Intermediate Accounting I - Exam 2
A company recently moved to a new building. The old building is being actively marketed for
sale, and the company expects to complete the sale in 4 months. Each of the following
statements is correct except:
1. NO longer depreciated
2. Reclassified as asset held for sale
3. Valued at historical cost
4. Classified as a current asset - ANS-WILL NOT BE VALUED AT HISTORICAL COST
\A component of an entity is:
1. Operating segment or below operating segment
2. Significant disposal group
3. Set of operations and cash flows clearly distinguishable from the rest of the entity for
operational and financial reporting purposes
4. Separate major line of business or class of customer - ANS-Set of operations and cash flows
clearly distinguishable from the rest of the entity for operational and financial reporting purposes
\Allocation of the transaction price to performance obligations:
1. Is based on relative standalone selling prices
2. Cannot be based on estimated selling prices
3. May not use the residual method when selling prices are uncertain
4. Is not allowed when bad debts are material - ANS-Is based on relative standalone selling
prices
\Assume a prepayment is made 6 mos. in advance of delivery of a product. Seller is likely to do
which of the following with respect to TVM over life of contract?
1. Recognize interest expense
2. Recognize interest revenue
3. Ignore TVM
4. None - ANS-Payment is less than year (ignore TVM)
\Computation of current value of an asset using the PV of future cash flows method doesn't
include
1. Cost of alternate use of funds given up
2. Productive life of asset
3. Applicable interest rate
4. Future amounts of cash receipts or cash savings - ANS-Cost of alternate uses of funds given
up
\Determining PV which relationship is true?
1. Higher discount rate and longer discount period, lower PV
2. Higher future cash flow and longer disc period, lower PV
3. Lower disc rate and shorter disc period, lower PV
4. lower future cash flow and shorter disc period, lower PV - ANS-Higher disc rate and longer
disc period, lower PV.
, As disc rate and disc period go up, PV goes down
\Earnings per share should be reported for eaxch of the following income statement captions
except:
1. Income from continuing operations
2. Discontinued operations
3. Operating income
4. Net income - ANS-Operating income is not included in earnings per share
\Envoy Co. manufactures and sells household products. Envoy plans to sell small appliance
group with operations. What is earliest to say discontinued operation?
1. When Envoy recieves an offer
2. When Envoy sells majority of assets
3. When Envoy classifies it as held for sale
4. When Envoy first sells any of assets - ANS-If disposed or held for sale this is considered
discontinued operation
\For a manufacturing company, each of the following items would be considered non operating
income for income statement purposes except:
1. Income from investments
2. Cost of Goods Sold
3. Interest expense
4. Gain on sale of investments - ANS-Cost of Goods Sold would not be considered
nonoperating income
\Given PV tables, annual interest rate, $ amount of equal pmts made, # semiannual pmts, what
other info is necessary to calc PV of series of pmts?
1. FV of annuity
2. Timing of payments
3. Rate of inflation
4. No other information is required - ANS-Timing of pmts (Beginning or end of period)
\if likelihood of event is:
75% -- 100,000
25% -- 40,000
what is expected value? - ANS-85,000
\In the current fiscal year, the Spin Company recognized items properly classified as
components of other comprehensive income. In its annual financial statements, Spin must
report comprehensive income in:
1. One continuous statement or two consecutvie statements
2. A statement of income and comprehensive income
3. Statement of comprehensive income
4. Statemnet of changes in equity - ANS-One continuos statement or two consecutive
statements
\Item typically included in the income from continuing operations section of the income
statement is:
1. Discontinued operations
2. Restructuring costs
A company recently moved to a new building. The old building is being actively marketed for
sale, and the company expects to complete the sale in 4 months. Each of the following
statements is correct except:
1. NO longer depreciated
2. Reclassified as asset held for sale
3. Valued at historical cost
4. Classified as a current asset - ANS-WILL NOT BE VALUED AT HISTORICAL COST
\A component of an entity is:
1. Operating segment or below operating segment
2. Significant disposal group
3. Set of operations and cash flows clearly distinguishable from the rest of the entity for
operational and financial reporting purposes
4. Separate major line of business or class of customer - ANS-Set of operations and cash flows
clearly distinguishable from the rest of the entity for operational and financial reporting purposes
\Allocation of the transaction price to performance obligations:
1. Is based on relative standalone selling prices
2. Cannot be based on estimated selling prices
3. May not use the residual method when selling prices are uncertain
4. Is not allowed when bad debts are material - ANS-Is based on relative standalone selling
prices
\Assume a prepayment is made 6 mos. in advance of delivery of a product. Seller is likely to do
which of the following with respect to TVM over life of contract?
1. Recognize interest expense
2. Recognize interest revenue
3. Ignore TVM
4. None - ANS-Payment is less than year (ignore TVM)
\Computation of current value of an asset using the PV of future cash flows method doesn't
include
1. Cost of alternate use of funds given up
2. Productive life of asset
3. Applicable interest rate
4. Future amounts of cash receipts or cash savings - ANS-Cost of alternate uses of funds given
up
\Determining PV which relationship is true?
1. Higher discount rate and longer discount period, lower PV
2. Higher future cash flow and longer disc period, lower PV
3. Lower disc rate and shorter disc period, lower PV
4. lower future cash flow and shorter disc period, lower PV - ANS-Higher disc rate and longer
disc period, lower PV.
, As disc rate and disc period go up, PV goes down
\Earnings per share should be reported for eaxch of the following income statement captions
except:
1. Income from continuing operations
2. Discontinued operations
3. Operating income
4. Net income - ANS-Operating income is not included in earnings per share
\Envoy Co. manufactures and sells household products. Envoy plans to sell small appliance
group with operations. What is earliest to say discontinued operation?
1. When Envoy recieves an offer
2. When Envoy sells majority of assets
3. When Envoy classifies it as held for sale
4. When Envoy first sells any of assets - ANS-If disposed or held for sale this is considered
discontinued operation
\For a manufacturing company, each of the following items would be considered non operating
income for income statement purposes except:
1. Income from investments
2. Cost of Goods Sold
3. Interest expense
4. Gain on sale of investments - ANS-Cost of Goods Sold would not be considered
nonoperating income
\Given PV tables, annual interest rate, $ amount of equal pmts made, # semiannual pmts, what
other info is necessary to calc PV of series of pmts?
1. FV of annuity
2. Timing of payments
3. Rate of inflation
4. No other information is required - ANS-Timing of pmts (Beginning or end of period)
\if likelihood of event is:
75% -- 100,000
25% -- 40,000
what is expected value? - ANS-85,000
\In the current fiscal year, the Spin Company recognized items properly classified as
components of other comprehensive income. In its annual financial statements, Spin must
report comprehensive income in:
1. One continuous statement or two consecutvie statements
2. A statement of income and comprehensive income
3. Statement of comprehensive income
4. Statemnet of changes in equity - ANS-One continuos statement or two consecutive
statements
\Item typically included in the income from continuing operations section of the income
statement is:
1. Discontinued operations
2. Restructuring costs
