Exam (elaborations) Liberty University ACCT 370 Exam 1 Complete solution

Exam (elaborations) Liberty University ACCT 370 Exam 1 Complete solution Liberty University ACCT 370 Exam 1 Complete solution 100% satisfied: solutions 1. 1. 2. A 3-for-1 stock split will reduce the per share par value and will 3. 4. 5. 2. 6. accounting errors or irregularities can occur for what reason? 7. 8. 9. 3. 10. Accrual accounting net income can differ from operating cash flows for all of the following reasons except: A) future pension and healthcare benefits. B) estimates of uncollectible accounts. C) useful lives of assets. D) dividend declaration and payment dates. 1112. . 13. 4. 14. Assuming the requirements for recognizing revenue over time are met, and using the percentage-of-completion method to recognize revenue, the measure of completion is computed by dividing: 1156.. 17. 5. 18. A balance sheet prepared in accordance with U.S. GAAP typically: 1290.. 21. 6. 22. The balance sheet provides information on all of the following except: A) where the money came from. B) assessing rates of return. C) how management invested its money. D) the market price of the company’s stock. 2234.. 25. 7. 26. Balance sheets prepared under IFRS: 2278.. 29. 8. 30. Being verifiable and neutral is part of what makes financial information 3312.. 33. 9. 34. The best measure of a firm’s sustainable income is 3356.. 37. 10. 38. Cash collected from customers can be derived: 3490.. 41. 11. 42. The cash flow from operating activities: 4434.. 45. 12. 46. The cash flow statement of the company is in process for 2019. They are reporting the following balances: 4478.. Liberty University ACCT 370 Exam 1 Complete Solution 12/31/18 12/31/19 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated dep.—equipment 75,000 95,000 During 2019, they sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash. Equipment purchases in 2019 were: 49. 13. 50. The cash flow statement of the company is in process for 2019. They are reporting the following balances: 12/31/18 12/31/19 Equipment $ 100,000 $ 170,000 Loss on sale of equipment 0 10,000 Accumulated dep.—equipment 75,000 95,000 During 2019, they sold equipment costing $30,000 for $12,000 and made several purchases of new equipment for cash. If these were the only investing activities, the cash flow from investing activities is a net cash: 5512.. 53. 14. 54. Changes in the balance sheet accounts at June 30, 2018 and 2019 for the Company are presented below: Assets Cash $ 480,000 Accounts receivable 200,000 Inventory 300,000 Long-term investments 200,000 Equipment (200,000 ) Accumulated depreciation (60,000 ) 555.6. Liabilities and Stockholders’ Equity Accounts payable $ (40,000 ) Dividends payable 400,000 Notes payable—Current (200,000 ) Notes payable—Long-term 400,000 Common stock, $1.00 par 300,000 Additional paid-in capital 100,000 Retained earnings 80,000 Additional Information for 2019: -Net income was $480,000 and dividends of $400,000 were declared. -Common stock was issued for cash. -A new long-term investment was acquired for $360,000. -A long-term investment was sold for $160,000. -Equipment that cost $600,000 was sold for $200,000. -The book value of those assets was $150,000. The cash flow from financing activities for 2019 is a: 57. 15. 58. Changes in the balance sheet accounts at June 30, 2018 and 2019 for the Company are presented below: Assets Cash $ 480,000 Accounts receivable 200,000 Inventory 300,000 Long-term investments 200,000 Equipment (200,000 ) Accumulated depreciation (60,000 ) 596.0. Liabilities and Stockholders’ Equity Accounts payable $ (40,000 ) Dividends payable 400,000 Notes payable—Current (200,000 ) Notes payable—Long-term 400,000 Common stock, $1.00 par 300,000 Additional paid-in capital 100,000 Retained earnings 80,000 Additional Information for 2019: -Net income was $480,000 and dividends of $400,000 were declared. -Common stock was issued for cash. -A new long-term investment was acquired for $360,000. -A long-term investment was sold for $160,000. -Equipment that cost $600,000 was sold for $200,000. -The book value of those assets was $150,000. The gain on the sale of equipment for 2019 is: 61. 16. 62. Changes in the balance sheet accounts at June 30, 2018 and 2019 for the Company are presented below: Assets Cash $ 480,000 Accounts receivable 200,000 Inventory 300,000 Long-term investments 200,000 Equipment (200,000 ) Accumulated depreciation (60,000 ) 6634.. Liabilities and Stockholders’ Equity Accounts payable $ (40,000 ) Dividends payable 400,000 Notes payable—Current (200,000 ) Notes payable—Long-term 400,000 Common stock, $1.00 par 300,000 Additional paid-in capital 100,000 Retained earnings 80,000 Additional Information for 2019: -Net income was $480,000 and dividends of $400,000 were declared. -Common stock was issued for cash. -A new long-term investment was acquired for $360,000. -A long-term investment was sold for $160,000. -Equipment that cost $600,000 was sold for $200,000. -The book value of those assets was $150,000. The purchase of equipment during 2019 is: 65. 17. 66. Companies that have projected operating cash flow that are more than sufficient to meet debt payments are: 6678.. 69. 18. 70. Companies with a history of net operating losses are prone to issue which one of the following to raise money? 7712.. 73. 19. 74. A company decides to discontinue producing toasters in lieu of more versatile toaster ovens. In the process of discontinuing this line, the company disposes of the old production equipment and buys new equipment. The disposal of the old 7756.. equipment would be reported in the income statement as: 77. 20. 78. A company discovered that equipment purchased on January 1, 2018 for $300,000 will not last as long as originally estimated. The firm was depreciating the equipment at the rate of $40,000 per year with an estimated salvage value of $20,000. New estimates on January 1, 2021 indicate that the equipment will last a total of five years with no salvage value. How much should the company record as depreciation in 2021? 7890.. 81. 21. 82. A company has the following shareholders’ equity accounts at December 31, 2018: Preferred stock, $100 par value, 10% dividend, 50,000 shares issued and outstanding $5,000,000 Common stock, $6 par value, 1 million shares issued and outstanding $6,000,000 Paid-in capital in excess of par $119,000,000 Unrestricted retained earnings $7,500,000 RE restricted for plant expansion $2,500,000 Assuming that the preferred stock is cumulative, and that there are no dividends in arrears, what is the maximum dividend that may be distributed to common shareholders at December 31, 2018? 8834.. 85. 22. 86. A company installs and maintains manufacturing equipment. The contract with its customers to purchase equipment includes installation and includes a one-year maintenance contract, renewable for up to five years. Because the useful life of the 8878.. equipment is expected to be five years, the company can reasonably expect its customers to renew the maintenance contracts for the full five years. The company records the cost of installation of the equipment as a capitalized contract and amortizes the cost over the five-year maintenance agreement period. Because of a defect in model A5403, the company anticipates that many of its customers will trade in the model and not renew the maintenance contracts. The company should, 89. 23. 90. A company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Year 1 Year 2 Year 3 Costs incurred $ 1,000 $ 1,500 $ 1,250 Est. com. costs $ 3,000 $ 1,500 $ 0 Billings $ 750 $ 1,750 $ 2,500 Cash collected $ 500 $ 1,500 $ 3,000 Using the percentage-of-completion method of revenue recognition, how much income is recognized in Year 2? 919.2. 93. 24. 94. A company records revenue on the installment sales method, prior to ASC Topic 606 for revenue recognition. The following information is available for the first two years of business. Year 1 Year 2 Sales $ 200,000 $ 250,000 COGS 140,000 162,500 959.6. Cash collections: Yr 1 sales 100,000 80,000 Yr 2 sales 130,000 Assume that the company has consistently recognized revenue on installment sales using the cost recovery method. How much realized gross profit on installment sales will Ford recognize in Year 1? 97. 25. 98. A company reported net income for 2018 of $100,000. The company reported depreciation expense of $17,500 and amortization of $5,000. The company also reported a loss on the sale of equipment of $2,500. Based only on this information, the company would report cash flow from operating activities of: 991.00. 101.26. 102.A company reported net income for 2018 of $177,500. They began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, they sold 10,000 shares of common stock for $6 per share. They paid dividends to the common shareholders in December. The basic earnings per share for 2018 is: 10130.4. 105.27. 106.A company reported net income for 2018 of $177,500. They began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, they sold 10,000 shares of common stock for $6 per share. They paid dividends to the common shareholders in December. The weighted average number of common shares used to compute earnings per share for 2018 is 10170.8. 109.28. 110.A company reported net income of $770,000 for 2018. They sold 15,000 shares of treasury stock acquired in a previous year on July 1 and 15,000 new shares on 11111.2. November 1. At year-end, 180,000 shares were outstanding. They had 20,000 shares of $100 par value 7% preferred stock outstanding all year. They paid dividends to the preferred shareholders. The basic earnings per share for 2018 is: 113. 29. 114.A company’s financial statements reflect information about: 11151.6. 117. 30. 118.A company’s retained earnings on December 31, 2018 was $2,190,000 and its shareholders’ equity was $8,760,000. During 2019 the company reported the following: -Net income $225,000 -A sale of treasury stock costing $75,000 for $79,750 -A treasury stock purchase costing $125,700 -A cash dividend declaration of $73,200 -A 10,000 share “small” common stock ($10 par value) dividend was declared and distributed when the market value was $12.75 per share. What is the shareholders’ equity balance on December 31, 2019? . . 121.31. 122.Contributed capital might be a negative dollar amount because: .. 125.32. 126.A corporation reported the following during 2018: -Net income $175,250 -Sale of 10,000 shares of $5 par value common stock for $8.75 per share -A repurchase of shares as treasury stock, costing $24,750 -A resale of treasury stock for $14,695; the shares cost $15,500 when repurchased. -A declaration and distribution of a $39,000 cash dividend -A declaration and distribution of a “small” stock dividend of 5,000 shares of $5 par value common stock at a total market value of $50,000. .. What was the increase in shareholders’equity during 2018? 129.33. 130.Creditors assess credit risk by comparing a firm’s required principal and interest payments to estimates of the firm’s current and future .. 133.34. 134.Current liabilities are reported on the balance sheet at: .. 137.35. 138.A decrease in accounts receivable of $16,000 for the year: .. 141.36. 142.The denominator used in the calculation of basic earnings per share is the: .. 145.38. 146.Employee demand financial information for all the following EXCEPT: A) monitoring how much the senior executives earn B) monitoring union contracts that link negotiated wage increases to company financial performance C) monitoring profit sharing and stock ownership plans D) monitoring the health of company pension plans .. 149.39. 150.Examples of variable consideration include all of the following except: A) bonuses for completing performance on a contract early. B) discounts on transaction prices. C) penalties for not completing performing on a contract on time. D) all of the answer choices are correct. .. 153.41. cial information capable of making a difference in a decision is: .. 157.42. cial information which does not favor one set of interested parties over another is: 15196.0. 161.43. 162.The following data is for a company for 2018: Gain on sale of equipment $ 8,000 Purchase of bonds (face value $250,000) 275,000 Proceeds from sale of machinery 300,000 Dividends paid 50,000 Proceeds from sale of treasury stock 200,000 The amount reported as net cash provided by financing activities is 16136.4. 165.44. 166.The following data is for the company for 2018: Loss on sale of equipment $ 4,000 Purchase of bonds (face value $400,000) 375,000 Proceeds from sale of machinery 200,000 Dividends paid 25,000 Proceeds from sale of treasury stock 100,000 The amount reported as net cash from investing activities is: 16176.8. 169.45. 170.The following information has been obtained from a company: -550,000 shares of common stock were outstanding on January 1, 2018. -Bonds convertible into 50,000 shares of common stock were issued on July 1, 2018; the bonds have been determined to be dilutive. -36,000 shares of common stock were issued on November 1, 2018. -24,000 shares of common stock were purchased on December 1, 2018. What is the weighted average number of shares to be used in the calculation of diluted earnings per share for 2018? 17117.2. 173.46. 174.The following information has been provided to you by a company for the year ending December 31, 2018: -Net income was $979,000. -Cash dividends totaling $120,000 were paid to the common shareholders. -6% convertible bonds with a par value of $2,000,000 were issued on February 1, 2018. -The corporation’s marginal income tax rate is 40%. 17157.6. -6% convertible preferred stock with a par value of $800,000 was outstanding during the entire year. Assuming that both the bonds and preferred stock are dilutive, what is the numerator that should be used in the calculation of basic earnings per share and diluted earnings per share? 177.47. 178.The following information has been provided to you by a company for the year ending December 31, 2018: -The numerator used in the calculation of basic earnings per share was $797,000. -Cash dividends were paid to the common shareholders. -8% convertible bonds with a par value of $1,000,000 were issued on July 1, 2018. -The corporation’s marginal income tax rate is 40%. -6% convertible preferred stock with a par value of $800,000 were outstanding during the entire year. Assuming that both the bonds and preferred stock are dilutive, what is the numerator that should be used in the calculation of diluted earnings per share? 17198.0. 181.48. 182.The following information has been provided to you by a company: Net income $ 175,300 Increase in accounts payable 18,500 Increase in inventory 17,500 Increase in accounts receivable 9,700 Increase in bonds payable 75,000 Amortization of bond premium 5,400 Depreciation expense 21,300 18138.4. Decrease in income taxes payable 7,300 What is their net cash flow from operating activities? 185.49. 186.The following information has been provided to you by your controller: Net income $ 100,000 Decrease in accounts payable $ 38,000 Decrease in inventory $ 7,500 Increase in accounts receivable $ 8,000 Decrease in bonds payable $ 75,000 Amortization of bond discount $ 9,400 Depreciation expense $ 20,000 Increase in income taxes payable $ 6,000 What is the net cash flow from operating activities? 18178.8. 189.50. accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. A decrease in the balance of the Accounts Receivable account would: 19119.2. 193.51. accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. An increase in the Computer Equipment account would: 19159.6. 197.52. 198.If consideration is received before a contract is identified and the consideration is nonrefundable, revenue may be recognized if: 19290.0. 201.53. 202.In 2017, a company was contracted to build an apartment complex for its client. The project was estimated to cost $15 million; however, on December 31, 2017, when the project was 75% complete. The 20230.4. company estimated that the project costs would be much less, and agreed to adjust the contract price to $10 million. Prior to December 31, 2017, they had recognized revenue of $10 million. At year end, the company should: 205.54. 206.An increase in accounts receivable of $6,000 for the year: 20270.8. 209.55. designing audit procedures the auditor will include all of the following except: A) Global economic trends B) Industry conditions C) Assessing the reasonableness of the numbers in relation to the company’s activities D) Fraud risk factors that may be present 21211.2. 213.56. 214.The indirect method of presenting cash flow from operating activities 21251.6. 217.57. 218.Initial franchise fees should be recorded as revenue by the franchisor: 21292.0. 221.58. 222.Internet companies that simply act as agent or broker for the transfer of goods must record revenue based on: .. 225.59. tors who follow a fundamental analysis approach: .. 229.60. matching principle requires that expenses be recognized .. 233.61. atements of tax expense, improper restructuring charges, asset impairment charges and gains/losses related to acquisitions are which type of restatement? .. 237.62. income recognition always increases: .. 241.63. 242.Net property, plant and equipment are reported on the balance sheet at: .. 245.64. 246.On balance sheets prepared in accordance with U.S. GAAP: .. 249.65. 250.On January 1, 2018, a company adopted a compensatory stock option plan and granted its managers 10,000 options to buy shares of common stock; each option can be used to acquire a share of common stock at a price of $25 a share. The fair value of each option was $7.50 on January 1, 2018. The options can be converted into common stock .. after July 1, 2018. The required service period is three years. What is the balance in paid-in capital-stock options as of December 31, 2019 assuming that the fair value approach to accounting for stock options is used? 253.66. 254.On January 1, 2018, a company signed a contract to inspect and complete needed repairs to the water lines for the town of Pleasantville. Because the company will not know which water lines will need repairs until after it completes the inspections, it is difficult to accurately estimate the amount it will charge the town. Therefore, the company will recognize revenue for the contract using the completed-contract method. The work is expected to be completed in 2020. Using a completed-contract method prior to ASC Topic 606 for revenue recognition, if the company had $1.5 million in its Construction In Progress Inventory account and billings to Pleasantville of $2 million as of December 31, 2018, how much net income should the company recognize for 2018? .. 257.67. 258.Other Comprehensive Income (OCI) is used both in U.S GAAP & IFRS. Which statement is correct? A) Both IFRS & GAAP require companies to report in other comprehensive income each period and valuation changes from changes in actuarial estimates affecting defined benefit pension plans B) As a general rule, US GAAP allows more opportunities for managers to change balance sheets valuations of certain assets even when management has no intention to sell the assets C) Changes in the valuation of property, plant, and equipment create a Revaluation Surplus used in both IFRS and US GAAP .. D) US GAAP requires a separate statement of OCI to immediately follow the income statement in the financial reporting statement 261.68. 262.Recent changes in ______ accounting standards require companies to group items within OCI based on ____ .. 265.69. 266.Revenue for goods to be sold under a consignment arrangement of a manufacturer and a retail store should be recognized by the manufacturer when: 26276.8. 269.70. 270.The Revised Model Business Corporation Act defines solvency as a situation where the fair value of: 27217.2. 273.71. 274.A right of return exists when: A) the customer is entitled to a full or partial refund, B) the customer is entitled to another product in exchange, C) if the customer is entitled to a credit against amounts owed. D) any one of these conditions is met. 27257.6. 277.72. 278.Selected data for a company’s comparative balance sheets for Year 1 and Year 2 are as follows: Year 1 Year 2 Assets Cash $100,000 $(50,000 ) AR (net) 50,000 100,000 Inventory 100,000 250,000 Equipment 300,000 350,000 -------------------------------------- Total assets $550,000 $650,000 Liabilities and Equity AP $150,000 100,000 Taxes Payable80,000 30,000 27298.0. Bonds payable100,000 80,000 Common stock100,000 200,000 RE 120,000 240,000 -------------------------------------- Total L&E $ 550,000 $ 650,000 The change in the balance of the Bonds Payable account would be recorded on the statement of cash flows as: 281.73. 282.Selected data for a company’s comparative balance sheets for Year 1 and Year 2 are as follows: Year 1 Year 2 Assets Cash $100,000 $(50,000 ) AR (net) 50,000 100,000 Inventory 100,000 250,000 Equipment 300,000 350,000 -------------------------------------- Total assets $550,000 $650,000 Liabilities and Equity AP $150,000 100,000 Taxes Payable80,000 30,000 Bonds payable100,000 80,000 Common stock100,000 200,000 RE 120,000 240,000 -------------------------------------- Total L&E $ 550,000 $ 650,000 28238.4. The change in the balance of the common stock account would be recorded on the statement of cash flows as: 285.74. 286.Selected data for a company’s comparative balance sheets for Year 1 and Year 2 are as follows: Year 1 Year 2 Assets Cash $100,000 $(50,000 ) AR (net) 50,000 100,000 Inventory 100,000 250,000 Equipment 300,000 350,000 -------------------------------------- Total assets $550,000 $650,000 Liabilities and Equity AP $150,000 100,000 Taxes Payable80,000 30,000 Bonds payable100,000 80,000 Common stock100,000 200,000 RE 120,000 240,000 -------------------------------------- Total L&E $ 550,000 $ 650,000 The changes in the Accounts Payable balance would be recorded on the statement of cash flows as: .. 289.75. 290.Selected data for a company’s comparative balance sheets for Year 1 and Year 2 are as follows: .. Year 1 Year 2 Assets Cash $100,000 $(50,000 ) AR (net) 50,000 100,000 Inventory 100,000 250,000 Equipment 300,000 350,000 -------------------------------------- Total assets $550,000 $650,000 Liabilities and Equity AP $150,000 100,000 Taxes Payable80,000 30,000 Bonds payable100,000 80,000 Common stock100,000 200,000 RE 120,000 240,000 -------------------------------------- Total L&E $ 550,000 $ 650,000 Using the indirect method to create the operating activities section of the statement of cash flows, the cash flow recorded based on the change in inventory would be: 293.76. 294.The statement of cash flows is used by outside parties in all but which of the following ways? A) To assess if the proper amount of income taxes is reported and can be paid from current funds. .. B) To assess credit risk, as cash flows provide the resources for periodic interest and principal repayment. C) To assess whether to underwrite an issue of debt or equity securities, using the firm’s expected operating cash flows in the analysis. D) To assess equity values since the firm’s value is dependent on the discounted present value of its expected future cash flows. 297.77. of the following statements is not correct regarding a company’s financial statements? 29390.0. 301.78. type of analysis that uses financial statements to assess a company’s current market price is: 30330.4. 305.79. 306.The U.K. Equity account “Share premium” is reported on U.S. GAAP balance sheets as: 30370.8. 309.80. 310.Under the indirect method, the gain on sale of equipment should be: 31311.2. 313.81. 314.What describes efficient market investors? 31351.6. 317.82. 318.What isn’t a change in reporting entity? 31392.0. 321.83. 322.What isn’t correct of Regulation Fair Disclosure? A) It limits what management can say in private conversations with analysts and investors B) It helps level the playing field between individual and institutional investors C) it was passed by the SEC D) it does not limit what management can say in private conversations with analysts or investors 32332.4. 325.84. 326.When analysts provide basic EPS for income from continuing operations that exclude the effects of special (i.e nonrecurring) gains or losses other non-cash chargers, such as earnings are frequently referred to as: 32372.8. 329.85. financial statements are used by shareholders and investors to evaluate the performance of a company’s top executives it is referred 33313.2. to as the ______ function of financial reports. 333.86. 334.When independent measurers get similar results when using the same accounting measurement methods, the financial information is: 33353.6. 337.87. 338.Which of the following does not accurately describe the “ownership” perspective of the firm? A) Its focus is on owners’ capital. B) Its focus is on the firm’s net capital deployed. C) It is the prevailing view of GAAP. D) It requires that financing transactions generate income or loss 33394.0. 341.88. 342.Which of the following is not an accurate statement related to the demand for financial reporting? A) Cross-country differences have no impact on capital funding opportunities and financial reporting practices B) Economically realistic reporting standards are low when there are few important capital providers C) External investors who provide capital demand a reporting system that accurately depicts a company past economic performance and its future prospects D) Comprehensive financial data is demanded when there is broad base of external investors .. 345.89. 346.Which of the following is not correct with respect to accrual accounting? A) Accrual accounting does not decouple measured earnings from operating cash inflows and outflows B) Reported accrual accounting net income for a period always provides an accurate picture of underlying economic performance C) Accrual accounting can produce large discrepancies between the .. firm’s reported profit performance and the amount of cash generated from operations D)the principle that govern revenues and expense recognition under accrual accounting are designed to alleviate the mismatching problems that exist under cash-basis accounting 349.90. 350.Which of the following statements does not apply to the installment sales method? A) The deferred gross profit account is generally classified as a contraaccount to accounts receivable. B) The accounting system must match cash collections with the specific sales year to which the cash collections relate. C) Deferred gross profit on installment sales is generally treated as a deduction from installment sales in calculating the gross profit percentage. D) Selling, general and administrative expenses related to installment sales are treated as period costs. .. 353.91. 354.Which of the following statements does not correctly describe an adjustment to net income in determining cash flows from operating activities when using the indirect method? A) Amortization of bond premium will be deducted from net income. B) An increase in inventory will be added to net income. C) An increase in accounts payable will be added to net income. D) A decrease in accounts receivable will be added to net income. .. 357.92. 358.Which of the following statements is correct if treasury stock costing $25,000 was sold for $27,500? .. 361.93. 362.Which of the following statements is correct when a company has a complex capital structure? A) The company might have convertible bonds outstanding. B) Diluted earnings per share and basic earnings per share must both be shown on the income statement. C) Diluted earnings per share must be shown on the income statement. D) The company must have participating preferred stock outstanding. .. 365.94. 366.Which of the following statements is not true regarding the adoption of ASC Topic 606 guidance for revenue recognition? A) When using the cumulative approach, the prior three years of financial statements need to be restated. B) Under the cumulative effect, the firm determines how the balance sheet would differ as of the first day of the year of adoption. C) Upon adoption, entities can choose between the retrospective approach or the cumulative effect approach. D) Under the retrospective approach, each period presented is restated to what the financial statements would have been had the new standard always been in place. .. 369.95. 370.Which of the following statements is not true regarding the treatment of warranties under the new revenue recognition guidance in ASC Topic 606? .. A) A warranty that covers services that are normally considered routine maintenance is an assurance warranty. B) Warranties that provide services beyond assuring the product is defect-free at the time of sale are separate performance obligations. C) The length of the warranty period should be considered. D) A warranty that assures the product is free of defects is not a distinct performance obligation. 373.96. 374.Which of the following transactions would be reported within the investing activities section of the cash flow statement? A) The sale of a building in exchange for a parcel of land. B) The acquisition of treasury stock in exchange for cash. C) The exchange of a stock investment in order to retire a long-term debt. D) The cash sale of a building at a loss .. 377.97. 378.Which of the following would not be considered a revenue recognition abuse? A) Recording goods on layaway for a customer as a final sale B) Recording revenue on goods ready for delivery to the customers, segregated in the company warehouse without a bill-and-hold arrangement in the contract C) recording goods on consignment as part of inventory when there is a right of return D) recording revenue on a large shipment to a customer whose ability to pay is not reasonably assured .. 381.98. 382.Which statement isn’t true regarding the conservatism convention in accounting: A) Conservatism is sometimes used to defend poor accounting judgments B) Conservatism strives to ensure that business risks and uncertainties are adequately reflected in the financial statements C) Conservatism means we only record that of which we are 100% certain D) Conservatism guides us to choose the approach that leads to lower assets or higher liabilities .. 385.1. 386.39. Which of the following statements is correct with respect to economic incentives to release financial information? a.Because companies have an economic incentive to supply information investors want, regulatory groups have little influence over the amount and type of financial information that companies disclose. b.Because financial disclosures are regulated, owners and managers have little economic incentive to supply the amount and type of financial information that will enable them to raise capital most cheaply. c.Companies have an economic incentive to supply the information investors want in order to raise capital at the lowest possible cost. d.Owners and managers do not have an economic incentive to supply the amount and type of financial information because it has no effect on .. the company’s ability to raise capital at the lowest cost. 389.2. 390.51. Which statement is not true regarding the conservatism convention in accounting? a.Conservatism guides us to choose the approach that leads to lower assets or higher liabilities. b.Conservatism means we only record that of which we are 100% certain. c.Conservatism is sometimes used to defend poor accounting judgments. d.Conservatism strives to ensure that business risks and uncertainties are adequately reflected in the financial statements. .. 393.3. 394.The ability to raise additional cash by selling assets, issuing stock, or borrowing more is a. financial flexibility. b. a credit risk indicator. c. a stock price predictor. d. one way to project earnings. .. 397.4. 398.All financial statements a. provide a picture of the company at a moment in time. b. describe changes that took place over a period of time. c. help to evaluate what happened in the past. d. contain the most up to date information about the company. .. 401.5. 402.The amounts of executive compensation and bonuses are often determined by .. a. auditor’s recommendations. b. evaluations by subordinates. c. company compensation contracts.