Which of the following items describes the current practices under the GAAP? a.Tax accounting is not related to the quality of earnings. b.Firm should report the net of deferred tax asset and liability in 10-k c.Capital lease is to be same as a purchase with financing. d.Current GAAP does not allow any off-balance-sheet financing available. Which one is not a correct practice under the GAAP? a.Generally cash equivalents include the investments purchased within three months of their maturity value. b.trading securities are in current assets, but securities held to maturity is in long-term assets (non current) c.Holding gain or loss for held-to-maturity securities are estimated at the end of every accounting period d.Holding gain or loss for trading and available for sale securities are not reported on income statement. Which one is not a correct practice under the GAAP? a.ARB 43 noted that there are two separate types of intangibles: those having a term of existence limited by regulation and others and those having no such term of existence. b.Goodwill should be amortized as an expense over less than 40 years. c.Generally R&D is recorded as a current expense. d.all of the above are correct. Which one is false? a.Generally off-balance sheet financing is not ethical in terms of the users. b.Off-balance sheet financing may reduce the total assets and total liabilities on B/S. c.Off-balance-sheet financing mostly decreases return on assets (ROA) d.Off-balance sheet financing may be frequently used by firms who has stronger restrictions on bond covenant. FASB attempts to improve the quality of accounting information. One of the recent changes made by FASB is the goodwill impairment test. Instead of the amortization, the goodwill should be revalued. a.passive investors b.active investors c.equally beneficial d.neither Under the disclosure provisions of SFAS No. 123, the estimated stock option expense for 2006 would be $15,500 for W Co.. When the company records this expense: a.the capital decreases by 15,500 b.The total assets increase by 15,500 c.The equity on B/S has no effect. d.Retained earnings account has no effect K. Co. uses LIFO inventory method. At the end of the 2006 accounting period, the company reported $10,000 of net earnings on I/S. The inventory balance on the 2006 B/S is $7,000. In the footnotes, LIFO reserve at the end of 2006 is $3,000 and LIFO reserve at the end of 2005 is $2,500. JJ Co. uses FIFO and reported 10,300 of net earnings on the 2006 I/S. Which company has a higher earnings if both of the companies would use the same inventory method? a.K b.cannot determine. c.JJ JK company has the following balances on the 2008 B/S: current assets=70,000, long-term assets=250,000, current liability=40,000, long-term debt=130,000, and stockholders equity=150,000. The company has an operating lease contract. It promises to pay a lessor $10,000 annually for the next three years. The company s average borrowing rate (discount rate) is 10%. If the lease is recorded as a capital lease, what will be the long-term asset total? a.about 274,868 b.about 296,321 c.about 250,500 d.about 285,131