentage of completion used to recognize revenue in the first year usually is determined by measuring:

   	Costs incurred in the first year, divided by estimated remaining costs to complete the project.
   	Costs incurred in the first year, divided by estimated total costs for the completed project.
   	Costs incurred in the first year, divided by estimated gross profit.
   	Costs incurred in the first year, divided by estimated total costs to be incurred in the remaining years of the project.

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Question 12

1. Which of the following accounts has a normal debit balance?

   	Accounts payable.
   	Accrued taxes.
   	Accumulated depreciation.
   	Advertising expense.

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Question 13

1. In comparing the direct method with the indirect method of preparing the statement of cash flows:

   	Only operating activities are presented differently.
   	Only investing activities are presented differently.
   	Only financing activities are presented differently.
   	All activities are presented differently.

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Question 14

1. Recording revenue that is earned, but not yet collected, is an example of:

   	A prepaid expense transaction.
   	A deferred revenue transaction.
   	An accrued liability transaction.
   	An accrued receivable transaction.

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Question 15

1. The difference between single-step and multiple-step income statements is primarily an issue of:

   	Consistency.
   	Presentation.
   	Measurement.
   	Valuation.

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Question 16

1. Operating cash outflows would include:

   	Purchase of investments.
   	Purchase of equipment.
   	Payment of cash dividends.
   	Purchases of inventory.

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Question 17

1. Which of the following is not an indicator that the customer is likely to have control over a good?

   	Asset warehoused by seller-affiliated third party
   	Accepted the asset
   	Legal title to the asset
   	Physical possession of the asset

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Question 18

1. Change statements include a:

   	Retained earnings statement, balance sheet, and cash flow statement.
   	Balance sheet, cash flow statement, and income statement.
   	Cash flow statement, income statement, and retained earnings statement.
   	Retained earnings statement, balance sheet, and income statement.

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Question 19

1. Explodia.com sells fireworks over the Internet. Customers access Explodia's website and select particular products, and Explodia refers the customer order to a fireworks manufacturer who fulfills the order, ships to the customer, and pays Explodia a 20% commission. Which of the following is true about Explodia?

   	Explodia is an agent in this transaction.
   	Explodia is primarily responsible for providing the product to the customer.
   	Explodia's income statement would report gross revenue and cost of sales associated with these transactions.
   	Explodia warehouses inventory.

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Question 20

1. Which of the following is one of the steps for recognizing revenue?

   	Identify the performance obligations of the contract.
   	Determine whether bad debts can be reasonably estimated.
   	Estimate the total transaction price of the contract based on fair value.
   	Allocate all revenue to the performance obligation with the largest stand-alone selling price.

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Question 21

1. Cash flows from investing do not include cash flows from:

   	Lending money to another corporation.
   	The sale of equipment.
   	Borrowing.
   	The purchase of other corporation's securities.

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Question 22

1. Pro forma earnings:

   	Could be considered management's view of permanent earnings.
   	Are needed for the correction of errors.
   	Are standardized under generally accepted accounting principles
   	Are useful to compare two different firms' performance.

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Question 23

1. In the DuPont formula, return on assets equals:

   	Gross margin on sales Inventory turnover.
   	Profit margin on sales Inventory turnover.
   	Gross margin on sales Asset turnover.
   	Profit margin on sales Asset turnover.

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Question 24

1. Which of the following has the statutory authority to set accounting standards in the United States?

   	FASB.
   	IRS.
   	SEC.
   	AICPA.

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Question 25

1. Elements of financial statements do not include:

   	Monetary unit.
   	Investments by owners.
   	Comprehensive income.
   	Losses.

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Question 26

1. The quick ratio is:

   	The liquidity ratio divided by the equity ratio.
   	Current assets minus inventory divided by current liabilities minus accounts payable.
   	Current assets minus inventory and prepaid items divided by current liabilities.
   	Cash divided by accounts payable.

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Question 27

1. Which of the following accounts has a normal credit balance?

   	Salary expense.
   	Accrued income taxes payable.
   	Land.
   	Prepaid rent.

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Question 28

1. Cash equivalents would include:

   	Highly liquid equity securities.
   	Accounts receivable from a financial institution.
   	Restricted funds for bonds that mature in three years.
   	Debt instruments with maturity dates of less than three months from the date of the purchase.

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Question 29

1. Reporting comprehensive income can be accomplished by each of the following methods except:

   	In the statement of shareholders' equity.
   	A single, continuous statement of comprehensive income.
   	In two separate, but consecutive statements.
   	All of these are acceptable methods.

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Question 30

1. Cash equivalents would not include:

   	Cash not available for current operations.
   	Money market funds.
   	U.S. treasury bills.
   	Bank drafts.

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Question 31

1. In the operating activities section of the statement of cash flows, we start with net income:

   	In the direct method.
   	In the indirect method.
   	In both the direct and the indirect methods.
   	In neither the direct nor the indirect methods.

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Question 32

1. Todd Sweeney is an artist who sells his work under consignment (he displays his work in local barbershops, and customers purchase his work there). Sweeney recently transferred a painting on consignment to a local barbershop. Sweeney most likely should recognize revenue when:

   	He paints the painting, because the painting is produced while he works.
   	When he transfers the painting to a barbershop.
   	When the barbershop sells the painting.
   	When the barbershop's right of return expires.

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Question 33

1. Intraperiod income tax presentation is primarily a matter of:

   	Valuation.
   	Going concern.
   	Periodicity.
   	Allocation.

1.3334 points

Question 34

1. Which of the following is not an indicator that the constraint on recognizing variable consideration should be applied?

   	Poor (limited) evidence on which to base an estimate
   	A broad range of outcomes that could occur
   	A short delay before uncertainty resolves
   	A history of the seller changing payment terms on similar contracts

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Question 35

1. Which of the following is not a required segment reporting disclosure according to International Financial Reporting Standards?

   	Segment profit or loss.
   	Segment assets.
   	Segment liabilities.
   	All are required disclosures.

1.3334 points

Question 36

1. In comparing the direct method with the indirect method of preparing the statement of cash flows:

   	Only operating activities are presented differently.
   	Only investing activities are presented differently.
   	Only financing activities are presented differently.
   	All activities are presented differently.

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Question 37

1. Expenses in an income statement prepared under International Financial Reporting Standards:

   	Must be classified by function.
   	Must be classified by natural description.
   	Can be classified either by function or by natural description.
   	None of the other answers is correct.

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Question 38

1. Estimate the stand-alone selling price of the software using the residual approach.

   	$50
   	$80
   	$90
   	$97.50

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Question 39

1. On December 31, 2016, the end of Larry's Used Cars' first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the 2016 balance sheet will be valued at:

   	$53,600.
   	$54,800.
   	$52,400.
   	$1,200.

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Question 40

1. SFAC 8 of the conceptual framework focuses on:

   	Objective and qualitative characteristics.
   	Presentation and disclosure.
   	Recognition and measurement.
   	Elements of financial statements.

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Question 41

1. Reporting comprehensive income according to International Financial Reporting Standards can be accomplished by each of the following methods except:

   	In the statement of shareholders' equity.
   	A combined statement of income and comprehensive income.
   	In two separate statements.
   	The entity may choose either a combined statement of income and comprehensive income or two separate statements.

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Question 42

1. Cost of goods sold is:

   	An asset account.
   	A revenue account.
   	An expense account.
   	A permanent equity account.

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Question 43

1. Enhancing qualitative characteristics of accounting information include:

   	Relevance and comparability.
   	Comparability and timeliness.
   	Understandability and relevance.
   	Neutrality and consistency.

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Question 44

1. Ace Bonding Company purchased merchandise inventory on account. The inventory costs $2,000 and is expected to sell for $3,000. How should Ace record the purchase?

   Inventory	2,000
   Accounts payable		2,000

   Cost of goods sold	2,000
   Deferred revenue	1,000
   Sales in advance		3,000

   Cost of goods sold	2,000
   Inventory payable		2,000

   Cost of goods sold	2,000
   Profit	1,000
   Sales payable		3,000

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Question 45

1. Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002?

   	Corporate executive accountability.
   	Auditor rotation.
   	Retention of work papers.
   	All of these are provisions of the Act.

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Question 46

1. A series of equal periodic payments in which the first payment is made one compounding period after the date of the contract is:

   	A deferred annuity.
   	An ordinary annuity.
   	An annuity due.
   	A delayed annuity.

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Question 47

1. A series of equal periodic payments that starts more than one period after the agreement is called:

   	An annuity due.
   	An ordinary annuity.
   	A future annuity.
   	A deferred annuity.

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Question 48

1. Permanent accounts would not include:

   	Cost of goods sold.
   	Inventory.
   	Current liabilities.
   	Accumulated depreciation.

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Question 49

1. Which of the following is not a characteristic that defines a reportable operating segment according to U.S. GAAP?

   	Operating results are regularly reviewed by the enterprise's chief operating officer.
   	Discrete financial information is available.
   	Engages in business activities from which it may recognize revenues and incur expenses.
   	Represents more than 20% of total company revenues, assets, or net income.

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Question 50

1. George Jones is planning on a cruise for his 70^th birthday party. He wants to know how much he should set aside at the beginning of each month at 6% interest to accumulate the sum of $4,800 in five years. He should use a table for the:

   	Future value of an ordinary annuity of 1.
   	Future value of an annuity due of 1.
   	Future value of 1.
   	Present value of an annuity due of 1.

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Question 51

1. The acid-test ratio is also known as the:

   	Current ratio.
   	Debt to equity ratio.
   	Times interest earned ratio.
   	Quick ratio.

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Question 52

1. When converting an income statement from a cash basis to an accrual basis, cash received for services:

   	Exceed service revenue.
   	May exceed or be less than service revenue.
   	Is less than service revenue.
   	Equals service revenue.

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Question 53

1. Which of the following is a characteristic of a contract for purposes of revenue recognition?

   	Commercial substance.
   	Nonverbal.
   	Reasonable profit margin.
   	Notarized within the company's state of incorporation.

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Question 54

1. In the operating activities section of the statement of cash flows, we start with net income:

   	In the direct method.
   	In the indirect method.
   	In both the direct and the indirect methods.
   	In neither the direct nor the indirect methods.

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Question 55

1. Long-term solvency refers to:

   	The efficiency with which a company manages its resources.
   	The profitability of a company for a period of time.
   	The amount of current assets relative to long-term assets.
   	The riskiness of a company with regard to the amount of liabilities in its capital structure.

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Question 56

1. Which of the following is never a current liability account?

   	Accrued payroll.
   	Dividends payable.
   	Prepaid rent.
   	Subscriptions collected in advance from customers.

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Question 57

1. The current ratio is calculated as:

   	Current assets divided by noncurrent assets.
   	Current assets divided by total assets.
   	Current assets divided by current liabilities.
   	Current assets divided by total liabilities.

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Question 58

1. Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting?

   	Timeliness.
   	Better reflecting economic activity.
   	Periodicity.
   	Better matching of revenues and expenses.

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Question 59

1. Mama's Pizza Shoppe borrowed $8,000 at 9% interest on May 1, 2016, with principal and interest due on October 31, 2017. The company's fiscal year ends June 30, 2016. What adjusting entry is necessary on June 30, 2016?

   No entry.

   Interest expense	240
   Interest payable		240

   Interest expense	120
   Interest payable		120

   Prepaid interest	120
   Interest payable		120

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Question 60

1. Dave's Duds reported cost of goods sold of $2,000,000 this year. The inventory account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that Dave's purchased during the year?

   	$1,600,000.
   	$1,800,000.
   	$2,200,000.
   	$2,400,000.

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Question 61

1. Notes payable that are due in two years are:

   	Current liabilities.
   	Long-term intangible assets.
   	Long-term liabilities.
   	Long-term investments.

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Question 62

1. Red Onion Restaurant would classify a six-month prepaid insurance policy as:

   	Property, plant, and equipment.
   	Investment.
   	Current asset.
   	Goodwill.

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Question 63

1. The FASB's conceptual framework's qualitative characteristics of accounting information include:

   	Full disclosure.
   	Relevance.
   	Going concern.
   	Historical cost.

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Question 64

1. In a statement of cash flows prepared under International Financial Reporting Standards, each of the following items is typically classified as a financing cash flow except:

   	Interest paid.
   	Dividends paid.
   	Proceeds from the issuance of long-term debt.
   	Dividends received.

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Question 65

1. An asset that is generally not expected to be converted to cash or consumed within one year or the operating cycle is:

   	Building.
   	Accounts receivable.
   	Inventory.
   	Supplies.

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Question 66

1. Which of the following is typically true for a bill-and-hold arrangement?

   	Revenue is recognized at the point in time when the arrangement is made.
   	Revenue is recognized at the point in time when goods are manufactured.
   	Revenue is recognized at the point in time when the delivery of goods is made.
   	Revenue is recognized at the point in time at which payment from the customer is received.

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Question 67

1. Disclosure notes would not include:

   	Depreciation methods used and estimated useful life.
   	Definition of cash equivalents.
   	Details of pension plans.
   	Data to adjust the financial statements so that they are not misleading.

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Question 68

1. The conceptual framework's qualitative characteristic of faithful representation includes:

   	Predictive value.
   	Neutrality.
   	Confirmatory value.
   	Timeliness.

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Question 69

1. Assume a contract for the sale of goods specifies that payment is to be made four months after delivery of a product. The seller is likely to do which of the following, with respect to the time value of money over the life of the contract?

   	Recognize interest expense.
   	Recognize interest revenue.
   	Recognize additional cost of goods sold.
   	Ignore the time value of money.

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Question 70

1. Operating cash outflows would include:

   	Purchase of investments.
   	Purchase of equipment.
   	Payment of cash dividends.
   	Purchases of inventory.

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Question 71

1. Which of the following groups is not among the external users for whom financial statements are prepared?

   	Customers.
   	Suppliers.
   	Employees.
   	Customers, suppliers, and employees are all external users of financial statements.

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Question 72

1. On November 1, 2016, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $4,800 for the one-year period. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until 2017. Taylor should recognize revenue in 2016 in the amount of

   	$0.
   	$800.
   	$2,400.
   	$4,800.

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Question 73

1. In the Norwalk Agreement, the FASB and IASB pledged to:

   	Combine their organizations to form the BUSYB.
   	Make progress on specific MOU projects.
   	Achieve convergence by the year 2015.
   	Remove existing differences between their standards.

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Question 74

1. Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the installment sales method for revenue recognition. In 2015, Lake began operations and sold jet skis with a total price of $900,000 that cost Lake $450,000. Lake collected $300,000 in 2015, $300,000 in 2016, and $300,000 in 2017 associated with those sales. In 2016, Lake sold jet skis with a total price of $1,500,000 that cost Lake $900,000. Lake collected $500,000 in 2016, $400,000 in 2017, and $400,000 in 2018 associated with those sales. In 2018, Lake also repossessed $200,000 of jet skis that were sold in 2016. Those jet skis had a fair value of $75,000 at the time they were repossessed. Total cash collections on installment sales during 2016 would be:

   	$700,000.
   	$300,000.
   	$800,000.
   	$0

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Question 75

1. Each of the following would be reported as items of other comprehensive income except:

   	Foreign currency translation gains.
   	Unrealized gains on investments accounted for as securities available for sale.