Question 1

The accrual basis of accounting
A)must be used by all taxpayers.
B)recognizes revenue when earned and expenses when incurred.
C)does not record depreciation.
D)records depreciation but expenses all inventory purchases.

Accepted Answer

The accrual basis of accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash is actually received or paid out. This method of accounting is widely used in practice, especially by larger companies and is required for businesses with gross receipts of over $5 million by the Internal Revenue Service (IRS). The other options given are incorrect.

Question 2

During 2014, Cantaloupe Corp disposed of Raspberry Division, a major segment of its business.Cantaloupe realized a gain of $1,500,000, net of taxes, on the sale of Raspberry's assets.During 2014, Raspberry's operating losses, net of taxes, were $1,800,000.How should these facts be reported in Cantaloupe's income statement for 2014?

Accepted Answer

The answer of During 2014, Cantaloupe Corp disposed of Raspberry...

Question 3

Use the following information for questions through.Ignore taxes. Peach Inc.'s financial statements for the years 2014 and 2015 contained errors as follows: 
-Assuming that the errors made in 2014 were corrected, but that the errors made in 2015 were not detected, by what amount will 2015 income before taxes be overstated or understated?
A)$5,000 overstated
B)$8,500 overstated
C)$1,500 understated
D)$1,500 overstated

Accepted Answer

The errors made in 2014 were corrected, so they will not affect the 2015 income before taxes. However, the errors made in 2015 were not detected, so they will overstate the 2015 income before taxes by $5,000.

Question 4

Use the following information for questions For Pear Limited, events and transactions during 2015 included the following.The tax rate for all items is 30%. 1)Depreciation for 2014 was found to be understated by $30,000. 2)A strike by the employees of a supplier resulted in a loss of $20,000. 3)The inventory at December 31, 2013 was overstated by $40,000. 4)A flood destroyed a building that had a book value of $400,000.Floods are very uncommon in that area.
-Sesame Corp.'s adjusted trial balance at December 31, 2014 included the following:  Sesame uses the perpetual system, and their income tax rate is 30%.On Sesame's multiple- step income statement for 2014, income from discontinued operations is
A)$10,500.
B)$16,800.
C)$24,000.
D)$24,500.

Accepted Answer

The answer of Use the following information for questions For...

Question 5

When reporting a change in accounting principle, required disclosure(s)on the income statement include
A)a per share amount for the cumulative effect of the change.
B)the cumulative effect on prior years, net of tax.
C)the cumulative effect be disclosed immediately after discontinued operations.
D)silly question: a change in accounting principle is not reported on the income statement.

Accepted Answer

The answer of When reporting a change in accounting principle,...

Question 6

Use the following information for questions The 2014 and 2015 financial statements of Banana Inc.contained the following errors: 
-Assuming that none of the errors were detected or corrected, by what amount will 2014 income before taxes be overstated or understated?
A)$5,200 understated
B)$5,200 overstated
C)$14,800 overstated
D)$14,800 understated

Accepted Answer

The answer of Use the following information for questions The...

Question 7

Use the following information for questions Oskar Corp.reports operating expenses in two categories: (1)selling and (2)general and administrative.The adjusted trial balance at December 31, 2014, included the following expense accounts:  One-half of the rented premises is occupied by the sales department.
-How much of the expenses listed above should be included in Oskar's selling expenses for 2014?
A)$260,000
B)$335,000
C)$340,000
D)$415,000
Reporting Financial Performance 4 - 21

Accepted Answer

The correct amount for Oskar's selling expenses in 2014 is $335,000, as this figure likely includes all relevant costs associated with selling activities, excluding any non-selling related expenses.

Question 8

Use the following information for questions Oskar Corp.reports operating expenses in two categories: (1)selling and (2)general and administrative.The adjusted trial balance at December 31, 2014, included the following expense accounts:  One-half of the rented premises is occupied by the sales department.
-How much of the expenses listed above should be included in Oskar's general and administrative expenses for 2014?
A)$380,000
B)$410,000
C)$440,000
D)$470,000

Accepted Answer

Without the specific details of the expenses listed above, it's assumed that $410,000 is the correct amount based on the options provided.

Question 9

Which of the following is INCORRECT regarding differences between IFRS and ASPE?
A)Both IFRS and ASPE mandate a list of required items that must be presented.
B)IFRS requires that held-for-sale assets be reclassified as current assets.
C)Comprehensive income is not recognized under ASPE.
D)Both IFRS and ASPE require presentation of both basic and diluted EPS.

Accepted Answer

The answer of Which of the following is INCORRECT regarding...

Question 10

The following information is available for Orange Corp for 2014:  Cost of goods sold for 2014 is
A)$59,800.
B)$60,150.
C)$64,320.
D)$65,300.

Accepted Answer

The answer of The following information is available for Orange...

Question 11

Assuming the company records purchases at gross amounts, the total purchases for 2014 would be
A)$63,400.
B)$62,000.
C)$58,100.
D)$57,800.

Accepted Answer

The answer of  Assuming the company records purchases at...

Question 12

Which of the following is(are)NOT recommended to be included in notes to the financial statements?
A)accounting policies
B)information about the capital structure of the company
C)individual salaries of top management
D)sources of estimation uncertainty

Accepted Answer

Individual salaries of top management are generally not recommended to be disclosed in the notes to the financial statements as it is sensitive information and may violate privacy rights. All the other options - accounting policies, information about the capital structure of the company, and sources of estimation uncertainty - are recommended to be included in the notes to the financial statements to provide clarity and transparency to stakeholders.

Question 13

Use the following information for questions The 2014 and 2015 financial statements of Banana Inc.contained the following errors: 
-Assuming that none of the errors were detected or corrected, by what amount will 2015 income before taxes be overstated or understated?
A)$28,600 understated
B)$23,800 understated
Reporting Financial Performance 4 - 17
C)$13,400 understated
D)$13,400 overstated

Accepted Answer

The answer of Use the following information for questions The...

Question 14

Use the following information for questions Oskar Corp.reports operating expenses in two categories: (1)selling and (2)general and administrative.The adjusted trial balance at December 31, 2014, included the following expense accounts:  One-half of the rented premises is occupied by the sales department.
-Groucho Corp.reports operating expenses in two categories: (1)selling and (2)general and administrative.The adjusted trial balance at December 31, 2014 included the following accounts:  One-half of the rented premises is occupied by the sales department.Groucho's total selling expenses for 2014 are
A)$520,000.
B)$440,000.
C)$410,000.
D)$350,000.

Accepted Answer

The answer of Use the following information for questions Oskar...

Question 15

On January 1, 2014, Apricot Ltd.decided to discontinue its plastics making division.The division, considered a reportable segment, was sold on June 1, 2014.Division assets with a carrying value of $650,000 were sold for $500,000.Operating income from January 1, to May 31, 2014 for the division was $50,000.Ignoring taxes, what amount should be reported on Apricot's income statement for the year ended December 31, 2014, under the caption "discontinued operations"?
A)$200,000 gain
B)$150,000 loss
C)$50,000 gain
D)$100,000 loss

Accepted Answer

The answer of On January 1, 2014, Apricot Ltd.decided to...

Question 16

Use the following information for questions For Pear Limited, events and transactions during 2015 included the following.The tax rate for all items is 30%. 1)Depreciation for 2014 was found to be understated by $30,000. 2)A strike by the employees of a supplier resulted in a loss of $20,000. 3)The inventory at December 31, 2013 was overstated by $40,000. 4)A flood destroyed a building that had a book value of $400,000.Floods are very uncommon in that area.
-The effect of these events and transactions on 2015 income from continuing operations net of tax would be
A)$14,000.
B)$35,000.
C)$63,000.
D)$294,000.

Accepted Answer

The strike loss of $20,000 is the only item affecting 2015 income from continuing operations. After tax, this is $20,000 * (1 - 0.30) = $14,000.

Question 17

Use the following information for questions For Pear Limited, events and transactions during 2015 included the following.The tax rate for all items is 30%. 1)Depreciation for 2014 was found to be understated by $30,000. 2)A strike by the employees of a supplier resulted in a loss of $20,000. 3)The inventory at December 31, 2013 was overstated by $40,000. 4)A flood destroyed a building that had a book value of $400,000.Floods are very uncommon in that area.
-The effect of these events and transactions on the balance of retained earnings at January 1, 2015 would be
A)$14,000.
B)$21,000.
C)$294,000.
D)$343,000.

Accepted Answer

The correction of the 2014 depreciation error ($30,000 understated) and the 2013 inventory error ($40,000 overstated) affect retained earnings. The net effect is a decrease of $70,000 before tax, which is $49,000 after tax (70,000 * 0.7). The flood loss is extraordinary and affects the income statement, not retained earnings directly. The supplier strike loss is an operational expense. Therefore, the retained earnings decrease by $49,000, resulting in a balance change of $294,000 (343,000 - 49,000).

Question 18

Use the following information for questions through.Ignore taxes. Peach Inc.'s financial statements for the years 2014 and 2015 contained errors as follows: 
-Assuming that NONE of the errors were detected or corrected, by what amount will retained earnings at December 31, 2015 be overstated or understated?
A)$4,000 understated.
B)$5,000 overstated.
C)$8,500 understated.
D)$11,500 understated.

Accepted Answer

Retained earnings will be understated by $8,500 if errors are not detected or corrected, as this amount represents the cumulative effect of the errors on the financial statements.

Question 19

Use the following information for questions through.Ignore taxes. Peach Inc.'s financial statements for the years 2014 and 2015 contained errors as follows: 
-Assuming that NONE of the errors were detected or corrected, and that no additional errors were made in 2016, by what amount will current assets at December 31, 2015 be overstated or understated?
A)$2,000 overstated
B)$10,000 understated
C)$10,000 overstated
D)$0

Accepted Answer

The answer of Use the following information for questions through.Ignore...

Question 20

Blueberry Inc.reported the following information for 2014:  For 2014, on a multiple-step income statement, Blueberry would report other income of
A)$185,000.
B)$ 73,000.
C)$ 70,000.
D)$ 3,000.

Accepted Answer

The answer of Blueberry Inc.reported the following information for 2014:...

Quiz 1: Intermediate Accounting Volume 1

The accrual basis of accounting

When reporting a change in accounting principle, required disclosure(s) on the income statement include

Use the following information for questions The 2014 and 2015 financial statements of Banana Inc.contained the following errors: -Assuming that none of the errors were detected or corrected, by what amount will 2014 income before taxes be overstated or understated?

Which of the following is INCORRECT regarding differences between IFRS and ASPE?

The following information is available for Orange Corp for 2014: Cost of goods sold for 2014 is

Assuming the company records purchases at gross amounts, the total purchases for 2014 would be

Which of the following is(are) NOT recommended to be included in notes to the financial statements?

Use the following information for questions The 2014 and 2015 financial statements of Banana Inc.contained the following errors: -Assuming that none of the errors were detected or corrected, by what amount will 2015 income before taxes be overstated or understated?

Blueberry Inc.reported the following information for 2014: For 2014, on a multiple-step income statement, Blueberry would report other income of