CC 471 – Practice Exam #1 1. The primary focus for financial accounting information is to provide information useful for: A. Option a B. Option b C. Option c D. Option d 2.

ACC 471 – Practice Exam #1 1. The primary focus for financial accounting information is to provide information useful for: A. Option a B. Option b C. Option c D. Option d 2. Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting? A. Timeliness. B. Better reflecting economic activity. C. Periodicity. D. Better matching of revenues and expenses. 3. The conceptual framework’s qualitative characteristic of relevance includes: A. Predictive value. B. Verifiability. C. Completeness. D. Neutrality. 4. A firm’s comprehensive income: A. Is the same as its net income. B. Is greater than its net income. C. Is less than its net income. D. Could be greater than or less than net income. https://www.coursehero.com/file/10092489/Practice-Test-Exam-1-/ This study resource was shared via CourseHero.com 5. Surefeet Corporation changed its inventory valuation method. Which characteristic is jeopardized by this change? A. Comparability. B. Representational faithfulness. C. Consistency. D. Feedback value. 6. The assumption that in the absence of contrary information a business entity will continue indefinitely is the: A. Periodicity assumption. B. Entity assumption. C. Going concern assumption. D. Historical cost assumption. 7. Somerset Leasing received $12,000 for 24 months rent in advance. How should Somerset record this transaction? A. B. C. D. 8. On December 31, 2012, Coolwear, Inc. had a balance in its prepaid insurance account of $48,400. During 2013, $86,000 was paid for insurance. At the end of 2013, after adjusting entries were recorded, the balance in the prepaid insurance account was 42,000. Insurance expense for 2013 would be: A. $6,400. B. $134,400. C. $86,000. D. $92,400. https://www.coursehero.com/file/10092489/Practice-Test-Exam-1-/ This study resource was shared via CourseHero.com 9. Accruals occur when cash flows: A. Occur before expense recognition. B. Occur after revenue or expense recognition. C. Are uncertain. D. May be substituted for goods or services. 10. The adjusting entry required when amounts previously recorded as unearned revenues are earned includes: A. A debit to a liability. B. A debit to an asset. C. A credit to a liability. D. A credit to an asset. 11. When a tenant makes an end-of-period adjusting entry credit to the “Prepaid rent” account: A. (S)he usually debits cash. B. (S)he usually debits an expense account. C. (S)he debits a liability account. D. (S)he does none of the above. 12. Permanent accounts would not include: A. Interest expense. B. Wages payable. C. Prepaid rent. D. Unearned revenues. 13. Current assets include cash and all other assets expected to become cash or be consumed: A. Within one year. B. Within one operating cycle. C. Within one year or one operating cycle, whichever is shorter. D. Within one year or one operating cycle, whichever is longer. https://www.coursehero.com/file/10092489/Practice-Test-Exam-1-/ This study resource was shared via CourseHero.com 14. Rent collected in advance is: A. An asset account in the balance sheet. B. A liability account in the balance sheet. C. A shareholders’ equity account in the balance sheet. D. A temporary account, not in the balance sheet at all. 15. Notes payable: A. Is a current liability account. B. Usually has a debit balance. C. Is a noncurrent liability account. D. Cannot determine its classification without additional information. 16. Intraperiod income tax presentation is primarily a matter of: A. Valuation. B. Going concern. C. Periodicity. D. Allocation. 17. Provincial Inc. reported the following before-tax income statement items: Provincial has a 30% income tax rate. Provincial would report the following amount of income tax expense as a separate item in the income statement: A. $198,000. B. $180,000. C. $168,000. D. $150,000. 18. The distinction between operating and nonoperating income relates to: A. Continuity of income. B. Principal activities of the reporting entity. C. Consistency of income stream. D. Reliability of measurements. https://www.coursehero.com/file/10092489/Practice-Test-Exam-1-/ This study resource was shared via CourseHero.com 20. On August 1, 2013, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by June 30, 2014. On January 31, 2014, Rocket’s fiscal year-end, the following information relative to the discontinued division was accumulated: In its income statement for the year ended January 31, 2014, Rocket would report a before-tax loss on discontinued operations of: A. $115,000. B. $195,000. C. $65,000. D. $125,000. 21. Reporting comprehensive income can be accomplished by each of the following methods except: A. In the statement of shareholders’ equity. B. A single, continuous statement of comprehensive income. C. In two separate, but consecutive statements. D. All of the above are acceptable methods. 19. The Claxton Company manufactures children’s toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity according to GAAP regarding disposal of long-lived assets. How should Claxton report the sale in its 2013 income statement? A. Report it as an extraordinary item. B. Report it as a discontinued operation, reported below income from continuing operations. C. Report the income or loss from operations of the division in discontinued operations below continuing operations and the gain or loss from disposal in continuing operations. D. None of the above. https://www.coursehero.com/file/10092489/Practice-Test-Exam-1-/ This study resource was shared via CourseHero.com Please use this information for questions 22 and 23: On December 15, 2013, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigsby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2014, and December 15, 2015. Ignore interest charges. Rigsby has a December 31 year-end. 22. In 2013, Rigsby would recognize realized gross profit of: A. $500,000. B. $0. C. $900,000. D. $100,000. 23. In its December 31, 2013, balance sheet, Rigsby would report: A. Realized gross profit of $100,000. B. Deferred gross profit of $100,000. C. Installment receivables (net) of $3,200,000. D. Installment receivables (net) of $4,000,000. 24. Gunk Goblin sells vacuums and just launched a policy where customers have the right to return a vacuum during a three-year period following purchase. Gunk management has no experience under this sort of policy and does not believe it can accurately estimate returns. What is the longest period of time that Gunk may have to wait before recognizing gross profit associated with one of these sales? A. No time delay, recognize gross profit upon delivery. B. Gunk should recognize gross profit as cash is received under the installment method. C. Gunk should defer gross until costs are recovered under the cost recovery method. D. Three years, after the right of return has expired. 25. The percentage-of-completion method violates the general rule for revenue recognition that: A. Collection is reasonably assured. B. Costs are known or reasonably estimated. C. The earnings process is complete. D. Collections have been received. Please use the following information for questions 26 and 27: Miley, Inc. began work in 2008 on a project with a contract price of $8,400,000. Other data are as follows: 2008 2009 Costs incurred to date $3,600,000 $5,600,000 Estimated costs to complete 2,400,000 – Billings to date 2,800,000 8,400,000 Collections to date 2,000,000 7,200,000 https://www.coursehero.com/file/10092489/Practice-Test-Exam-1-/ This study resource was shared via CourseHero.com 26. If Miley uses the percentage-of-completion method, the gross profit to be recognized in 2008 is A. $1,440,000. B. $1,600,000. C. $2,160,000. D. $2,400,000. E. Loss is recorded 27. If Miley uses the completed-contract method, the gross profit to be recognized in 2009 is A. $1,360,000. B. $2,800,000. C. $1,400,000. D. $5,600,000. E. Loss is recorded 28. Please rank the following three methods from “least conservative” to “most conservative” in terms of income recognition: point-of-sale (or point-of-delivery) method, installment sales method, and cost recovery method. Least conservative Most conservative A. Point-of-sale Installment sales Cost recovery B. Installment sales Point-of-sale Cost recovery C. Point-of-sale Cost recovery Installment sales D. Cost recovery Installment sales Point-of-sale 29. Amazon.com serves as an agent when it sells a non-fiction novel for Koehler University Press. Suppose the book is priced at $50 on Amazon, and it costs Koehler University Press $25 to produce. Suppose Amazon charges a referral (commission) fee of 20% of the sale price. What would be the journal entry of Amazon when it sells this book? A. Cash 50 Revenue 50 B. Cash 50 Sales revenue 50 Cost of goods sold 25 Inventory 25 C. Cash 10 Revenue 10 D. Cost of goods sold 25 Profit 15 Commission Fee 10 Sales revenue 50 https://www.coursehero.com/file/10092489/Practice-Test-Exam-1-/ This study resource was shared via CourseHero.com Powered by TCPDF (www.tcpdf.org)

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