# Shared Flashcard Set

## Details

Acct Intermediate II Assessment Quiz
Acct Intermediate II Assessment Quiz
36
Accounting
03/29/2017

Term
 In a corporate form of business organization, legal capital is best defined as
Definition
 the par value of all capital stock issued.
Term
 Manning Company issued 10,000 shares of its \$5 par value common stock having a fair value of \$25 per share and 15,000 shares of its \$15 par value preferred stock having a fair value of \$20 per share for a lump sum of \$530,000. How much of the proceeds would be allocated to the common stock
Definition
 240,909: (10,000 x \$25) + (15,000 x \$20) = \$550,000(\$250,000/\$550,000) x \$530,000 = \$240,909
Term
 A corporation was organized in January 2014 with authorized capital of \$10 par value common stock. On February 1, 2014, shares were issued at par for cash. On March 1, 2014, the corporation's attorney accepted 7,000 shares of common stock in settlement for legal services with a fair value of \$90,000. Additional paid-in capital would increase on
Definition
 February 1, 2014 NO March 1, 2014 YES
Term
 The accounting for treasury stock retirements under IFRS requires
Definition
 a charge for the excess to paid-in capital, depending on the original transaction related to the issuance of the stock.
Term
 The conversion of bonds is most commonly recorded by the
Definition
 book value method.
Term
 In January 1, 2015, Evans Company granted Tim Telfer, an employee, an option to buy 3,000 shares of Evans Co. stock for \$25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be \$22,500. The service period is for three years beginning January 1, 2015. As a result of the option granted to Telfer, using the fair value method, Evans should recognize compensation expense for 2015 on its books in the amount of
Definition
 7500; \$22,500/3=\$7500
Term
 Lang Co. issued bonds with detachable common stock warrants. Only the warrants had a known market value. The sum of the fair value of the warrants and the face amount of the bonds exceeds the cash proceeds. This excess is reported as
Definition
 Discount on Bonds Payable.
Term
 Under IFRS, how are convertible debt recorded?
Definition
 Convertible debt is separated into equity component and debt component.
Term
 All of the following are characteristics of a derivative financial instrument except the instrument
Definition
 a. has one or more underlyings and an identified payment provision. B. requires a large investment at the inception of the contract. C. requires or permits net settlement.
Term
 Gains or losses on cash flow hedges are
Definition
 recorded in equity, as part of other comprehensive income.
Term
 Rushia Company has an available-for-sale investment in the 10%, 10-year bonds of Pear Company The investment’s carrying value is \$3,200,000 at December 31, 2014. On January 9, 2015, Rushia learns that Pear Company has lost its primary manufacturing facility in an uninsured fire. As a result, Rushia determines that the investment is impaired and now has a fair value of \$2,300,000. In June, 2016, Pear Company has succeeded in rebuilding its manufacturing facility, and its prospects have improved as a result. If Rushia Company determines that the fair value of the investment is now \$3,900,000 and is using U.S. GAAP for its external financial reporting, which of the following is true?
Definition
 Rushia is prohibited from recording the recovery in value of the impaired investment.
Term
 The first step in the process for revenue recognition is to
Definition
 identify the contract with customers
Term
 Roche Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Roche will receive \$6,750,000 if the new drug receives FDA approval. Based on prior approval, Roche determines that it is 85% likely that the drug will gain approval. The transaction price of this arrangement should be
Definition
 5737500, \$6750000x85%
Term
 IASB has issued ___ standard related to revenue recognition
Definition
 One
Term
 Taxable income of a corporation differs from pretax financial income because of
Definition
 Permanent Temporary YESDifferences Differences YES
Term
 Lehman Corporation purchased a machine on January 2, 2013, for \$3,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes: 2013 \$600,000 2016 \$345,0002014 960,000 2017 345,000 Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on Lehman's balance sheet at December 31, 2014 be2015 576,000 2018 174,000
Definition
 Deferred Tax Liability Current \$0 Noncurrent \$108,000
Term
 Didde Corp. prepared the following reconciliation of income per books with income per tax return for the year ended December 31, 2015: Book income before income taxes \$1,800,000 Add temporary difference Construction contract revenue which will reverse in 2016 160,000 Didde's effective income tax rate is 34% for 2015. What amount should Didde report in its 2015 income statement as the current provision for income taxes?Deduct temporary difference Depreciation expense which will reverse in equal amounts in each of the next four years (640,000) Taxable income \$1,320,000
Definition
 \$448,800 = \$1,320,000x.34=\$448,800
Term
 Which of the following is false regarding accounting for deferred taxes under IFRS?
Definition
 A deferred tax liability is classified as current or noncurrent based on the classification of the asset or liability to which it relates.
Term
 In determining the present value of the prospective benefits (often referred to as the projected benefit obligation), which of the following are considered by the actuary?
Definition
 Retirement and mortality rate. Interest rates. Benefit provisions of the plan
Term
 Interest cost included in pension expense recognized for a period by an employer sponsoring a defined-benefit pension plan represents the
Definition
 increase in the projected benefit obligation due to the passage of time
Term
 The International Accounting Standards Board has proposed changes to IFRS pension accounting including all of the following except
Definition
 a. elimination of smoothing via the corridor approach. b. different presentation of pension costs in the income statement. **c. requiring recognition of actuarial gains and losses over the expected service lives of employees. d. a new category of pensions for accounting purpose – “contribution-based promises.”
Term
 Which of the following best describes current practice in accounting for leases?
Definition
 a. Leases are not capitalized. b. Leases similar to installment purchases are capitalized. *c. All long-term leases are capitalized. d. All leases are capitalized
Term
 Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent of the estimated economic life of the leased property. Lease B does not transfer ownership of the property to the lessee by the end of the lease term, but the lease term is equal to 75 percent of the estimated economic life of the leased property. How should the lessee classify these leases?
Definition
 Lease A: Capital Lease, Lease B: Capital Lease
Term
 Which of the following is a one of the criteria for recording a lease as a finance lease, under IFRS?
Definition
 *a. The lease term is for the major part of the economic life of the asset. b. The lease must be cancelable. c. The lease doesn’t contain a bargain-purchase option. d. The present value of the minimum lease payments amounts to 75% of the fair value of the leased asset.
Term
 What is accounted for as a change in accounting principle?
Definition
 A change in inventory valuation from average cost to FIFO.
Term
 On January 1, 2012, Nobel Corporation acquired machinery at a cost of \$1,200,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2015, a decision was made to change to the double-declining balance method of depreciation for this machine Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings
Definition
 *No cumulative effect, prospectively
Term
 Which of the following should be reported as a prior period adjustment?
Definition
 Change in Estimated Live of Depreciable Assets NOChange from Unaccepted Principle to Accepted Principle YES
Term
 Detailed guidance regarding the accounting and reporting for the indirect effects of changes in accounting principle is available under
Definition
 US GAAP Only
Term
 The primary purpose of the statement of cash flows is to provide information
Definition
 about the cash receipts and cash payments of an entity during a period.
Term
 Hager Company sold some of its plant assets during 2015. The original cost of the plant assets was \$750,000 and the accumulated depreciation at date of sale was \$700,000. The proceeds from the sale of the plant assets were \$75,000. The information concerning the sale of the plant assets should be shown on Hager's statement of cash flows (indirect method) for the year ended December 31, 2015, as a(n)
Definition
 subtraction from net income of \$25,000 and a \$75,000 increase in cash flows from investing activities.
Term
 Foxx Corp.'s comparative balance sheet at December 31, 2015 and 2014 reported accumulated depreciation balances of \$830,000 and \$600,000, respectively. Property with a cost of \$50,000 and a carrying amount of \$38,000 was the only property sold in 2015. Depreciation charged to operations in 2015 was
Definition
 \$242,000; 830000-600000+(50000-38000)=\$242,000
Term
 Ocean Company follows IFRS for its external financial reporting. Which of the following methods of reporting are acceptable under IFRS for the items shown?
Definition
Term
 Which of the following should be disclosed in a Summary of Significant Accounting Policies?
Definition
 Depreciation method followed
Term
 In January 2015, Post, Inc. estimated that its year-end bonus to executives would be \$840,000 for 2015. The actual amount paid for the year-end bonus for 2014 was \$770,000. The estimate for 2015 is subject to year-end adjustment. What amount, if any, of expense should be reflected in Post's quarterly income statement for the three months ended March 31, 2015?
Definition
 \$210,000
Term
 Farr, Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Farr should report segment financial information for each division meeting which of the following criteria?
Definition
 Segment revenue is 10% or more of combined revenue of all the company segments
Term
 IFRS is important for U.S. investors for all of the following reasons
Definition
 *many U.S. companies, such as McDonald’s, generate 50% of their sales outside the U.S.*mergers frequently take place between companies from different countries.*financial markets are among the most significant international markets
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