SWIC ACCT211 Chapter 1,2 & 4 Quiz Latest 2022 March

Question # 00634853
Course Code : ACCT211
Subject: Business
Due on: 05/06/2022
Posted On: 05/06/2022 05:36 AM
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ACCT211 Intermediate Accounting

CH 1, 2 and 4 Exam

Question 1If plant assets of a manufacturing company are sold at a gain of $1,800,000 with related taxes of $540,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose these effects as

operating income net of applicable taxes, $1,260,000.

a prior period adjustment net of applicable taxes, $1,260,000.

a gain of $1,800,000 and an increase in income tax expense of $540,000.

a discontinued operations gain net of applicable taxes, $1,260,000.

Question 2When information about two different enterprises has been prepared and presented in a similar manner, the information exhibits the characteristic of

None of these answer choices are correct.

relevance.

consistency.

faithful representation.

Question 3Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as

a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements.

an increase in depreciation expense for the year in which the error is discovered.

a prior period adjustment.

a change in accounting principle for the year in which the error was made.

Question 4Gross billings for merchandise sold by Lang Company to its customers last year amounted to $12,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Company were

$12,035,000.

$12,175,000.

$12,720,000.

$12,350,000.

Question 5Arreaga Corp. has a tax rate of 20 percent and income before non-operating items of $1,392,000. It also has the following items (gross amounts).

            Unusual loss                                                                  $222,000

            Discontinued operations loss                                          606,000

            Gain on disposal of equipment                                          48,000

      Change in accounting principle

          increasing prior year's income                                    318,000

            What is the amount of income tax expense Arreaga would report on its income statement?

$297,600

$243,600

$186,000

$278,400

Question 6Which of the following earnings per share figures must be disclosed on the face of the income statement?

The effect on EPS from unusual items.

EPS for gross profit.

EPS for income from continuing operations.

EPS for income before taxes.

Question 7Lantos Company had a 20 percent tax rate. Given the following pre-tax amounts, what would be the income tax expense reported on the face of the income statement?

                  Sales revenue                       $  1,000,000

                  Cost of goods sold                       600,000

                  Salaries and wages expense        80,000

                  Depreciation expense                  110,000

                  Dividend revenue                           90,000

                  Utilities expense                            10,000

                  Discontinued operations loss      100,000

                  Interest expense                            20,000

$54,000

$16,000

$34,000

$36,000

Question 8Which of the following is true of accounting for changes in estimates?

Changes in estimates are not carried back to adjust prior years.

A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.

A company accounts for changes in estimates only in the period of change, even though it affects the future periods.

Changes in estimates are considered as errors.

Question 9Which of the following is an example of managing earnings up?

Writing off obsolete inventory.

Decreasing estimated salvage value of equipment.

Accruing a contingent liability for an ongoing lawsuit.

Underestimating warranty claims.

Question 10What is prudence or conservatism?

Recognizing revenue when earned and realized

Understating assets and net income

When in doubt, recognizing the option that is least likely to overstate assets and income

Recognizing the option that is least likely to overstate assets and liabilities

Question 11Moorman Corporation reports the following information:

Correction of understatement of depreciation expense

     in prior years, net of tax                                      $   1,290,000

Dividends declared                                                          960,000

Net income                                                                   3,000,000

Retained earnings, 1/1/20, as reported                        6,000,000

Moorman should report retained earnings, 12/31/20, at

$6,750,000.

$8,040,000

$4,710,000.

$9,330,000

Question 12All the following are ways in which accounting information is used by financial accounting users except to

buy, sell, hold equity and debt instruments.

decide whether to invest in the company.

plan and control company's operations.

evaluate borrowing capacity to determine the extent of a loan to grant.

Question 13Which of the following serves as the justification for the periodic recording of depreciation expense?

Association of efforts (expense) with accomplishments (revenue)

Systematic and rational allocation of cost over the periods benefited

Immediate recognition of an expense

Minimization of income tax liability

Question 14The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is

a majority of the members of the FASB are CPAs who are drawn from public practice.

all members of the FASB possess extensive experience in financial reporting.

all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.

the FASB issues exposure drafts of proposed standards.

Question 15What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?

The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.

The SEC coordinates with the AICPA in establishing accounting standards.

The SEC reviews financial statements for compliance.

The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.

Question 16What is meant by comparability when discussing financial accounting information?

Information is reasonably free from error.

Information is timely.

Information is measured and reported in a similar fashion acorss companies.

Information has predictive or confirmatory value.

Question 17A company issuing its annual financial reports within one month of the end of the year is an example of which enhancing quality of accounting information?

Comparability

Understandability

Verifiability

Timeliness

Question 18What would be an advantage of having all countries adopt and follow the same accounting standards?

Lower preparation costs.

Comparability and lower preparation costs.

Comparability.

Agreement.

Question 19Madsen Company reported the following information for 2020:

Sales revenue                                                                         $2,040,000

Cost of goods sold                                                                    1,400,000

Operating expenses                                                                    220,000

Unrealized holding gain on available-for-sale debt securities    120,000

Cash dividends received on the securities                                     8,000

For 2020, Madsen would report other comprehensive income of

$128,000

$428,000.

$120,000

$420,000.

Question 20A correction of an error in prior periods' income will be reported

In the income statement         Net of tax

Yes                                  No

No                                    No

Yes                                  Yes

No                                   Yes

Question 21A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to:

stockholders’ equity of the period in which the change occurred.

comprehensive income for the earliest period presented.

net income of the period in which the change occurred.

beginning retained earnings of the earliest period presented.

Question 22Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

Results of operations of a discontinued component should be disclosed immediately before income from continuing operations.

The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.

The gain or loss on disposal should be reported as an unusual gain or loss.

Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement.

Question 23At Ruth Company, events and transactions during 2020 included the following. The tax rate for all items is 20%.

(1)   Depreciation for 2018 was found to be understated by $120,000.

(2)   A strike by the employees of a supplier resulted in a loss of $100,000.

(3)   The inventory at December 31, 2018 was overstated by $160,000.

(4)   A disposal of a component of the business resulted in a $2,000,000 loss.

            The effect of these events and transactions on 2020 net income net of tax would be

($1,680,000).

($47,000).

($1,904,000).

($1,776,000).

Question 24Which of the following is of interest to investors in decision-making?

Both assessing the company’s ability to generate net cash inflows and assessing management’s ability to protect and enhance the capital provider’s investments.

Assessing the company’s ability to collect debts.

Assessing management’s ability to protect and enhance the capital providers’ investments.

Assessing the company’s ability to generate net cash inflows.

Question 25The objective of general-purpose financial reporting is?

to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers

to provide users with financial information that implies total freedom from error.

to provide companies with the option to select information that favors one set of interested parties over another

to provide a metric for financial information used to determine when the boundary between two or more entities should be disregarded and the entities considered to be a licensing arrangement.

Question 26For the year ended December 31, 2020, Transformers Inc. reported the following:

Net income                                                                             $300,000

Preferred dividends declared                                                     50,000

Common dividend declared                                                       10,000

Unrealized holding loss, net of tax                                               5,000

Retained earnings, beginning balance                                     400,000

Common stock                                                                          200,000

Accumulated Other Comprehensive Income,

    Beginning Balance                                                                 25,000

What would Transformers report as total stockholders' equity?

$640,000

$840,000

$600,000

$860,000

Question 27In the conceptual framework for financial reporting, what provides "the why"--the purpose of accounting?

Objective of financial reporting

Elements of financial statements

Qualitative characteristics of accounting information

Recognition, measurement, and disclosure concepts such as assumptions, principles, and constraints

Question 28Which of the following is not true of generally accepted accounting principles?

GAAP is influenced by pronouncements of the SEC.

GAAP changes over time as the nature of the business environment changes.

GAAP does not have substantial authoritative support.

GAAP includes detailed practices and procedures as well as broad guidelines of general application.

Question 29Income taxes are allocated to each of the following except

continuing operations.

discontinued operations.

prior period adjustments.

balance sheet adjustments.

Question 30Which of the following is not a generally practiced method of presenting the income statement?

The consolidated statement of income

Including gains and losses from discontinued operations of a component of a business in determining income.

The single-step income statement

Including prior period adjustments in determining net income

Question 31A statement of stockholders’ equity includes a column for each of the following except

net income.

accumulated other comprehensive income.

retained earnings.

common stock.

Question 32Which of the following elements of financial statements is not a component of comprehensive income?

Distributions to owners

Losses

Expenses

Revenues

Question 33Which of the following is false about an income statement?

Income measurement involves judgment.

Items that cannot be measured reliably are not reported in the income statement.

Income numbers are affected by the accounting methods employed.

It is used to measure the solvency of a company.

Question 34Which of the following is not an acceptable way of displaying the components of other comprehensive income?

Combined statement of retained earnings

One statement approach

Two statement approach

One and Two statement approach

Question 35At Ruth Company, events and transactions during 2020 included the following. The tax rate for all items is 20%.

(1)   Depreciation for 2018 was found to be understated by $150,000.

(2)   A strike by the employees of a supplier resulted in a loss of $125,000.

(3)   The inventory at December 31, 2018 was overstated by $200,000.

  The effect of these events and transactions on 2020 income from continuing operations net of tax would be

 ($220,000).

($280,000).

($100,000).

($380,000).

Question 36Moorman Corporation reports the following information:

Correction of understatement of depreciation expense

     in prior years, net of tax                                      $   1,290,000

Dividends declared                                                          960,000

Net income                                                                   3,000,000

Retained earnings, 1/1/20, as reported                        6,000,000

Moorman should report retained earnings, 1/1/20, as adjusted at

$4,710,000

$6,750,000

$9,330,000

$8,040,000

Question 37Application of the full disclosure principle

requires that the financial statements be consistent and comparable.

is violated when important financial information is buried in the notes to the financial statements.

is demonstrated by the use of supplementary information explaining the effects of financing arrangements.

is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits.

Question 38Korte Company reported the following information for 2020

Sales revenue                                                                      $2,500,000

Cost of goods sold                                                                 1,750,000

Operating expenses                                                                 275,000

Unrealized holding gain on available-for-sale debt securities   85,000

Cash dividends received on the securities                                10,000

For 2020, Korte would report comprehensive income of

$570,000

$560,000

$485,000

$85,000

Question 39The accounting principle of expense recognition is best demonstrated by

establishing an Appropriation for Contingencies account.

recognizing prepaid rent received as revenue.

matching effort (expense) with accomplishment (revenue).

not recognizing any expense unless some revenue is realized.

Question 40For the year ended December 31, 2020, Transformers Inc. reported the following:

Net income                                                                             $300,000

Preferred dividends declared                                                     50,000

Common dividend declared                                                       10,000

Unrealized holding loss, net of tax                                               5,000

Retained earnings                                                                    400,000

Common stock                                                                          200,000

Accumulated Other Comprehensive Income,

                      Beginning Balance                                                                 25,000

What would Transformers report as its ending balance of Accumulated Other

Comprehensive Income?

$25,000

$5,000

$20,000

$30,000

Question 41The major elements of the income statement are

revenues, expenses, gains, and losses.

revenues, irregular items, and general expenses.

revenue, cost of goods sold, selling expenses, and general expense.

operating section, nonoperating section, discontinued operations, and cumulative effect.

Question 42The purpose of the International Accounting Standards Board is to:

develop a single set of high-quality financial reporting standards,

regulate stock prices at the international level.

develop a uniform currency in which the financial transactions occur.

arbitrate accounting disputes between auditors and international companies.

Question 43Accounting information is considered to be relevant when it

is understandable by reasonably informed users of accounting information.

is verifiable and neutral.

can be depended on to represent the economic conditions and events that it is intended to represent.

is capable of making a difference in a decision.

Question 44In 2020, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2020, Esther had a weighted average of 300,000 common shares outstanding. Compute Esther's 2020 earnings per share.

$2.50

$2.00

$1.50

$1.30

Question 45For Mortenson Company, the following information is available:

Cost of goods sold                                             $390,000

Dividend revenue                                                   15,000

Income tax expense                                              36,000

Operating expenses                                            138,000

Sales revenue                                                      600,000

In Mortenson’s single-step income statement, gross profit

should be reported at $51,000.

should be reported at $210,000.

should be reported at $225,000.

should not be reported.

 

 

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SWIC ACCT211 Chapter 1,2 & 4 Quiz Latest 2022 March

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