Question: TREPB-0001

 

Which of the following characteristics does not relate to prior period adjustments?

 

Question: TREPB-0002

 

During 2009, Olsen Company discovered that the ending inventories reported on its financial statements were understated as follows:

 

 

 

Year

Understatement

2006

$50,000

2007

$60,000

2008

$0

 

 

 

Olsen ascertains year-end quantities on a periodic inventory system.  These quantities are converted to dollar amounts using the FIFO cost flow method.  Assuming no other accounting errors, Olsen’s retained earnings at December 31, 2008, will be.

 

Question: TREPB-0003

 

At the end of 2007, Ritzcar Co. failed to accrue sales commissions earned during 2007 but paid in 2008.  The error was not repeated in 2008.  What was the effect of this error on 2007 ending working capital and on the 2008 ending retained earnings balance?

 

 

 

 

2007 ending
working capital

2008 ending
 retained earnings

A.

Overstated

Overstated

B.

No effect

Overstated

C.

No effect

No effect

D.

Overstated

No effect

 

Question: TREPB-0004

 

After the issuance of its 2007 financial statements Terry, Inc. discovered a computational error of $150,000 in the calculation of its December 31, 2007 inventory.  The error resulted in a $150,000 overstatement in the cost of goods sold for the year ended December 31, 2007.  In October 2008, Terry paid $500,000 in settlement of litigation instituted against it during 2007.  Ignore income taxes.  In the 2008 financial statements the December 31, 2007 retained earnings balance, as previously reported, should be adjusted by a

 

 

 

Question: TREPB-0005

 

While preparing its 2008 financial statements, Dek Corp. discovered computational errors in its 2007 and 2006 depreciation expense.  These errors resulted in overstatement of each year’s income by $25,000, net of income taxes.  The following amounts were reported in the previously issued financial statements:

 

 

 

 

2007

2006

Retained earnings, 1/1

$700,000

$500,000

Net income

150,000

200,000

Retained earnings, 12/31

$850,000

$700,000

 

 

 

Dek’s 2008 income is correctly reported at $180,000.  Which of the following amounts should be adjusted to retained earnings and presented for net income in Dek’s 2008 and 2007 comparative financial statements?

 

 

 

 

 

Year

Retained

earnings

 

Net income

A.

2007

$150,000

 

2008

($50,000)

180,000

B.

2007

($50,000)

$150,000

 

2008

180,000

C.

2007

($50,000)

$125,000

 

2008

180,000

D.

2007

$125,000

 

2008

180,000

 

 

 

 

 

Question: TREPB-0006

 

Miller Co. discovered that in the prior year, it failed to report $40,000 of depreciation related to a newly constructed building.  The depreciation was computed correctly for tax purposes.  The tax rate for the current year was 40%.  What was the impact of the error on Miller’s financial statements for the prior year?

 

Question: TREPD-0001

 

The following expenses were among those incurred by Sayre Company during 2008.

 

 

 

Accounting and legal fees

$160,000

Interest

60,000

Loss on sale of office equipment

25,000

Rent for office space

200,000

 

One-quarter of the rented premises is occupied by the sales department.  How much of the expenses listed above should be included in Sayre’s general and administrative expenses for 2008?

 

 

 

Question: TREPD-0002

 

Coffey Corp.’s trial balance of income statement accounts for the year ended December 31, 2008, was as follows:

 

 

 

 

 

 

Debit

Credit

Net sales

 

$1,600,000

Cost of goods sold

$960,000

 

Selling expenses

235,000

 

Administrative expenses

150,000

 

Interest expense

25,000

 

Loss from discontinued operation

 

 

40,000

 

Extraordinary loss

   10,000

_______

 

$1,420,000

$1,600,000

 

 

 

Coffey’s income tax rate is 30%.  Coffey prepares a multiple-step income statement for 2008.  Income from operations before income tax is

 

 

 

 

Question: TREPD-0003

 

Coffey Corp.’s trial balance of income statement accounts for the year ended December 31, 2008, was as follows:

 

 

 

 

Debit

Credit

Net sales

 

$1,600,000

Cost of goods sold

$  960,000

 

Selling expenses

235,000

 

Administrative expenses

150,000

 

Interest expense

25,000

 

Loss from discontinued operation

 

40,000

 

Extraordinary gain

________

     10,000

 

$1,410,000

$1,610,000

 

 

 

Coffey’s income tax rate is 30%.  Coffey prepares a multiple-step income statement for 2008.  Net income is

 

Question: TREPD-0004

 

The effect of a material transaction that is infrequent in occurrence but not unusual in nature should be presented separately as a component of income from continuing operations when the transaction results in a

 

 

 

 

  Gain

   Loss

A.

Yes

Yes

B.

Yes

No

C.

No

No

D.

No

Yes

 

 

 

Question: TREPD-0005

 

How should an unusual event not meeting the current criteria for an extraordinary item be disclosed in the financial statements?

 

Question: TREPD-0006

 

During 2008 Kerr Company sold a parcel of land used as a plant site.  The amount Kerr received was $100,000 in excess of the land’s carrying amount.  Kerr’s income tax rate for 2008 was 30%.  In its 2008 income statement, Kerr should report a gain on sale of land of

 

Question: TREPD-0007

 

Ball Corporation had the following infrequent gains during 2008:

 

 

 

A $240,000 gain on sale of a plant facility; Ball continues similar operations at another location.

 

A $90,000 gain on repayment of a long-term note denominated in a foreign currency.

 

A $190,000 gain on reacquisition and retirement of bonds.

 

 

 

In its 2008 income statement, how much should Ball report as total infrequent gains which are not considered extraordinary?

 

Question: TREPD-0008

 

Thorpe Co.’s income statement for the year ended December 31, 2008, reported net income of $74,100.  The auditor raised questions about the following amounts that had been included in net income:

 

 

 

 

 

 

Unrealized loss on decline in market value of available-for-sale marketable equity securities

 

$(5,400)

Gain on early retirement of bonds payable

33,000

Adjustment to profits of prior years for errors in depreciation (net of $3,750 tax effect)

 

(7,500)

Loss from fire (net of $7,000 tax effect)

(14,000)

 

 

 

Thorpe did not elect the fair value option for reporting any of its financial assets.  The loss from the fire was an infrequent but not unusual occurrence in Thorpe’s line of business.  Thorpe’s December 31, 2008 income statement should report net income of

 

 

 

Question: TREPD-0009

 

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the earnings statement as a gain or loss on disposal reported as

 

 

 

Question: TREPD-0010

 

Which of the following is not normally an example of an exit activity?

 

 

 

Question: TREPD-0011

 

Gordon, Inc. is engaged in the process of restructuring its business.  As a part of the restructuring, Gordon is going to pay onetime termination benefits to involuntarily terminated employees.  Which of the following is true about the accounting for this cost?

 

 

 

Question: TREPD-0012

 

On January 1, 2008, Dart, Inc. entered into an agreement to sell the assets and product line of its Jay Division, considered a segment of the business.  The sale was consummated on December 31, 2008, and resulted in a gain on disposition of $400,000.  The division’s operations resulted in losses before income tax of $225,000 in 2008 and $125,000 in 2007.  Dart’s income tax rate is 30% for both years.  In a comparative statement of income for 2008 and 2007, Dart should report a gain (loss) from discontinued operations for the years 2008 and 2007 of

 

 

2008

2007

A.

$ 122,500

$ 0

B.

$ 122,500

$(87,500)

C.

$(157,500)

$(87,500)

D.

$(157,500)

$ 0

 

Question: TREPD-0013

 

The following condensed statement of income of Helen Corporation, a diversified company, is presented for the two years ended December 31, 2008 and 2007:

 

 

 

 

2008

2007

Net sales

$10,000,000

$9,600,000

Cost of sales

 6,200,000

6,000,000

Gross profit

3,800,000

3,600,000

Operating expenses

 2,200,000

2,400,000

Operating income

1,600,000

1,200,000

Gain on sale of division

    900,000

________

 

2,500,000

1,200,000

Provision for income taxes

 1,000,000

  480,000

Net income

$ 1,500,000

$  720,000

 

 

 

On January 1, 2008, Helen entered into an agreement to sell for $3,200,000 the assets and product line of one of its separate operating divisions.  The sale was consummated on December 31, 2008, and resulted in a gain on disposition of $900,000.  This division’s contribution to Helen’s reported income before income taxes for each year was as follows:

 

 

 

2008 $(640,000) loss

 

2007 $(500,000) loss

 

 

 

Assume an income tax rate of 40%.  In the preparation of a revised comparative statement of income, Helen should report income from continuing operations after income taxes for 2008 and 2007, respectively, amounting to

 

Question: TREPD-0014

 

A transaction that is unusual in nature and infrequent in occurrence should be reported

 

Question: TREPD-0015

 

Which of the following items, if material, should be presented in the income statement separately as a component of income, net of applicable income taxes?

 

 

 

Question: TREPD-0016

 

On July 1, 2007, an erupting volcano destroyed Coastal Corporation’s operating plant, resulting in a loss of $1,500,000, of which only $500,000 was covered by insurance.  Coastal’s income tax rate is 30%.  How should this event be shown in Coastal’s income statement for the year ended December 31, 2007?

 

Question: TREPD-0017

 

A company changes from the double-declining balance method of depreciation for previously recorded assets to the straight-line method.  According to SFAS 154, the effect of the change should be reported separately as a(n)

 

Question: TREPD-0018

 

According to SFAS 154, the cumulative effect of changing to a new accounting principle should be included in net income of

 

 

 

 

 

 

Future

periods

The period

 of change

A.

No

No

B.

Yes

No

C.

Yes

Yes

D.

No

Yes

 

Question: TREPD-0019

 

The cumulative effect of an accounting change should generally be given retrospective application for a

 

 

 

 

Change in

accounting principle

Change in

accounting entity

A.

Yes

Yes

B.

Yes

No

C.

No

Yes

D.

No

No

 

 

 

 

 

Question: TREPD-0020

 

The correction of an error in the financial statements of a prior period should be reflected, net of applicable income taxes, in the current

 

Question: TREPD-0021

 

What is the purpose of reporting comprehensive income?

 

 

 

Question: TREPD-0022

 

Which of the following describes how comprehensive income should be reported?

 

Question: TREPD-0023

 

Assume the fair value option of SFAS 159 is not elected.  Which of the following would not be an item classified separately under other comprehensive income?

 

Question: TREPD-0024

 

Comprehensive income can be displayed in the financial statements in all of the following formats except

 

 

 

Question: TREPD-0025

 

Which of the following is false?

 

 

 

Question: TREPD-0026

 

SFAS 130, Reporting for Comprehensive Income, applies to which of the following entities?

 

I.

Enterprises that develop a full set of financial statements which report cash flows, results of operations, and financial position.

II.

All enterprises even if no items classified as other comprehensive income exist for the periods presented.

III.

Not-for-profit organizations that follow the reporting requirements of SFAS 117, Financial Statements of Not-for-Profit Organizations.

 

 

 

Question: TREPD-0027

 

Comprehensive income is defined as

 

Question: TREPD-0028

 

What is a reclassification adjustment as used when reporting comprehensive income?

 

Question: TREPD-0029

 

If losses in the amount of $2,750 (net of tax)  on available-for-sale securities have been previously included in other comprehensive income, what amount would be the reclassification adjustment when the securities are sold?  Assume a 30% tax rate.

 

Question: TREPD-0030

 

Where on the statement of financial position (balance sheet) should accumulated other comprehensive income be reported?

 

Question: TREPD-0031

 

Taft Inc. began operations in 2008.  For the year ended December 31, 2008, the company reported the following information:

 

 

 

Net income

$300,000

Dividends paid on common stock

40,000

Unrealized loss from available-for-sale securities

(42,000)

Credit translation adjustments

17,000

 

 

 

Taft does not elect the fair value option for reporting its financial assets.  Taft Inc. has comprehensive income in 2008 of

 

Question: TREPD-0032

 

Watson Company acquired available-for-sale securities at a cost of $150,000 in 2007.  At December 31, 2007, the securities had a market value of $172,000.  In 2008, Watson sold all of its available-for-sale securities for $185,000.  Watson uses SFAS 115 for reporting its available-for-sale securities.  As a result of the information presented, what amount of gain should be reported in Watson’s net income for 2007 and 2008?  Ignore income taxes.

 

 

 

 

Income

statement for 2007

Income

statement for 2008

A.

$0

$13,000

B.

$22,000

$13,000

C.

$0

$35,000

D.

$22,000

$35,000

 

 

 

Question: TREPD-0033

 

Harris Inc. received $50,000 from the sale of available-for-sale securities in 2008.  The securities were acquired in 2007 at a cost of $62,000, and had a market value of $55,000 at December 31, 2007.  Harris does not elect the fair value option to report any of its financial assets.  Ignoring income taxes, how would this information affect other comprehensive income (loss) for 2007 and 2008?

 

 

 

 

2007

2008

A.

$(7,000)

$  (5,000)

B.

$(7,000)

$   7,000

C.

$0

$(12,000)

D.

$(7,000)

$ 12,000

 

Question: TREPD-0034

 

Comprehensive income can be disclosed in various formats.  Which of the following is not an acceptable format for disclosing comprehensive income?

 

 

 

Question: TREPD-0035

 

The comparative balance sheets for Wellington Inc. reported the following information at December 31, 2007 and 2008:

 

 

 

 

December 31

 

2008

2007

Retained earnings

$210,000

$140,000

Accumulated other comprehensive income

30,000

35,000

 

 

 

Wellington declared cash dividends of $20,000 in 2007.  The decrease in accumulated other comprehensive income for 2008 was due to unrealized losses on available-for-sale securities.  For the year ended December 31, 2008, what was Wellington’s comprehensive income?

 

Question: TREPD-0036

 

In single period statements, which of the following should be reflected as an adjustment to the opening balance of retained earnings?

 

Question: TREPD-0037

 

The following changes in account balances of the Marvel Corporation during 2008 are presented below:

 

 

 

 

Increase

Assets

$356,000

Liabilities

  108,000

Capital stock

  240,000

Additional paid-in capital

    24,000

 

 

 

Assuming there were no charges to retained earnings other than for a dividend payment of $52,000, the net income for 2008 should be

 

Question: TREPD-0038

 

When preparing a draft of its 2008 balance sheet, Mont, Inc. reported net assets totaling $875,000.  Included in the asset section of the balance sheet were the following:

 

 

 

Treasury stock of Mont, Inc. at cost

$24,000

Idle machinery

11,200

Cash surrender value of life insurance on corporate executives

 

13,700

 

 

 

At what amount should Mont’s net assets be reported in the December 31, 2008 balance sheet?

 

Question: TREPD-0039

 

Mirr, Inc. was incorporated on January 1, 2008, with proceeds from the issuance of $750,000 in stock and borrowed funds of $110,000.  During the first year of operations, revenues from sales and consulting amounted to $82,000, and operating costs and expenses totaled $64,000.  On December 15, Mirr declared a $3,000 cash dividend, payable to stockholders on January 15, 2009.  No additional activities affected owners’ equity in 2008.  Mirr’s liabilities increased to $120,000 by December 31, 2008.  On Mirr’s December 31, 2008 balance sheet, total assets should be reported at

 

Question: TREPD-0040

 

APB 22, Disclosure of Accounting Policies,

 

 

 

Question: TREPD-0041

 

Which of the following should be disclosed in the summary of significant accounting policies?

 

Question: TREPD-0042

 

Which of the following should be disclosed in a summary of significant accounting policies?

 

 

 

  I.Management’s intention to maintain or vary the dividend payout ratio.

 

 II.Criteria for determining which investments are treated as cash equivalents.

 

III.          Composition of the sales order backlog by segment.

 

Question: TREPD-0043

 

Which of the following facts concerning inventories should be disclosed in the summary of significant accounting policies?

 

 

 

 

Composition

Pricing

A.

Yes

Yes

B.

Yes

No

C.

No

Yes

D

No

No

 

This answer is incorrect.  Refer to the correct answer explanation.

 

 

Question: TREPD-0044

 

Which of the following facts concerning plant assets should be disclosed in the summary of significant accounting policies?

 

 

 

 

 

Composition

Depreciation

expense amount

A.

No

Yes

B.

No

No

C.

Yes

No

D.

Yes

Yes

 

 

 

 

 

Question: TREPD-0045

 

Which of the following should be disclosed in the summary of significant accounting policies?

 

 

 

Question: TREPD-0046

 

In accordance with SFAS 89, the Consumer Price Index for All Urban Consumers is used to compute information on a

 

Question: TREPD-0047

 

Loy Corp. purchased a machine in 2006 when the average Consumer Price Index (CPI) was 180.  The average CPE was 190 for 2007, and 200 for 2008.  Loy prepares supplementary constant dollar statements (adjusted for changing prices).  Depreciation on this machine is $200,000 a year.  In Loy’s supplementary constant dollar statement for 2008, the amount of depreciation expense should be stated as

 

Question: TREPD-0048

 

During a period of inflation, an account balance remains constant.  When supplemental statements are being prepared, a purchasing power gain is reported if the account is a

 

 

 

Question: TREPD-0049

 

When computing information on a historical cost-constant dollar basis, which of the following is classified as nonmonetary?

 

Question: TREPD-0050

 

Information with respect to Bruno Co.’s cost of goods sold for 2008 is as follows:

 

 

 

 

Historical

  Cost  

 

    Units 

Inventory, 1/1/08

$1,060,000

20,000

 

Production during 2008

5,580,000

  90,000

 

 

6,640,000

110,000

 

Inventory, 12/31/08

2,520,000

  40,000

 

Cost of goods sold

$4,120,000

70,000

 

 

 

 

Bruno estimates that the current cost per unit of inventory was $58 at January 1, 2008, and $72 at December 31, 2008.  In Bruno’s supplementary information restated into average current cost, the cost of goods sold for 2008 should be

 

Question: TREPD-0051

 

SFAS 89 requires that the current cost for inventories be measured as the

 

 

 

Question: TREPD-0052

 

In a period of rising general price levels, Pollard Corp. discloses income on a current cost basis in accordance with SFAS 89, Financial Reporting and Changing Prices.

 

 

 

Compared to historical cost income from continuing operations, which of the following conditions increases Pollard’s current cost income from continuing operations?

 

Question: TREPD-0053

 

Financial statements shall include disclosures of material transactions between related parties except

 

Question: TREPD-0054

 

Which of the following accounting bases may be used to prepare financial statements in conformity with a comprehensive basis of accounting other than generally accepted accounting principles?

 

Question: TREPD-0055

 

Users of prospective financial information can include

 

  I.  General users with whom the responsible party is not negotiating directly.

 

 II.  The responsible party.

 

III.Third parties with whom the responsible party is negotiating directly.

 

Question: TREPD-0056

 

Which of the following is not a reason to prepare prospective financial information?

 

 

 

Question: TREPD-0057

 

Which one of the following areas does not require disclosures about the risks and uncertainties that exist?

 

 

 

Question: TREPD-0058

 

Which of the following should be disclosed in a sum­mary of significant accounting policies?

 

Question: TREPD-0059

 

Which of the following must be included in a com­pany’s summary of significant accounting policies in the notes to the financial statements?

 

Question: TREPD-0060

 

Which of the following is correct concerning financial statement disclosure of accounting policies?

 

Question: TREPD-0061

 

Dex Co. has entered into a joint venture with an affiliate to secure access to additional inventory.  Under the joint venture agreement, Dex will purchase the output of the venture at prices negotiated on an arm’s-length basis.  Which of the following is(are) required to be disclosed about the related-party transaction?

 

I.  The amount due to the affiliate at the balance sheet date.

 

II.The dollar amount of the purchases during the year.

 

Question: TREPD-0062

 

According to SFAS 157, the fair value of an asset should be based upon

 

Question: TREPD-0063

 

According to SFAS 157, which of the following is an assumption used in fair value measurements?

 

Question: TREPD-0064

 

According to SFAS 157, which level has the lowest priority for valuation purposes?

 

 

 

 

 

Question: TREPD-0065

 

Which of the following is an accepted valuation technique for fair value estimates?

 

Question: TREPD-0066

 

Which of the following items does not require fair value measurement for reporting on the balance sheet?

 

Question: TREPD-0067

 

Which of the following statements is true regarding developing fair value measurements for financial statement purposes?

 

Question: TREPD-0068

 

Which of the following is an appropriate income approach for developing fair value measurements?

 

Question: TREPD-0069

 

Which of the following is an appropriate market approach for determining fair value measurements?

 

Question: TREPD-0070

 

Which of the following is an appropriate cost approach for determining fair value measurements?

 

Question: TREPD-0071

 

According to SFAS 157, the market that has the greatest volume and level of activity is the

 

 

 

 

 

Question: TREPD-0072

 

According to SFAS 157, the market that maximizes the price received for the asset is the

 

Question: TREPD-0073

 

According to SFAS 157, a stock market quotation from the New York Stock Exchange is considered what level of valuation input for determining fair value measurement?

 

Question: TREPD-0074

 

The SFAS 159 fair value option election applies to all of the following items except for

 

Question: TREPD-0075

 

The SFAS 159 fair value option election applies to all of the following items except for

 

Question: TREPD-0076

 

Which of the following statements is true regarding the fair value option for valuing financial assets and liabilities?

 

Question: TREPD-0077

 

Which of the following statements is true regarding the fair value option for valuing financial assets and liabilities?

 

Question: TREPD-0078

 

Which of the following items is eligible for the fair value election under SFAS 159?

 

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