QUESTION 1

When we have a dispute without filing (unasserted claim) with a probable possibility of being presented and with a reasonable possibility of suffering a loss of $ 5,000,000, it should not be reported in the financial statements.

True

False

3 points

QUESTION 2

The guideline of 75% of economic life for classifying a lease as a finance lease is consistent with the basic premise that most of the risks and rewards of ownership occur during the first 75% of an asset's life and has been transferred to the lessee.

True

False

3 points

QUESTION 3

Social security and medicare taxes must be withheld from employees' wages unless they reach the maximum wage limit.

True

False

3 points

QUESTION 4

According to IFRS, a liability refinanced after the balance sheet date, but before the financial statements are issued, would normally be classified as a current liability.

True

False

3 points

QUESTION 5

When bonds are issued at a discount, the journal entry used to record the issuance would contain a credit to discount on bonds payable.

True

False

3 points

QUESTION 6

Of the following temporary differences, which one ordinarily generates a deferred tax asset (DTA)?

Use of the completed contract method for long-term construction contracts for tax reporting and use of the percentage of completion method for books.

Using the installment sales method for tax returns.

The estimated warranty expense (accumulated).

Use of an accelerated depreciation method for tax reporting versus the straight-line method for books.

3 points

QUESTION 7

Which of the five criteria for classifying a lease as a finance lease requires less judgment on the part of the accountant?

The term of the contract is for the majority of the asset's useful life.

The legal title to the asset will be transferred to the lessee at the end of the contract.

The present value of the lease payments and any residual value guaranteed by the lessee equals or exceeds "substantially all" the fair value of the asset.

The contract contains a purchase option that is reasonably certain that the lessee will exercise it.

3 points

QUESTION 8

Which of the following statements characterizes an operating lease?

The lessor derecognizes the asset from its books.

The lessor registers a Lease Receivable on the date the contract begins.

The lessor records a depreciation expense in the income statement.

The lessor records an interest income in the Income Statement.

3 points

QUESTION 9

After the latest revision of the leasing standard in the United States, under the U.S. GAAP and IFRS, a lease is a finance lease if substantially all the risks and rewards of ownership are transferred to the lessee. In making this determination, more judgment and less specificity (fewer rules) is applied using

U.S. GAAP

IFRS

Both U.S. GAAP and IFRS

Neither nor U.S. GAAP or IFRS

3 points

QUESTION 10

Current liabilities are normally recorded at the amount expected to be paid and not at their present value. This practice can be supported by GAAP in accordance with the concept of:

Pareo

Consistency

Materiality

Conservatism

QUESTION 13

Which of the following changes should be accounted for using the retrospective approach?

A change in the estimated useful life of a depreciable asset

A shift from straight-line depreciation to declining balance

A change from the LIFO method of inventory costing.

A change from the completed-contract method of accounting for long-term construction contracts

3 points

QUESTION 14

Which of the following transactions is NOT reported as an adjustment to net income when the indirect method is used to compute net cash flows from operating activities?

Payment of dividends in cash

A change in accounts receivable

Depreciation expense

A change in a prepaid expense

3 points

QUESTION 15

Under US GAAP, which of the following would not be a component of the investing activities of the Statement of Cash Flows?

Sale of land

Purchase of bonds.

Buying a team.

Dividend collection

3 points

QUESTION 16

An accounting change that is reported by the prospective approach is reflected in the financial statements of

previous years only.

previous years and the current year.

current year only.

current year and future years.

3 points

QUESTION 17

Interest payments to bondholders are reported in the Statement of Cash Flows as

an investment activity.

a loan activity.

a financing activity.

an operational activity.

3 points

QUESTION 18

The sale of equipment is an investment activity within the Statement of Cash Flows

True

False

3 points

QUESTION 19

Error corrections require restatement of all the affected prior year financial statements reported in comparative financial statements.

True

False

3 points

QUESTION 20

The purchase of treasury stocks are cash outflows within financing activities

True

False

3 points

QUESTION 21

A change to the double-decline method of depreciation requires the use of a retrospective approach.

True

False

3 points

QUESTION 22

The cash paid for taxes and the cash paid for interest should be disclosed in the Statement of Cash Flows or in the notes, whether the direct or indirect method was used to prepare the operating activities section.

True

False