On June 1, 2012, Nott Corp. loaned Horn $600,000 on a 12% note, - 15803

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The Financial Accounting Standards Board (FASB) was proposed by the

 
Special Study Group on establishment of Accounting Principles (Wheat Committee).
 
Accounting Principles Board.
 
American Institute of Certified Public Accountants.
 
Study Group on the Objectives of Financial Statements.

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

 
The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.
 
The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
 
The SEC reviews financial statements for compliance.
 
The SEC coordinates with the AICPA in establishing accounting standards.

Primary users for general-purpose financial statements include

 
both creditors and investors.
 
investors.
 
creditors.
 
employees.

All the following are differences between financial and managerial accounting in how accounting information is used except to

 
evaluate borrowing capacity to determine the extent of a loan to grant.
 
plan and control company's operations.
 
All the above.
 
decide whether to invest in the company.

Which of the following is not a major challenge facing the accounting profession?

 
Timeliness.
 
Forward-looking information.
 
Accounting for hard assets.
 
Nonfinancial measurements.

Which of these statements regarding the IFRS and U.S. GAAP is correct?

 
IFRS is considered to be "principles-based" and less detailed than US GAAP
 
US GAAP is considered to be "principles-based" and more detailed than IFRS
 
Both US GAAP and IFRS are considered to be "rules-based", but US GAAP tends to be more complex
 
US GAAP is considered to be "rules-based" and less detailed than IFRS

Charging off the cost of a wastebasket with an estimated useful life of 10 years as an expense of the period when purchased is an example of the application of the

 
consistency characteristic.
 
expense recognition principle.
 
historical cost principle.
 
materiality characteristic.

Which of the following are the two components of the revenue recognition principle?

 
Recognition occurs when and earned realized or realizable.
 
Production is complete and there is an active market for the product.
 
Cash is received and the amount is material.
 
Cash is realized or realizable and production is complete.

Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy?

 
Going-concern assumption.
 
Periodicity assumption.
 
Economic entity assumption.
 
Monetary unit assumption.

Which of the following are benefits of providing financial information?

 
Auditing.
 
Disclosure to competition.
 
Potential litigation.
 
Improved allocation of resources.

Which of the following basic elements of financial statements is more associated with the balance sheet than the income statement?

 
Equity.
 
Revenue.
 
Gains.
 
Expenses.

Which of the following statements regarding the IASB and FASB conceptual frameworks is not correct?

 
The FASB conceptual framework discusses the concept of accrual basis accounting in detail, but does not specifically identity it as an assumption.
 
The existing IASB and FASB conceptual frameworks are organized in similar ways.
 
The FASB and IASB agree that the sole objective of financial reporting is to provide users with information that is useful for decision-making.
 
The two assumptions of the IASB framework are that the financial statements are prepared on an accrual basis and that the reporting entity is a going concern.

Stockholders' equity is not affected by all

 
revenues.
 
dividends.
 
expenses.
 
cash receipts.

On June 1, 2012, Nott Corp. loaned Horn $600,000 on a 12% note, payable in five annual installments of $120,000 beginning January 2, 2013. In connection with this loan, Horn was required to deposit $5,000 in a noninterest-bearing escrow account. The amount held in escrow is to be returned to Horn after all principal and interest payments have been made. Interest on the note is payable on the first day of each month beginning July 1, 2012. Horn made timely payments through November 1, 2012. On January 2, 2013, Nott received payment of the first principal installment plus all interest due. At December 31, 2012, Nott's interest receivable on the loan to Horn should be

 
$6,000.
 
$18,000.
 
$12,000.
 
$0.

Pappy Corporation received cash of $18,000 on September 1, 2012 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The December 31, 2012 adjusting entry is

 
debit Rent Revenue and credit Unearned Rent Revenue, $6,000.
 
debit Rent Revenue and credit Unearned Rent Revenue, $12,000.
 
debit Cash and credit Unearned Rent Revenue, $12,000.
 
debit Unearned Rent Revenue and credit Rent Revenue, $6,000.

Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for

 
a prepaid expense.
 
an accrued expense.
 
an accrued revenue.
 
an unearned revenue.

Tate Company purchased equipment on November 1, 2012 and gave a 3-month, 9% note with a face value of $40,000. The December 31, 2012 adjusting entry is

 
debit Interest Expense and credit Interest Payable, $3,600.
 
debit Interest Expense and credit Cash, $600.
 
debit Interest Expense and credit Interest Payable, $600.
 
debit Interest Expense and credit Interest Payable, $900.

Maso Company recorded journal entries for the issuance of common stock for $80,000, the payment of $26,000 on accounts payable, and the payment of salaries expense of $42,000. What net effect do these entries have on owners' equity?

 
increase of $12,000
 
increase of $54,000
 
increase of $38,000
 
increase of $80,000

For Mortenson Company, the following information is available:
Cost of goods sold    $120,000
Dividend revenue    5,000
Income tax expense    12,000
Operating expenses    46,000
Sales    200,000
In Mortenson's multiple-step income statement, gross profit

 
should be reported at $85,000.
 
should be reported at $27,000.
 
should not be reported.
 
should be reported at $80,000.

Leonard Corporation reports the following information:
Correction of overstatement of depreciation expense     
in prior years, net of tax    $  215,000
Dividends declared    160,000
Net income    500,000
Retained earnings, 1/1/12, as reported    2,000,000
Leonard should report retained earnings, 12/31/12, at

 
$1,785,000.
 
$2,340,000.
 
$2,555,000.
 
$2,125,000.


Which of the following is an acceptable method of presenting the income statement?

 
a single-step income statement
 
a multiple-step income statement
 
a consolidated statement of income
 
all of these
Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2012, included the following expense accounts:
Accounting and legal fees    $280,000
Advertising    240,000
Freight-out    150,000
Interest    120,000
Loss on sale of long-term investments    60,000
Officers' salaries    360,000
Rent for office space    360,000
Sales salaries and commissions    220,000
One-half of the rented premises is occupied by the sales department.
How much of the expenses listed above should be included in Perry's general and administrative expenses for 2012?

 
$880,000
 
$940,000
 
$1,000,000
 
$820,000


Which of the following is a change in accounting principle?

 
a change from straight-line to double-declining-balance
 
a change from FIFO to LIFO and a change from straight-line to double-declining- balance
 
a change from FIFO to LIFO
 
a change in the estimated service life of machinery


Leonard Corporation reports the following information:
Correction of overstatement of depreciation expense     
in prior years, net of tax    $  215,000
Dividends declared    160,000
Net income    500,000
Retained earnings, 1/1/12, as reported    2,000,000
Leonard should report retained earnings, 1/1/12, as adjusted at

 
$2,555,000.
 
$2,215,000.
 
$1,785,000.
 
$2,000,000.


The iGAAP income statement classification of expenses by nature results in descriptions which include all of the following except

 
depreciation.
 
utilities.
 
salaries.
 
distribution.


                                       

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