Which of the following statements is true when comparing

Which of the following statements is true when comparing the accounting for leasing transactions under U.S. GAAP with IFRS? The IFRS leasing standard is the subject of over 30 interpretations since its issuance in 1982. IFRS for leases is more rules-based than U.S. GAAP and includes many bright-line criteria to determine ownership. IFRS does not provide detailed guidance for leases of natural resourcessale-leasebacks and leveraged leases. IFRS requires that companies provide a year-by-year breakout of future noncancelable lease payments due in years 1 through 5. Question 2 A lessor with a sales-type lease involving an unguaranteed residual value available to the lessor at the end of the lease term will report sales revenue in the period of inception of the lease at which of the following amounts? The minimum lease payments plus the unguaranteed residual value. The present value of the minimum lease payments. The cost of the asset to the lessor less the present value of any unguaranteed residual value. The present value of the minimum lease payments plus the present value of the unguaranteed residual value. Question 3 Which of the following is an advantage of leasing? Off-balance-sheet financing Less costly financing 100% financing at fixed rates All of these Question 4 Which of the following is a correct statement of one of the capitalization criteria? The minimum lease payments (excluding executory costs) equal or exceed 90% of the fair value of the leased property. The lease transfers ownership of the property to the lessor. The lease contains a purchase option. The lease term is equal to or more than 75% of the estimated economic life of the leased property. Question 5 Hull Co. leased equipment to Riggs Company on May 1 2013. At that time the collectibility of the minimum lease payments was not reasonably predictable. The lease expires on May 1 2014. Riggs could have bought the equipment from Hull for $4000000 instead of leasing it. Hull’s accounting records showed a book value for the equipment on May 1 2010 of $3500000. Hull’s depreciation on the equipment in 2013 was $450000. During 2013 Riggs paid $900000 in rentals to Hull for the 8-month period. Hull incurred maintenance and other related costs under the terms of the lease of $80000 in 2013. After the lease with Riggs expires Hull will lease the equipment to another company for two years. Ignoring income taxes the amount of expense incurred by Riggs from this lease for the year ended December 31 2013 should be $360000. $900000. $296000. $656000. Question 6 Metro Company a dealer in machinery and equipment leased equipment to Sands Inc. on July 1 2013. The lease is appropriately accounted for as a sale by Metro and as a purchase by Sands. The lease is for a 10-year period (the useful life of the asset) expiring June 30 2023. The first of 10 equal annual payments of $828000 was made on July 1 2013. Metro had purchased the equipment for $5200000 on January 1 2013 and established a list selling price of $7200000 on the equipment. Assume that the present value at July 1 2013 of the rent payments over the lease term discounted at 8% (the appropriate interest rate) was $6000000. What is the amount of profit on the sale and the amount of interest income that Metro should record for the year ended December 31 2013? $0 and $206880 $800000 and $240000 $1200000 and $480000 $800000 and $206880 Question 7 Haystack Inc. owns 30% of the outstanding stock of Hallmark Inc. and accordingly uses the equity method to account for its investment. The stock was purchased on January 1 2013 for $780000. During the year ended December 31 2013 Hallmark Inc. reported the following: Dividends declared and paid $ 400000 Net income 2400000 Haystack Inc. uses the FIFO method for costing its inventories while Hallmark Inc. uses the LIFO method to conform with other companies in its industry. Haystack Inc. determines that if Hallmark Inc. had used the FIFO method its income would have been $350000 higher during 2013. What is the balance in the Investment in Hallmark Inc. that will be reported on Haystack Inc.’s balance sheet at December 31 2013 assuming Haystack Inc. follows U.S. GAAP for its external financial reporting? $1725000 $1485000 $1275000 $1380000 Question 8 Link Co. purchased machinery that cost $1350000 on January 4 2011. The entire cost was recorded as an expense. The machinery has a nine-year life and a $90000 residual value. The error was discovered on December 20 2013. Ignore income tax considerations. Link’s income statement for the year ended December 31 2013 should show the cumulative effect of this error in the amount of $930000. $1210000. $1070000. $0. Question 9 Link Co. purchased machinery that cost $1350000 on January 4 2011. The entire cost was recorded as an expense. The machinery has a nine-year life and a $90000 residual value. The error was discovered on December 20 2013. Ignore income tax considerations. Before the correction was made and before the books were closed on December 31 2013 retained earnings was understated by $1350000. $1070000. $1210000. $930000. 0 Which type of accounting change should always be accounted for in current and future periods? change in accounting estimate correction of an error change in reporting entity change in accounting principle 1 Langley Company’s December 31 year-end financial statements contained the following errors: Dec. 31 2012 Dec. 31 2013 Ending inventory $15000 understated $22000 overstated Depreciation expense 4000 understated An insurance premium of $36000 was prepaid in 2012 covering the years 2012 2013 and 2014. The prepayment was recorded with a debit to insurance expense. In addition on December 31 2013 fully depreciated machinery was sold for $19000 cash but the sale was not recorded until 2014. There were no other errors during 2013 or 2014 and no corrections have been made for any of the errors. Ignore income tax considerations. What is the total net effect of the errors on the amount of Langley’s working capital at December 31 2013? Working capital understated by $24000 Working capital overstated by $3000 Working capital overstated by $10000 Working capital understated by $9000 2 Which of the following disclosures is required for a change from LIFO to FIFO? the cumulative effect on prior years net of tax in the current retained earnings statement the justification for the change restated prior year income statements All of these are required. 3 The net income for the year ended December 31 2013 for Oliva Company was $1500000. Additional information is as follows: Depreciation on plant assets $600000 Amortization of leasehold improvements 340000 Provision for doubtful accounts on short-term receivables 120000 Provision for doubtful accounts on long-term receivables 100000 Interest paid on short-term borrowings 80000 Interest paid on long-term borrowings 60000 Based solely on the information given above what should be the net cash provided by operating activities in the statement of cash flows for the year ended December 31 2013? $2560000 $2640000 $2800000 $2660000 4 The balance in retained earnings at December 31 2012 was $720000 and at December 31 2013 was $582000. Net income for 2013 was $500000. A stock dividend was declared and distributed which increased common stock $250000 and paid-in capital $110000. A cash dividend was declared and paid. The amount of the cash dividend was $388000. $248000. $638000. $278000. 5 The primary purpose of the statement of cash flows is to provide information about the operating investing and financing activities of an entity during a period. about the entity’s ability to meet its obligations its ability to pay dividends and its needs for external financing. about the cash receipts and cash payments of an entity during a period. that is useful in assessing cash flow prospects. 6 In reporting extraordinary transactions on a statement of cash flows (indirect method) the net of tax amount of an extraordinary gain should be deducted from net income. net of tax amount of an extraordinary gain should be added to net income. gross amount of an extraordinary gain should be added to net income. gross amount of an extraordinary gain should be deducted from net income. 7 The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) addition to net income. financing activity. deduction from net income. investing activity. 8 Surf Company follows IFRS for its external financial reporting. The following amounts were available at December 31 2013: Interest paid $22000 Dividends paid 16000 Taxes paid 37000 Under IFRS what is the maximum amount that could be reported for cash used by operating activities for Surf Company for the year ended December 31 2013? $53000 $38000 $75000 $59000 9 Correct. Information for Ramirez Corp. is given below: Ramirez Corp. Balance Sheet December 31 2013 Assets Equities Cash $100000 Accounts payable $210000 Accounts receivable (net) 650000 Federal income tax payable 63000 Inventories 813000 Miscellaneous accrued payables 75000 Plant and equipment Bonds payable (10% due 2015)625000 net of depreciation 661000 Preferred stock ($100 par 6% Patents87000 cumulative nonparticipating) 250000 Other intangible assets25000 Common stock (no par 20000 Total Assets $2336000 shares authorized issued and outstanding) 375000 Retained earnings 813000 Treasury stock-500 shares of preferred (75000) Total Equities $2336000 Ramirez Corp. Income Statement Year Ended December 31 2013 Net sales $3000000 Cost of goods sold 2000000 Gross profit 1000000 Operating expenses (including bond interest expense)500000 Income before income taxes 500000 Income tax 150000 Net income $350000 Additional information: There are no preferred dividends in arrears the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1 2013 and there were no changes in the Bonds Payable Preferred Stock or Common Stock accounts during 2013. Assume that preferred dividends for the current year have not been declared. The rate of return for 2013 based on the year-end common stockholders’ equity was 350 1173. 350 1188. 335 1173. 335 1188. Question 20 A$n example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the method used for pricing inventory. composition of inventory into raw materials work-in-process and finished goods. major backlogs of inventory orders. amount of income resulting from the involuntary liquidation of LIFO. Question 21 During 2013 Quirk Incorporated purchased $3400000 of inventory. The cost of goods sold for 2013 was $3600000 and the ending inventory at December 31 2013 was $400000. What was the inventory turnover for 2013? 7.2. 6.4. 9.0. 6.0. Question 22 Correct. If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole the opinion is said to be qualified. unqualified. adverse. exceptional. Question 23 Correct. The rate of return on common stock equity is calculated by dividing net income by ending common stockholders’ equity. net income less preferred dividends by average common stockholders’ equity. net income less preferred dividends by ending common stockholders’ equity. net income by average common stockholders’ equity. Question 24 Correct. Companies should disclose all of the following in interim reports except basic and diluted earnings per share. changes in accounting principles. post-balance-sheet events. seasonal revenue cost or expenses. Question 25 Correct. IFRS requires which of the following disclosures regarding related parties? I. The name of the related party. II. The amount and terms of the outstanding balance. III. Doubtful amounts related to the outstanding balance. I and II. I and III. I II and III. II and III.

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