10 Jan d. General information

Module 1 Case Assignments

Chapter 1: Case 1-2 (page 28)

Chapter 8: Case 8-1 (page 301-302)

Module 2 Case Assignments

Chapter 2: Case 2-4 (page 76)

Chapter 2: Case 2-6 (page 76-77)

Module 3 Case Assignments

Chapter 3: Case 3-1 (page 113)

Chapter 3: Case 3-2 (page 113)

Module 4 Case Assignments

Chapter 4: Case 4-4 (page 144)

Chapter 10: Case 10-6 (page 372-373)

Module 5 Case Assignments

Chapter 5: Case 5-1 (page 177)

Chapter 5: Case 5-8 (page 180)

Module 6 Case Assignments

Chapter 6: Case 6-2 (page 221-223)

Chapter 6: Case 6-4 (page 223)

Module 7 Case Assignments

Chapter 7: Case 7-2 (page 274-275)

Chapter 7: Case 7-5 (page 276)

Module 8 Case Assignments

Chapter 15: Case 15-12 (page 546-547)

Chapter 17: Case 17-4 (page 633)

Midterm quiz

Question 1 Which of the following was not a criticism of the development of accounting standards by the Accounting Principles Board?

Harmonization. The accounting standards developed were dissimilar to those developed by the International Accounting Standards Committee.

Response time. The emerging accounting problems were not being investigated and solved quickly enough by the part-time members.

The independence of the members of the APB. The individuals serving on the board had full-time responsibilities elsewhere that might influence their views of certain issues.

The structure of the board. The largest eight public accounting firms (at that time) were automatically awarded one member, and there were usually five or six other public accountants on the APB.

Question 2 Which of the following is the professional organization of university accounting professors?

Financial Executives Institute

American Accounting Association

American Institute of Certified Public Accountants

American Institute of Accountants

Question 3 The net realizable value of receivables is calculated as the face value of the receivables less adjustments for:

credit sales.

actual uncollected amounts adjusted for purchase discounts.

estimated uncollectible accounts.

bad debts already written off.

Question 4 Who was the author of Accounting Research Study No. 1, The Basic Postulates of Accounting?

Maurice Moonitz

Thomas Hatfield

Robert Sprouse

Alvin Jennings

Question 5 What is the objective of financial reporting?

Provide information that excludes claims to the resources

Provide information that is useful to management in making decisions

Provide information that clearly portrays nonfinancial transactions

Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors

Question 6 What is the name given to the agreement between the FASB and IASC to harmonize accounting standards?

The Paris Accords

The Norwalk Agreement

The Washington DC agreement

The London agreement

Question 7 Which of the following is not a qualitative characteristic contained in the IASB’s Framework for the Preparation of Financial Statements?

Understandability

Reliability

Relevance

Timeliness

Question 8 Which of the following research approaches is attributed to DR Scott?

Inductive

Deductive

Ethical

Pragmatic

Question 9 Which of the following outcomes of providing accounting information is an attempt to identify individual securities that are mispriced by reviewing all available financial information?

Capital asset pricing model

Agency theory

Efficient markets

Fundamental analysis

Question 10 A trading security is measured at fair value on the balance sheet date and reported as:

a current asset, and changes in fair value are reported in accumulated other comprehensive income as unrealized gains and losses.

either a current or noncurrent asset depending on whether it meets the definition of a current asset.

a current asset, and changes in fair value are reported in earnings as unrealized gains and losses.

a current asset, and changes in fair value are reported in earnings as realized gains and losses.

Question 11 What is goodwill?

How is the recorded value of goodwill determined?

How is goodwill written off under the provisions of SFAS No. 142 now FASB ASC 350?

Final exam

Question 1 One concept of income suggests that income be measured by determining the net change over time in the discounted present value of net cash flow expected to be received by the firm. Under this concept of income, which of the following, ignoring income taxes, would not affect the amount of income for a period?

Question 1 options:

Windfall gains and losses due to external causes

Providing services to outsiders and investments of the funds received

The method used to depreciate property, plant, and equipment

Production of goods or services not yet sold and not yet delivered to customers or clients

Question 2 The one-time overstatement of restructuring charges to reduce assets, which reduces future expenses, is the definition of which of the following earnings management techniques?

Question 2 options:

Taking a bath

Creative acquisition accounting

Creasing “cookie jar” reserves

Abusing the materiality concept

Question 3 If year one sales equal $800,000, year two sales equal $840,000 and year three sales equal $896,000, the percentage to be assigned for year two in a sales trend analysis, assuming that year one is the base year, is:

Question 3 options:

105%.

89%.

100%.

112%.

Question 4 The phrase events and transactions that are distinguished by both their unusual nature and their

infrequency of occurrence describes:

Question 4 options:

extraordinary items.

changes in accounting principles.

prior period adjustments.

prior period adjustments.

Question 5 The valuation basis used in conventional financial statements is:

Question 5 options:

original cost.

market value.

replacement cost.

a mixture of costs and values.

Question 6 A basic objective of the statement of cash flows is to:

Question 6 options:

disclose changes during the period in all asset and all liability accounts.

disclose the change in working capital during the period.

provide essential information in financial statements for those making economic decisions.

supplant the income statement and balance sheet.

Question 7 The calculation net income/average total assets is the formula for which of the following ratios?

Question 7 options:

Profit margin

Asset turnover

Asset usage

Return on assets

Question 8 Under the residual equity theory:

Question 8 options:

equities are viewed as restrictions on assets.

a business is viewed as a social institution.

a manager’s goals are considered as important as those of the common stockholders.

management is responsible for maximizing the wealth of common stockholders.

Question 9 As a minimum, how large in relation to total outstanding shares may a stock distribution be before it should be accounted for as a stock split instead of a stock dividend?

Question 9 options:

No less than 2 to 5 percent

No less than 20 to 25 percent

No less than 10 to 15 percent

No less than 45 to 50 percent

Question 10 Which of the following should be disclosed in the Summary of Significant Accounting Policies?

Composition of plant assets

Maturity dates of long-term debt

Basis of consolidation

Pro forma effect of retroactive application of an accounting change

Question 11 List and discuss the types of information commonly disclosed in the footnotes to corporate financial statements. Focus on the following:

a. Accounting policies

b. Schedules and exhibits

c. Explanation of financial statement items

d. General information about the company

Module 7 discussion

Consider management’s responsibility when it comes to the use of estimates (e.g., estimated uncollectibles, percentage-of-completion method, life of an asset, etc).

Describe the incentives management has to misrepresent estimates.

With the core values of responsible stewardship and integrity in mind, discuss controls and procedures companies can put in place to prevent misrepresentation of these estimates.

Module 8 discussion

Discuss the theories of equity. Do you prefer one over the other? Why?