When inventory is purchased on credit with terms FOB shipping point:

Select one:

a. the buyer reports the liability when the goods leave the seller's place of business.

b. the buyer reports the liability when the goods reaches the buyer's place of business.

c. the buyer receives discount if payment is made before the goods leave the seller's place of business.

d. the seller bears the insurance expense of goods during transit.

e. the seller reports the inventory after the goods reach the buyer's place of business.

Contingent gains are reported:

Select one:

a. when it is probable.

b. when the amount of the gain can be reasonably estimated.

c. when the gain actually occurs.

d. in the notes to the financial statement.

e. as assets in the balance sheet.

Current ratio measures a company's:

Select one:

a. profitability.

b. liquidity.

c. long-term solvency.

d. return on capital.

e. turnover.

Which of the following is true of intangible assets?

Select one:

a. In accounting for a parent's acquisition of a subsidiary, the amount paid for intangible assets is based on the cost at which the asset was originally acquired.

b. U.S. GAAP requires companies to follow the historical cost principle in reporting its intangible assets.

c. The balance reported for intangible assets represent the amount that an acquiring company will pay to buy those assets.

d. Internally developed intangible assets increase a company's intangible asset figures to grow to an incredible size.

e. Any appreciation in the value of an intangible asset is adjusted by raising it to the fair value.

Which of the following conditions must be met for a contingent loss to be recorded in the financial statements?

Select one:

a. The chance of loss must be remote.

b. The amount of the loss must be unknown.

c. The chance of loss must be probable and can be reasonably estimated.

d. The occurrence of loss must be from a future event.

e. The stock of the company must be a publicly-traded.

Which of the following statements is true of accounting for intangibles under IFRS, but not under U.S. GAAP?

Select one:

a. Intangible assets are carried at cost less accumulated amortization.

b. Intangible assets can be adjusted to fair value.

c. The cost of intangible assets also includes legal cost for successful defense.

d. The cost of the asset is amortized for the shorter of legal life or estimated useful life.

e. The accounting for recording the purchase of intangible asset is similar to purchase of land.

Which of the following is one of the criteria required to recognize intangible assets?

Select one:

a. The intangible cannot be separated from the subsidiary and sold.

b. Contractual or other legal rights have been gained.

c. The intangible should have a minimum useful life of 10 years.

d. Fair value of the intangible should be more than its book value.

e. The intangible should not suffer from impairment.

Which of the following will create a noncurrent liability?

Select one:

a. Cash borrowed from a bank to be repaid in 3 years

b. Goods sold on credit

c. Interest on 12 percent, 5 year bonds due in 6 months

d. Rent received in advance for 3 months

e. Outstanding salaries for one month

Which of the following is a reason for few decision makers to prefer fair value accounting?

Select one:

a. It reports any appreciation in value, thus, reflects the current market condition.

b. It is useful even if the assets are not held for sale.

c. It is based on an agreed-upon exchange price and reflects a resource allocation judgment made by management.

d. It is not open to manipulation.

e. It can be reliably and objectively determined.

Reclassifying the cost of an intangible asset to expense over a time period is termed as:

Select one:

a. depreciation.

b. depletion.

c. amortization.

d. appreciation.

e. allowance.

On January 1, 2013 Williams Company purchased a copyright for $220,000. The copyright has a useful life of 4 years and a legal life of 12 years. The entry to record the acquisition of copyright will include a:

Select one:

a. debit to cash and credit to copyright for $220,000.

b. debit to copyright and credit to cash for $220,000.

c. debit amortization expense and credit to copyright for $55,000.

d. debit to goodwill and credit to cash for $55,000.

e. debit to cash and credit to purchases for $220,000.

Which of the following is most likely to be classified as a noncurrent liability?

Select one:

a. Bonds Payable

b. Accounts Payable

c. Interest Payable

d. Rent Payable

e. Salaries Payable

Which of the following is a reason for a company's intangible assets figures to grow to incredible size?

Select one:

a. Internally developed copyrights and patents

b. Increase in the fair value of the intangibles assets held by a company

c. Copyrights and patents acquired from outside owners

d. Purchase of intangible assets with legal life exceeding 15 years

e. Increase in contingent liabilities in a year

Which of the following is a characteristic of a liability?

Select one:

a. It arises from a present obligation.

b. It is a probable future benefit.

c. It is used to earn profit in a business.

d. It includes only those obligations arising from passage of time.

e. It is amortized over the life of the debt.

Which of the following is most likely to be classified as a current liability?

Select one:

a. Long-term Leases

b. Employee Pension

c. Bonds Payable

d. Notes Payable

e. Unearned Revenue

Which of the following statements is true of accounting for gift cards?

Select one:

a. Revenue is recognized at the time of sale.

b. An expense is recognized at the end of the year towards unredeemed gift cards.

c. Total liability balance increases at the expiration of gift cards.

d. Revenue is recognized for the amount of gift cards that have been expired.

e. Net income decreases at the expiration of a gift card.

The intangible assets are amortized over:

Select one:

a. the shorter of the legal life or estimated useful life.

b. the longer of the legal life or estimated useful life.

c. the economic life of the asset.

d. 10 years from the date of its purchase or creation.

e. 15 years from the date of its purchase or creation.

Which of the following is a category of intangible assets as determined by U.S.GAAP?

Select one:

a. Artistic-related

b. Business-related

c. Revenue-related

d. Investment-related

e. Stock-related

Which of the following could be a reason for a company acquiring another to pay over and above its net asset value?

Select one:

a. The company had internally developed some copyright which were valued very low in their books of account.

b. The company had land whose value after appraisal were very high.

c. The company had trained and highly qualified employees.

d. The company had trademark with a long useful life.

e. The company had no liabilities at the time of acquisition.

A current ratio of 0.6 to 1.0 means:

Select one:

a. current assets is 60 percent of current liabilities.

b. current liabilities is 60 percent of current assets.

c. current liabilities represent 40 percent of total liabilities.

d. the company has more current assets than current liabilities.

e. the company will be able to satisfy 40 percent of current liabilities by the end of the year.

Which of the following is true of intangible assets?

Select one:

a. They have physical substance.

b. They are expected to provide future benefits for longer than one year.

c. They are reported at their fair value.

d. They are usually not amortized.

e. They are usually an obligation.

Which of the following is an example of loss contingencies?

Select one:

a. Increase in fair value of assets

b. Enter into a capital lease

c. Collectability of receivables

d. Issue of shares at discount

e. Loss from sale of copyright

Which of the following is an intangible asset?

Select one:

a. Accounts Payable

b. Retained Earnings

c. Equipment

d. Accounts Receivable

e. Franchise

Tydings Corporation is being sued by a former employee. Tydings' lawyer believes that the chance of loss is remote. Which of the following is true of reporting this contingent loss?

Select one:

a. The loss should not be reported.

b. The loss should be disclosed in the notes to the financial statements.

c. The loss should be reported in the statement of cash flows.

d. The loss should be reported on the balance sheet.

e. The loss should be reported on the income statement.

As per U.S. GAAP, which of the following is capitalized and amortized during the life of an intangible asset?

Select one:

a. Legal cost for successful defense

b. Revenue earned from giving permission to use copyright

c. Difference between book value and fair value

d. Research costs

e. Development costs

Gain contingencies are not recognized in an entity's financial statements due to the:

Select one:

a. matching principle.

b. conservatism principle.

c. monetary unit principle.

d. accounting period principle.

e. cost principle.

If the value of a company decreases after it is acquired:

Select one:

a. retained earnings is decreased for the loss.

b. goodwill is impaired.

c. goodwill is amortized.

d. no change is made until it is sold.

e. allowance for goodwill is increased.

The amount that an acquiring company pays over and above the fair values of the net assets of the company being acquired is classified as

Select one:

a. Amortization

b. Goodness

c. Goodwill

d. Excess

e. Trademark

Which of the following is the right to use literary, dramatic, musical, artistic, and certain other intellectual works?

Select one:

a. Copyright

b. Patent

c. Franchise

d. Trademark

e. Goodwill

Principle Company is suing a competitor for $400,000. Principle's lawyer believes that Principle will probably win and receive all $400,000. Which of the following is true of reporting this contingent gain under U.S. GAAP?

Select one:

a. The gain should be disclosed in the notes to the financial statements.

b. The gain should not be reported.

c. The gain should be reported in the statement of cash flows.

d. The gain should be reported on the income statement.

e. The gain should be reported on the balance sheet.

Yates Company borrowed $20,000 from Eastern Bank on November 1, 2013 at an interest rate of 6 percent. No entries related to interest on loan were made prior to December 31, 2013, when Yates Company prepared financial statements. On that date, Yates' accountant debited interest expense and credited interest payable for $100. Which of the following is true of this transaction?

Select one:

a. Liabilities are overstated.

b. Assets are understated.

c. Net income is understated.

d. Retained earnings are overstated.

e. Revenues are understated.

Carter Co. placed an order for a machine on January 5. The company received the machine on January 20. The company installed the machine on 29 January and started production from 1 February. The company paid the amount due for the machine on February 5. On which date will Carter recognize the liability for the purchase of machine?

Select one:

a. 5th January

b. 20th January

c. 29th January

d. 1st February

e. 5th February

Which of the following is true of accounting for research and development cost?

Select one:

a. Under U.S. GAAP, development costs are capitalized.

b. U.S.GAAP adheres to the matching principle by expensing research and development costs.

c. Accounting for research and development costs is same under U.S. GAAP and IFRS.

d. The current accounting for research and development costs under U.S. GAAP avoids the probability of companies to manipulate their earnings.

e. Under U.S. GAAP accounting for research and development costs violates the conservative principle.

Which of the following statements is true of liabilities?

Select one:

a. It represents claims to a company's equity.

b. The smaller a liability total is in comparison to the reported amount of assets, the riskier the financial position.

c. A lower percentage of current liabilities to current assets will result in a lower current ratio.

d. It is an obligation owed to a party outside the reporting organization.

e. It cannot be settled by the conveyance of other assets or the delivery of services.

If an initial estimation of a contingent loss is found to be fraudulent,:

Select one:

a. the financial statements in which the estimation was reported should be restated.

b. the loss should be adjusted to the retained earnings of the current year.

c. previous year's notes to financial statement should be restated.

d. current year financial statement should report the difference as an expense.

e. the company should record a loss from contingent liability in the current year financial statement.

Which of the following would be capitalized to an intangible asset account?

Select one:

a. Rise in the fair value of the intangible

b. Legal fees to successfully defend the intangible

c. The cost of an unsuccessful defense

d. The amount a buyer offered to pay for an intangible

e. Cost incurred to find new knowledge

When one company purchases another company, acquired assets are reported at:

Select one:

a. lower of cost or fair value.

b. book value of the asset in the subsidiary company.

c. pre-determined value set by the management of parent company.

d. fair value of those assets.

e. historical cost of the asset.

Which of the following needs to be adjusted, if a restatement of a prior period financial statement is necessary?

Select one:

a. Retained earnings

b. Fixed Assets

c. Long-term Liabilities

d. Contingent Liabilities

e. Revenue

Which of the following measures do decision makers use to determine a company's ability to pay it short-term debts as they come due?

Select one:

a. Age of receivables

b. Return on assets

c. Current ratio

d. Inventory turnover

e. Receivables turnover

Which of the following is the grant of a property right to the inventor?

Select one:

a. Copyright

b. Patent

c. Franchise

d. Trademark

e. Goodwill