ACCT 304 Intermediate Accounting I Course

ACCT 304 ( Intermediate Accounting I ) Entire Course
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ACCT 304 ( Intermediate Accounting I ) Entire Course

week 1

Development
of
Accounting
Standards
(graded)

Hello Class, Welcome to week 1 Discussion Topic 1.
Generally Accepted Accounting Principles (GAAP) are guidelines for companies to follow as they prepare and issue
financial statements.
Let’s start by getting an understanding of why the guidelines were developed in the first place?
1. a) Who relies on the financial statements (external users) and why, what are they using the
statements for?
b) What happens if an External User relies on financial statements that are inaccurate? (what could happen
to the corporaton)
c) What negative consequences can arise from relying on inaccurate financial statements? (what could
happen to the external user)
Remember, these discussion threads are supposed to be stimulating conversation, a back and forth discussion
among students and teacher.
After the first person responds, he or she can respond to the first item, the next person can add a point that maybe
the previous discussions failed to point out or answer the second item..
I don’t want to see everybody repeating the same answer. You wouldn’t do that if you were in class and I asked a
question.
You need to respond to each of the two separate discussion topics by Wednesday the latest. And, including
Wednesday, you need to respond to each of the 2 discussion threads on 3 different days. For example, you could
come in as late as Wednesday and respond to topic one and two. Then do the same for both topics on Thursday and
Sunday.
They need to be of quality responses. Not “I agree with what you said John.” or Not “Yes, John, you are correct in
saying that…..”
Prof. Marnell

Accounting
Conceptual
Framework
(graded)

Hello Class, Welcome to week 1 Discussion Topic 2.
A sound foundation is necessary for success in any task from building a house to putting on make-up.
In terms of U.S. Accounting Standards, it is also necessary to have a sound foundation, referred to as the conceptual
framework.
a)What is the conceptual framework, and why is it important?
Once students have answered the above thoroughly, lets move on and…
1. b) discuss it step by step starting with the objective. What is the objective of accounting standards?
Remember, these discussion threads are supposed to be stimulating conversation, a back and forth discussion
among students and teacher.
After the first person responds, he or she can respond to the first item, the next person can add a point that maybe
the previous discussions failed to point out or answer the second item..
I don’t want to see everybody repeating the same answer. You wouldn’t do that if you were in class and I asked a
question.
You need to respond to each of the two separate discussion topics by Wednesday the latest. And, including
Wednesday, you need to respond to each of the 2 discussion threads on 3 different days. For example, you could
come in as late as Wednesday and respond to topic one and two. Then do the same for both topics on Thursday and
Sunday.
They need to be of quality responses. Not “I agree with what you said John.” or Not “Yes, John, you are correct in
saying that…..”
Prof. Marnellweek 2

Balance
Sheet:
Purpose
and
Uses
(graded)

Hello class;
The balance sheet is one of the first financial statements I turn to when reviewing a company. You can learn a lot
about a company by looking at its balance sheet.
The balance sheet is also called the statement of financial position. Why is this? What is the purpose of the
balance sheet?
Hello Class;
Disclosures are required to elaborate on certain items that are presented in summarized form in the financial
statements. There are specific disclosure notes that are required to be present in all financial statements, while others
may be unique to the disclosure needs of a particular company.
Let’s start by discussing the three required disclosures. Please pick one and explain what information is to be
included in the note:
1. a) Summary of Significant Accounting Policies
2. b) Subsequent Events
3. c) Third Party Transactions

ACCT 304 week 4

Revenue
Recognition
(graded)

Hello Class;
When a company sells a product for cash, it generally recognizes the revenue. However, there are situations when it
is not always clear when a company should recognize the revenue.
1) How do you handle a car dealership that sells a warranty contract to its customers for $650 that will cover the next
5 years?

Time
Value of
Money
Concepts
(graded)

Hello Class;
You might think of the “time value of money” to be a topic for Finance class, but accountants need an understanding
of this topic as well.
Let’s discuss where/why an accountant may need to use these skills/calculations.

ACCT 304 week 3

Income
Statement
(graded)

Hello Class;
Students often refer to an income statement as the statement that shows how much money a company has made.
Money, by definition, is something that is generally accepted as a medium of exchange or means or payment.
Keeping that definition in mind, an income statement is not a measure of money, but rather it is a measure of net
income (or loss) also known as profit (or loss).
Select a publicly held company like Apple, Microsoft, IBM, Hewlett Packard, Home Depot (Note: do not select a
company already chosen by your classmate). Go to their website and select Investor Relations and there you will
find the company’s annual report.
Provide the link to that annual report and based on what you have read about income statements in this
chapter and in the Becker materials,tell us what you have learned about the company from reviewing its
income statement.
Prof. Marnell

Cash-
Flow
Statement
(graded)

Hello Class;
The Statement of Cash Flows has historically given students a lot of heartburn, but it really isn’t that scary. A cash-
flow statement, simply stated, reports the uses (where the cash was spent) and the sources (where the cash came
from) of cash during a period. Let’s start with a very simplistic set of facts. I run a CPA firm, and I billed my clients
$50K during the month of February. To earn that $50K, I incurred $20K of wage expense and another $10K of
overhead (rent, utilities, insurance, etc.). So I made $20K profit, right? So I am sitting pretty? Not necessarily. What if
I now tell you that $40K of my billings have yet to be collected? And my E&O insurance carrier increased my premium
and I had to pre-pay $10K of premiums this month.
1. a) How does my cash flow differ from my profit?
2. b) Will these transactions appear on my income statement?
3. c) My cash-flow statement?
Prof. Marnell

ACCT
304
week 5
Cash
(graded)

Hello Class;
Cash is listed first on the balance sheet because it is the asset most readily available to pay off debt or use in
operations. Cash is also one of the assets that most often “grows legs” and walks away. Therefore, it is important that
any business protect its cash; it does so through Internal Control Procedures.
1. a) Please start by defining Internal Control,
2. b) then discuss specific procedures related to cash.

Receivables
(graded)

Hello Class;
When a business extends credit to its customers, we call this Accounts Receivable. Often a business will grant its
customers a discount.
a)What are the two types of discounts, and
1. b) how does the journal entry to record the sale change when there is a discount granted?

ACCT 304 week 7

Inventories—
LCM
(graded)

Hello Class;
The lower-of-cost-or-market (LCM) approach was developed to avoid reporting inventory at an amount greater than
the benefits it can provide. The LCM approach records losses in the period the value of the inventory drops below its
cost instead of later in the period that the goods are ultimately sold.
Is this a conservative or an aggressive approach? What does GAAP say about LCM?

Inventory
Errors
(graded)

Hello Class;
It is discovered in 2013 that ending inventory from 2011 is understated.
What accounts will be affected by this understatement, and how will they be affected?
This is a situation that really happens. Start with the 2011 inventory being understated, and track the changes
through the inventory account to 2013.

ACCT 304 week 6

Inventory
Classification
and Systems
(graded)

Hello Class;
Merchandise Inventory is assets held for sale in the ordinary course of business of wholesale and retail companies.
Manufacturing inventories are raw materials or WIP (Work In Process) that will be used or consumed in the
production of finished goods to be sold.
 iscussion topic #1
1. explain how inventory is presented on the balance sheet, and
2. what further information you found in the footnote disclosures about the inventory method and “Impairment
of Inventory”, if any.

Inventoriable
Costs/Cost-
Flow
Assumptions
(graded)

Hello Class;
We read about the Perpetual and the Periodic Inventory System. Regardless of which system is used, under both, we
need to assign dollar amounts to the Ending Inventory and Cost of Goods Sold so that we can trace how costs flow
through the system.
1) Start by identifying what is included in inventory and then
2) discuss how each item might be treated differently in the Perpetual vs. the Periodic Inventory System.

quizesQuestion 1. Question : (TCO 1) Which of the following has the authority to set accounting standards in the
United States?
FASB
IRS
SEC
AICPA
: 1
Question 2. Question : (TCO 2) SFAC No.5 focuses on:
objectives of financial reporting.
qualitative characteristics of accounting information.
Recognition and measurement concepts in accounting, including assumptions and principles.
elements of financial statements.
: 1
5 of 5

Question 3. Question : (TCO 3) Mary Parker Co. invested $15,000 in ABC Corporation and received capital stock in
exchange. Mary Parker Co.’s journal entry to record this transaction would include a:
debit to investments.
credit to retained earnings.
credit to capital stock.
debit to expense.
: 2
5 of 5

Question 4. Question : (TCO 3) The adjusting entry required to record accrued expenses includes:
a credit to cash.
a debit to an asset.
a credit to an asset.
a credit to liability.
: 2
5 of 5
Question 5. Question : (TCO 3) Temporary accounts would not include:
salaries payable.
depreciation expense.

supplies expense.
cost of goods sold.
: 2
5 of 5

Question 6. Question : (TCO 4) Notes payable:
is a current liability account.
usually has a debit balance.
is a non-current liability account.
cannot determine its classification without additional information.
: 2
5 of 5

Question 7. Question : (TCO 4) The current ratio is given by:
current assets divided by non-current assets.
current assets divided by total assets.
current assets divided by current liabilities.
current assets divided by total liabilities.
: 3
5 of 5

Question 8. Question : (TCO 5) The distinction between operating and non-operating income relates to:
continuity of income.
principal activities of the reporting entity.
consistency of income stream.
reliability of measurements.
: 4
5 of 5

Question 9. Question : (TCO 5) A voluntary change in accounting principle is accounted for by:
a cumulative effect on income in the year of the change.
a retrospective reporting of all comparative financial statements shown.
a prior period adjustment.
a separate line component of income.
: 4
5 of 5

Question 10. Question : (TCO 5) Cash flows from investing activities do not include:
proceeds from issuing bonds.
payment for the purchase of equipment.
proceeds from the sale of marketable securities.
cash outflows from acquiring land.
: 4

5 of 5

Question 11. Question : (TCO 5) The Maytag Corporation’s income statement includes income from continuing
operations, a loss from discontinued operations, and extraordinary items. Earnings per share information would be
provided for:
net income only.
income from continuing operations and net income only.
income from continuing operations, loss from discontinued operations, and net income only.
income from continuing operations, loss from discontinued operations, extraordinary items, and net income.
: 4
5 of 5

Question 12. Question : (TCO 5) In a statement of cash flows prepared under International Financial Reporting
Standards, each of the following items is typically classified as a financing cash flow except:
interest paid.
dividends paid.
proceeds from the issuance of long-term debt.
dividends received.
: 4
5 of 5

Question 13. Question : (TCO 4) Which is a shareholders’ equity account in the balance sheet?
Accumulated depreciation
Paid-in capital
Dividends payable
Marketable securities
: 3
5 of 5

Question 14. Question : (TCO 4) Which of the following groups is not among the external users for whom financial
statements are prepared?
Customers
Suppliers
Employees
All of the above are external users of financial statements.

(TCO 5) Misty Company reported the following before-tax items during the current year:
Misty’s effective tax rate is 40% and there were 1,000 shares of common stock outstanding.
What would be Misty’s income before extraordinary item(s)?
Question 2. Question : (TCO 4) Listed below are account balances (in $millions) taken from the records of Symphony
Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment
receivables are current. Symphony uses a perpetual inventory system.
What would Symphony report as total assets? Hint: Don’t forget to deduct the contra assets.

(TCO 4) Explain how management’s discussion and analysis of its operations and liquidity may be helpful to
investors.
Question 2. Question : (TCO 2) What are the key provisions of the Public Company Accounting Reform and
Investor Protection (Sarbanes-Oxley) Act of 2002?
Question 3. Question : (TCO 5) Give an example of a non-cash financing and investing activity and explain when
and how it would be reported in the financial statements.
Question 4. Question : (TCO 3) What is the purpose of the closing process?

(TCO 1) The SEC issues accounting standards in the form of
accounting research bulletins.
financial reporting releases.
financial accounting standards.
financial technical bulletins.
:
Question 2. Question :
(TCO 2) Enhancing qualitative characteristics of accounting information include each of the following, except
timeliness.
materiality.
comparability.
verifiability.
Comments:

(TCO 3) Hughes Aircraft sold a four-passenger airplane for $380,000, receiving a $50,000 down payment and a 12%
note for the balance. The journal entry to record this sale would include a
credit to cash.
debit to cash discount.
debit to note receivable.
credit to note receivable.
Comments:

(TCO 3) When a tenant makes an end-of-period adjusting entry credit to the prepaid rent account
he or she usually debits cash.
he or she usually debits an expense account.
he or she debits a liability account.
he or she does none of the above.
Comments:

(TCO 3) Permanent accounts would not include
interest expense.
wages payable.
prepaid rent.
unearned revenues.


(TCO 4) Cash equivalents would not include
cash not available for current operations.
money market funds.
United States Treasury bills.
bank drafts.

(TCO 4) Which is a shareholders’ equity account in the balance sheet?
Paid-in capital
Dividends payable
Instructor Explanation: See Chapter 3.
Points Received: 4 of 4
Comments:

(TCO 4) Janson Corporation Co.’s trial balance included the following account balances at December 31, 2011:
Investments consist of treasury bills that were purchased in November and mature in January. Prepaid insurance is
for the next 2 years. What amount should be included in the current asset section of Janson’s December 31, 2011
balance sheet?
$88.000
$85,000
$55,000
$135,000

(TCO 4) Which of the following would be disclosed in the summary of significant accounting policies disclosure note?
Option A
Option B
Option C
Option D

(TCO 4) Below is the partial balance sheet ($ in thousands) for Paisano Seafood Inc.
The current ratio (rounded) is
1.98.
1.58.
1.17.
0.66.
quiz 3
<pstyle=”font-size: 11.8181819915771px;”=””>TCO 5) The distinction between operating and non-operating income
relates to

Comments:

(TCO 5) Major Co. reported a 2011 income of $300,000 from continuing operations before income taxes and a
before-tax extraordinary loss of $80,000. All income is subject to a 30% tax rate. In the 2011 income statement, Major
Co. would show the following line-item amounts for income tax expense and net income.
$66,000 and $210,000
$90,000 and $154,000
$90,000 and $276,000
$66,000 and $220,000
Instructor Explanation:
Comments:

(TCO 5) The financial statement presentation of a change in depreciation method is most similar to that of reporting
changes in accounting estimates.
prior period adjustments.
ion of errors.
extraordinary items.
Comments:

(TCO 5) Cash flows from investing activities do not include
Comments:

(TCO 5) Review Rowdy’s Restaurants cash flow (in millions):
Rowdy’s would report net cash inflows (outflows) from financing activities in the amount of
$1,100.
$(1,100).
$820.
$900.
Instructor Explanation:
Comments:
4

<pstyle=”font-size: 11.8181819915771px;”=””>(TCO 5) For a typical manufacturing company, the most common
critical point for recognizing revenue is the date
an order is received.
production is completed.
the product is delivered.
payment is received.

(TCO 5) On December 15, 2011, 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, 2012 and December 15,
2013. Ignore interest charges. Rigsby has a December 31 year-end. In 2011, Rigsby would recognize the realized
gross profit of
$500,000.
$0.
$900,000.
$100,000.

(TCO 6) Present and future value tables of $1 at 3% are presented below:
Carol wants to invest money in a 6% CD account that compounds semiannually. Carol would like the account to have
a balance of $50,000 5 years from now. How much must Carol deposit to accomplish her goal?
$35,069
$43,131
$37,205
$35,000
Comments:

(TCO 6) Sondra deposits $2,000 in an IRA account on April 15, 2011. Assume the account will earn 3% annually. If
she repeats this for the next 9 years, how much will she have on deposit on April 14, 2020?
$20,600
$20,928
$23,616
$24,715

(TCO 6) Jose wants to cash in his winning lottery ticket. He can either receive five, $5,000 annual payments starting
today, or he can receive a lump-sum payment now based on a 3% annual interest rate. What is the present value of
the installments if he opts for the lump sum payment?
$22,899
$21,565
$23,000
5
<pstyle=”font-size: 11.8181819915771px;”=””>(TCO 7) Cash may not include
foreign currency.
money orders.
restricted cash.

undeposited customer checks.

(TCO 7) On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit term 2/10,
n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on
November 17, assuming the correct payment was received on that date?
Option a
Option b
Option c
Option d

(TCO 7) Which of the following does not change the balance in accounts receivable?
Returns on credit sales
Collections from customers
Bad debts expense adjusting entry
Write-offs

(TCO 7) Brockton Carpet Cleaning prepares a bank reconciliation at the end of every month. At the end of July, the
balance in the general ledger checking account was $2,750, and the bank balance on the bank statement was
$2,980. Outstanding checks totaled $680, and deposits in transit were $400. The bank statement revealed that a
check written for $120 was incorrectly recorded by Brockton as a $220 disbursement. The bank statement listed
service charges and NSF check charges totaling $150. The corrected cash balance is
$2,270.
$2,550.
$2,470.
$2,700.

(TCO 7) Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts
receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2010.
During 2011, Calistoga’s credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in
accounts receivable were written off. Calistoga’s adjusted allowance for uncollectible accounts at December 31, 2011
is
$1,575.
$1,505.
$1,650.
$1,720.
quiz 7
<pstyle=”font-size: 11.8181819915771px;”=””>(TCO 8) In applying LCM, market cannot be
less than net realizable value minus a normal profit margin.
net realizable value less reasonable completion and disposal costs.
greater than net realizable value reduced by an allowance for normal profit margin.
less than cost.


(TCO 8) Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining
to that inventory is as follows:
What should be the carrying value of Montana’s inventory?
$600,000
$520,000
$590,000
$510,000

(TCO 8) Howard’s Supply Co. suffered a fire loss on April 20, 2011. The company’s last physical inventory was taken
on January 30, 2011, at which time the inventory totaled $220,000. Sales from January 30 to April 20 were $600,000,
and purchases during that time were $450,000. Howard’s consistently reports a 30% gross profit. The estimated
inventory loss is
$490,000.
$238,000.
$250,000.
None of the above

(TCO 8) When computing the cost-to-retail percentage for the conventional retail method, included in the
denominator are
net markups and net markdowns.
neither net markups nor net markdowns.
net markups, but not net markdowns.
net markdowns, but not net markups.

(TCO 8) Retrospective treatment of prior years’ financial statements is required when there is a change from
average cost to FIFO.
FIFO to average cost.
LIFO to average cost.
All of the above

ACCT 304 Week 6

Annual Report Analysis
Your annual report analysis is due at the end of Week 6. Obtain an annual report from a corporation that is interesting
to you. Using techniques that you have learned of in the previous weeks, respond to the following questions.
1. Who are the firm’s auditors? Do they provide a clean opinion on the financial statements?
2. Have there been any subsequent events, errors and irregularities, illegal acts, or related-party transactions
that have a material effect on the financial statements?
3. Describe the trend in total assets and total liabilities for the years presented.
4. What are the company’s three largest assets for the most recent year presented?
5. What are the company’s three largest liabilities for the most recent year presented?
6. What types of stock does the company have? How many outstanding shares are there for each type of stock
for the most recent year presented?

7. Does the company use the single-step income statement, multiple-step income statement, or a variation of
both?
8. Does the income statement contain any separately reported items, including discontinued operations or
extraordinary items, in any year presented? If it does, describe the event that caused the item. (Hint: There should be
a related footnote.)
9. Describe the trend in net income over the years presented.
10. Does the company have other comprehensive income? If yes, what is the nature of the transaction(s)?
11. Does the company use the indirect or direct method of the cash-flow statement?
12. What is the trend in cash from operations for the years presented?
13. What are the two largest items included in cash from investing activities?
Please see grading rubric for guidelines. Please submit the completed project by Sunday at the end of Week 6.
Submit your Course Project to the Dropbox located on the silver tab at the top of this page. For instructions on how to
use the Dropbox, read these

midterm
<pstyle=”font-size: 11.8181819915771px;”=””>Question 1. Question : (TCO 1) Which of the following has the
authority to set accounting standards in the United States?
FASB
IRS
SEC
AICPA
: 1
Question 2. Question : (TCO 2) SFAC No.5 focuses on:
objectives of financial reporting.
qualitative characteristics of accounting information.
Recognition and measurement concepts in accounting, including assumptions and principles.
elements of financial statements.
: 1
5 of 5
Question 3. Question : (TCO 3) Mary Parker Co. invested $15,000 in ABC Corporation and received capital stock in
exchange. Mary Parker Co.’s journal entry to record this transaction would include a:
debit to investments.
credit to retained earnings.
credit to capital stock.
debit to expense.
: 2
5 of 5
Question 4. Question : (TCO 3) The adjusting entry required to record accrued expenses includes:
a credit to cash.
a debit to an asset.
a credit to an asset.
a credit to liability.
: 2
5 of 5
Question 5. Question : (TCO 3) Temporary accounts would not include:
salaries payable.
depreciation expense.
supplies expense.

cost of goods sold.
: 2
5 of 5
Question 6. Question : (TCO 4) Notes payable:
is a current liability account.
usually has a debit balance.
is a non-current liability account.
cannot determine its classification without additional information.
: 2
5 of 5
Question 7. Question : (TCO 4) The current ratio is given by:
current assets divided by non-current assets.
current assets divided by total assets.
current assets divided by current liabilities.
current assets divided by total liabilities.
: 3
5 of 5
Question 8. Question : (TCO 5) The distinction between operating and non-operating income relates to:
: 4
5 of 5
Question 9. Question : (TCO 5) A voluntary change in accounting principle is accounted for by:
a cumulative effect on income in the year of the change.
a retrospective reporting of all comparative financial statements shown.
a prior period adjustment.
a separate line component of income.
: 4
5 of 5
Question 10. Question : (TCO 5) Cash flows from investing activities do not include:
: 4
5 of 5
Question 11. Question : (TCO 5) The Maytag Corporation’s income statement includes income from continuing
operations, a loss from discontinued operations, and extraordinary items. Earnings per share information would be
provided for:
net income only.
income from continuing operations and net income only.
income from continuing operations, loss from discontinued operations, and net income only.
income from continuing operations, loss from discontinued operations, extraordinary items, and net income.
: 4
5 of 5

Question 12. Question : (TCO 5) In a statement of cash flows prepared under International Financial Reporting
Standards, each of the following items is typically classified as a financing cash flow except:
interest paid.
dividends paid.
proceeds from the issuance of long-term debt.
dividends received.
: 4
5 of 5
Question 13. Question : (TCO 4) Which is a shareholders’ equity account in the balance sheet?
Paid-in capital
Dividends payable
: 3
5 of 5
Question 14. Question : (TCO 4) Which of the following groups is not among the external users for whom financial
statements are prepared?
Customers
Suppliers
Employees
All of the above are external users of financial statements.
(TCO 5) Misty Company reported the following before-tax items during the current year:
Misty’s effective tax rate is 40% and there were 1,000 shares of common stock outstanding.
What would be Misty’s income before extraordinary item(s)?
Question 2. Question : (TCO 4) Listed below are account balances (in $millions) taken from the records of Symphony
Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment
receivables are current. Symphony uses a perpetual inventory system.
What would Symphony report as total assets? Hint: Don’t forget to deduct the contra assets.
(TCO 4) Explain how management’s discussion and analysis of its operations and liquidity may be helpful to
investors.
Question 2. Question : (TCO 2) What are the key provisions of the Public Company Accounting Reform and Investor
Protection (Sarbanes-Oxley) Act of 2002?
Question 3. Question : (TCO 5) Give an example of a non-cash financing and investing activity and explain when and
how it would be reported in the financial statements.
Question 4. Question : (TCO 3) What is the purpose of the closing process?
final
acct304 final exam
Question 1.1. (TCO 1) The SEC issues accounting standards in the form of (Points : 6)
accounting research bulletins.
financial reporting releases.
financial accounting standards.
financial technical bulletins.
Question 2.2. (TCO 1) When a registrant company submits its annual filing to the SEC, it uses (Points : 6)
Form 10-A.
Form 10-K.
Form 10-Q.
Form S-1.
Question 3.3. (TCO 2) The conceptual framework’s qualitative characteristic of relevance includes (Points : 6)

predictive value.
verifiability.
completeness.
neutrality.
Question 4.4. (TCO 2) Enhancing qualitative characteristics of accounting information include each of the following,
except (Points : 6)
timeliness.
materiality.
comparability.
verifiability.
Question 5.5. (TCO 3) A sale on account would be recorded by (Points : 6)
debiting revenue.
crediting assets.
crediting liabilities.
debiting assets.
Question 6.6. (TCO 3) Prepayments occur when (Points : 6)
cash flow precedes expense recognition.
sales are delayed pending credit approval.
customers are unable to pay the full amount due when goods are delivered.
manufactured goods await quality control inspections.
Question 7.7. (TCO 4) An asset that is not expected to be converted to cash or consumed within 1 year or the
operating cycle is (Points : 6)
goodwill.
accounts receivable.
inventory.
supplies.
Question 8.8. (TCO 4) Which of the following is never a current liability account? (Points : 6)
Accrued payroll
Dividends payable
Prepaid rent
Subscriptions collected in advance
Question 9.9. (TCO 5) The distinction between operating and nonoperating income relates to (Points : 6)
Question 10.10. (TCO 5) On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for
$80 million. The sale was completed on December 31, 2012. The following additional facts pertain to the transaction:
The Footwear Division qualifies as a component of the entity, according to GAAP, regarding discontinued operations.
The book value of Footwear’s assets totaled $48 million on the date of the sale.
Footwear’s operating income was a pre-tax loss of $10 million in 2012.
Foxtrot’s income tax rate is 40%.
In the 2012 income statement for Foxtrot Co., it would report
(Points : 6)
income (loss) on its total operations for the year without separation.
income (loss) on its continuing operation only.
income (loss) from its continuing and discontinued operations separately.
income and gains separately from losses.

Question 11.11. (TCO 5) Operating cash outflows would include (Points : 6)
purchase of investments.
purchase of equipment.
payment of cash dividends.
purchases of inventory.
Question 12.12. (TCO 5) The FASB’s stated preference for reporting operating cash flows is the (Points : 6)
indirect method.
direct method.
working capital method.
all financial resources method.
Question 13.13. (TCO 5) Merchandise sold FOB shipping point indicates that (Points : 6)
the seller pays the freight.
the buyer holds title after the merchandise leaves the seller’s location.
the common carrier holds title until the merchandise is delivered.
the sale is not consummated until the merchandise reaches the point to which it is being shipped.
Question 14.14. (TCO 5) Todd Sweeney is an artist who sells his work under consignment. (He displays his work in
local barbershops, and customers buy the work there.) Sweeney recently transferred a painting to a local barbershop.
After Sweeney has transferred a painting to a barbershop, the painting (Points : 6)
should be counted in Sweeney’s inventory until the barbershop sells it.
should be counted in the barbershop’s inventory, as they now possess it.
should be counted in either Sweeney’s or the barbershop’s inventory, depending on which incurred the cost of
preparing the painting for display.
None of the above
Question 15.15. (TCO 6) Reba wishes to know how much money would be in her savings account if she deposits a
given sum in an account and leaves it there at 6% interest for 5 years. She should use a table for the (Points : 6)
future value of an ordinary annuity of 1.
future value of 1.
future value of an annuity of 1.
present value of an annuity due of 1.
Question 16.16. (TCO 6) Loan A has the same original principal, interest rate, and payment amount as Loan B.
However, Loan A is structured as an annuity due, while Loan B is structured as an ordinary annuity. The maturity
date of Loan A will be (Points : 6)
earlier than Loan B.
later than Loan B.
the same as Loan B.
indeterminate with respect to Loan B.
Question 17.17. (TCO 7) Compensating balances represent (Points : 6)
funds in a bank account that cannot be spent.
balances in a payroll checking account.
accounts that are subject to bank service charges.
accounts on which banks pay interest, such as NOW accounts.
Question 18.18. (TCO 7) Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April
12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What
entry would Oswego make on April 23, assuming the customer made the correct payment on that date?
(Points : 6)
Option a
Option b
Option c

Option d
Question 19.19. (TCO 8) In a periodic inventory system, the cost of purchases is debited to (Points : 6)
purchases.
cost of goods sold.
inventory.
accounts payable.
Question 20.20. (TCO 8) During periods when costs are rising and inventory quantities are stable, cost of goods sold
will be (Points : 6)
higher under FIFO than LIFO.
higher under FIFO than average cost.
lower under average cost than LIFO.
lower under LIFO than FIFO.
Question 21.21. (TCO 8) In applying LCM, market cannot be (Points : 6)
less than net realizable value.
greater than the normal profit.
less than the normal profit margin.
greater than net realizable value.
Question 22.22. (TCO 8) In calculating the cost-to-retail percentage for the retail method, the retail column will not
include (Points : 6)
purchases.
purchase returns.
abnormal shortages.
freight-in.
Question 1. 1. (TCO 8) Fulbright Corp. uses the periodic inventory system. During its first year of operation, Fulbright
made the following purchases (listed in chronological order of acquisition):
 40 units at $100
 70 units at $80
 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory
using the average cost method (rounded)? (Points : 15)
Question 2. 2. (TCO 5) Describe what is meant by unearned revenues, and give two examples. (Points : 28)
Question 3. 3. (TCO 7) Briefly compare and contrast the two allowance estimation approaches to estimating bad debt
expense. In your answer, indicate which approach, if either, is superior and explain your reasoning. (Points : 25)
1. (TCO 8) Briefly explain when there would be a tax benefit from electing LIFO rather than FIFO. (Points : 25)
Question 2. 2. (TCO 4) You are the independent accountant assigned to the audit of Neophyte Company. The
company’s accountant, a graduate of Rival State University, has prepared financial statements that contained the
following questionable items:
1. The balance sheet reports land at $100,000. Included in this amount is a piece of property held for
speculation at a cost of $30,000.
2. Current liabilities include $50,000 for long-term debt that comes due in 3 months. The company has
received a suitable firm commitment to refinance the debt for 5 years and intends to do so.
3. Long-term Investments (non-current) in marketable securities include $20,000 in short-term, high-grade
commercial paper.
Please discuss how the above items should be correctly classified and accounted for. (Points : 25)

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