Acct 2010 Final Exam Review UNT
Questions and Answers
The quality of earnings suggests that
a. stockholders want the corporation to earn enough income to be able to pay its debts.
b. continuing operations and one-time transactions are of equal importance.
c. net income is the best measure of the results of operations.
d. income from continuing operations is a more relevant predictor of future performance
than income from one-time transactions. - ANS-income from continuing operations is a
more relevant predictor of future performance than income from one-time transactions.
You are taking a vacation to Italy, and you buy euros for $1.50. On your return, you
cash in your unused euros for $1.20. During your vacation,
a. the dollar lost value.
b. the dollar rose against the euro.
c. the euro gained value.
d. the euro rose against the dollar - ANS-the dollar rose against the euro.
One way to hedge a foreign-currency transaction loss is to
a. pay debts as late as possible.
b. collect in your own currency.
c. pay in the foreign currency.
d. offset foreign-currency inventory and plant assets. - ANS-collect in your own
currency.)
Foreign-currency transaction gains and losses are reported on the
a. statement of cash flows.
b. income statement.
c. consolidation work sheet.
d. balance sheet. - ANS-income statement.)
Which statement is true?
a. Discontinued operations are a separate category on the income statement.
b. Prior-period adjustments are part of discontinued operations.
c. All prior-period adjustments are combined with continuing operations on the income
statement.
d. All of the above are true. - ANS-Discontinued operations are a separate category on
the income statement.)
Why is it important for companies to report their accounting changes to the public?
,a. Most accounting changes increase net income, and investors need to know why the
increase in net income occurred.
b. It is important for the results of operations to be compared between periods.
c. Accounting changes affect dividends, and investors want dividends.
d. Some accounting changes are more extraordinary than others. - ANS-It is important
for the results of operations to be compared between periods.)
Deferred Tax Liability is usually
Types of Account Reported on the Statement
a. Short term Statement of stockholders equity
b. Short term Income Statement
c. Long term Income Statement
d. Long term Balance Sheet - ANS-Long term Balance Sheet)
14. What is the most relevant net income figure on a corporate multistep income
statement for predicting future profits and for use in investment valuation?
a. Gain on sale of plant assets
b. Income from discontinued operations
c. Prior-period adjustments
d. Income from continuing operations - ANS-Income from continuing operations)
Earnings per share is not reported for
a. income from discontinued operations.
b. income from continuing operations.
c. comprehensive income. - ANS-comprehensive income.)
Which of the following items is most closely related to prior-period adjustments?
a. Preferred stock dividends
b. Retained earnings
c. Treasury stock
d. Earnings per share - ANS-Retained earnings)
Other comprehensive income
a. includes gains and losses on sale of equipment.
b. includes unrealized gains and losses on available-for-sale investments.
c. affects earnings per share.
d. has no effect on income tax. - ANS-includes unrealized gains and losses on
available-for-sale investments.)
Selling equipment for cash is reported on the statement of cash flows under
a. operating activities.
b. noncash investing and financing activities.
c. investing activities.
d. financing activities. - ANS-investing activities.)
Which of the following terms appears on a statement of cash flows - indirect method?
a. Cash receipt of interest revenue
, b. Depreciation expense
c. Payments to suppliers
d. Collections from customers - ANS-Depreciation expense)
On an indirect method statement of cash flows, an increase in a prepaid insurance
would be
a. deducted from net income.
b. added to net income.
c. included in payments to suppliers.
d. added to increases in current assets. - ANS-deducted from net income.)
On an indirect method statement of cash flows, an increase in accounts payable would
be
a. reported in the financing activities section.
b. added to net income in the operating activities section.
c. reported in the investing activities section.
d. deducted from net income in the operating activities section - ANS-added to net
income in the operating activities section.)
On an indirect method statement of cash flows, a gain on the sale of plant assets would
be
a. added to net income in the operating activities section.
b. ignored, since the gain did not generate any cash.
c. deducted from net income in the operating activities section.
d. reported in the investing activities section. - ANS-deducted from net income in the
operating activities section.)
Sheehan Corporation formats operating cash flows by the indirect method. How does
accrued liability affect the statement of cash flow?
a. Increase in cash used by investing activities
b. Increase in cash provided by operating activities
c. Increase in cash used by financing activities
d. They don't because the accrued liabilities are not yet paid - ANS-increase in cash
provided by operating activities)
The deferred tax liability account is best described as which type of account - ANS-Long
term liability account on the balance sheet
The Independent auditor's report provides assurance that - ANS-The company's
financial statements conform to GAAP
Cash flow from Investing activities - ANS-1) Acquisition of plant assets
2) Proceeds from sale of plant assets
3) loan to another company
Cash flow from Financing activities - ANS-1) Proceeds from issuance of long term debt
Questions and Answers
The quality of earnings suggests that
a. stockholders want the corporation to earn enough income to be able to pay its debts.
b. continuing operations and one-time transactions are of equal importance.
c. net income is the best measure of the results of operations.
d. income from continuing operations is a more relevant predictor of future performance
than income from one-time transactions. - ANS-income from continuing operations is a
more relevant predictor of future performance than income from one-time transactions.
You are taking a vacation to Italy, and you buy euros for $1.50. On your return, you
cash in your unused euros for $1.20. During your vacation,
a. the dollar lost value.
b. the dollar rose against the euro.
c. the euro gained value.
d. the euro rose against the dollar - ANS-the dollar rose against the euro.
One way to hedge a foreign-currency transaction loss is to
a. pay debts as late as possible.
b. collect in your own currency.
c. pay in the foreign currency.
d. offset foreign-currency inventory and plant assets. - ANS-collect in your own
currency.)
Foreign-currency transaction gains and losses are reported on the
a. statement of cash flows.
b. income statement.
c. consolidation work sheet.
d. balance sheet. - ANS-income statement.)
Which statement is true?
a. Discontinued operations are a separate category on the income statement.
b. Prior-period adjustments are part of discontinued operations.
c. All prior-period adjustments are combined with continuing operations on the income
statement.
d. All of the above are true. - ANS-Discontinued operations are a separate category on
the income statement.)
Why is it important for companies to report their accounting changes to the public?
,a. Most accounting changes increase net income, and investors need to know why the
increase in net income occurred.
b. It is important for the results of operations to be compared between periods.
c. Accounting changes affect dividends, and investors want dividends.
d. Some accounting changes are more extraordinary than others. - ANS-It is important
for the results of operations to be compared between periods.)
Deferred Tax Liability is usually
Types of Account Reported on the Statement
a. Short term Statement of stockholders equity
b. Short term Income Statement
c. Long term Income Statement
d. Long term Balance Sheet - ANS-Long term Balance Sheet)
14. What is the most relevant net income figure on a corporate multistep income
statement for predicting future profits and for use in investment valuation?
a. Gain on sale of plant assets
b. Income from discontinued operations
c. Prior-period adjustments
d. Income from continuing operations - ANS-Income from continuing operations)
Earnings per share is not reported for
a. income from discontinued operations.
b. income from continuing operations.
c. comprehensive income. - ANS-comprehensive income.)
Which of the following items is most closely related to prior-period adjustments?
a. Preferred stock dividends
b. Retained earnings
c. Treasury stock
d. Earnings per share - ANS-Retained earnings)
Other comprehensive income
a. includes gains and losses on sale of equipment.
b. includes unrealized gains and losses on available-for-sale investments.
c. affects earnings per share.
d. has no effect on income tax. - ANS-includes unrealized gains and losses on
available-for-sale investments.)
Selling equipment for cash is reported on the statement of cash flows under
a. operating activities.
b. noncash investing and financing activities.
c. investing activities.
d. financing activities. - ANS-investing activities.)
Which of the following terms appears on a statement of cash flows - indirect method?
a. Cash receipt of interest revenue
, b. Depreciation expense
c. Payments to suppliers
d. Collections from customers - ANS-Depreciation expense)
On an indirect method statement of cash flows, an increase in a prepaid insurance
would be
a. deducted from net income.
b. added to net income.
c. included in payments to suppliers.
d. added to increases in current assets. - ANS-deducted from net income.)
On an indirect method statement of cash flows, an increase in accounts payable would
be
a. reported in the financing activities section.
b. added to net income in the operating activities section.
c. reported in the investing activities section.
d. deducted from net income in the operating activities section - ANS-added to net
income in the operating activities section.)
On an indirect method statement of cash flows, a gain on the sale of plant assets would
be
a. added to net income in the operating activities section.
b. ignored, since the gain did not generate any cash.
c. deducted from net income in the operating activities section.
d. reported in the investing activities section. - ANS-deducted from net income in the
operating activities section.)
Sheehan Corporation formats operating cash flows by the indirect method. How does
accrued liability affect the statement of cash flow?
a. Increase in cash used by investing activities
b. Increase in cash provided by operating activities
c. Increase in cash used by financing activities
d. They don't because the accrued liabilities are not yet paid - ANS-increase in cash
provided by operating activities)
The deferred tax liability account is best described as which type of account - ANS-Long
term liability account on the balance sheet
The Independent auditor's report provides assurance that - ANS-The company's
financial statements conform to GAAP
Cash flow from Investing activities - ANS-1) Acquisition of plant assets
2) Proceeds from sale of plant assets
3) loan to another company
Cash flow from Financing activities - ANS-1) Proceeds from issuance of long term debt
