1. Companies follow both the matching
principle and the materiality constraint when applying the direct write-off
method.
True
False
2. All of the following statements regarding recognition of receivables under
U.S. GAAP and IFRS are True except:
U.S. GAAP and IFRS have similar asset criteria that apply to recognition of
receivables.
Receivables that arise from revenue-generating activities are subject to
broadly similar criteria for U.S. GAAP and IFRS.
The realization principle
under IFRS implies an arm's length transaction occurs.
Both refer to the realization principle and an earnings process.
Differences arise mainly from industry-specific guidance under U.S. GAAP.
3. Land is not subject to depreciation because it has an unlimited life. This
means that items which increase the usefulness of the land such as parking lots
are not depreciated.
True
False
4. Depreciation is higher and income is lower in the short run when using
accelerated versus straight-line methods.
True
False
5. A contingent liability is a potential obligation that depends on a future
event arising from a future transaction or event.
True
False
6. A payroll register usually shows the pay period dates, hours worked, gross
pay, deductions, and net pay of each employee for every pay period.
True
False
7. A potential lawsuit claim is recorded when the claim can be reasonably
estimated and it is reasonably possible.
True
False
8. An employee earned $47,000 during the year working for an employer. The FICA
tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is
1.45%. The employee's annual FICA taxes amount is:
$681.50.
$2,914.00.
$3,595.50.
$7,191.00.
Zero, since the employee's pay exceeds the FICA limit.
9. The total amount of cash and other assets received by a corporation from its
stockholders in exchange for its stock is:
Always equal to its par value.
Always equal to its stated value.
Referred to as paid-in
capital.
Referred to as retained earnings.
Always below its stated value.
10. Disadvantages of a partnership include:
Limited life.
Mutual agency.
Unlimited liability.
Co-ownership of property.
All of these.
11. When a partner leaves a partnership, the present partnership ends.
True
False
12. Par value of a stock refers to the:
Issue price of the stock.
Value assigned per share
of stock by the corporate charter.
Market value of the stock on the date of the financial statements.
Maximum selling price of the stock.
Dividend value of the stock.
13. A debit balance in retained earnings is referred to as a retained earnings
deficit.
True
False
14. A company had a beginning balance in retained earnings of $43,000. It had
net income of $6,000 and paid out cash dividends of $5,625 in the current
period. The ending balance in retained earnings equals:
$54,625.
$42,625.
$11,625.
$43,375.
$49,000.
principle and the materiality constraint when applying the direct write-off
method.
True
False
2. All of the following statements regarding recognition of receivables under
U.S. GAAP and IFRS are True except:
U.S. GAAP and IFRS have similar asset criteria that apply to recognition of
receivables.
Receivables that arise from revenue-generating activities are subject to
broadly similar criteria for U.S. GAAP and IFRS.
The realization principle
under IFRS implies an arm's length transaction occurs.
Both refer to the realization principle and an earnings process.
Differences arise mainly from industry-specific guidance under U.S. GAAP.
3. Land is not subject to depreciation because it has an unlimited life. This
means that items which increase the usefulness of the land such as parking lots
are not depreciated.
True
False
4. Depreciation is higher and income is lower in the short run when using
accelerated versus straight-line methods.
True
False
5. A contingent liability is a potential obligation that depends on a future
event arising from a future transaction or event.
True
False
6. A payroll register usually shows the pay period dates, hours worked, gross
pay, deductions, and net pay of each employee for every pay period.
True
False
7. A potential lawsuit claim is recorded when the claim can be reasonably
estimated and it is reasonably possible.
True
False
8. An employee earned $47,000 during the year working for an employer. The FICA
tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is
1.45%. The employee's annual FICA taxes amount is:
$681.50.
$2,914.00.
$3,595.50.
$7,191.00.
Zero, since the employee's pay exceeds the FICA limit.
9. The total amount of cash and other assets received by a corporation from its
stockholders in exchange for its stock is:
Always equal to its par value.
Always equal to its stated value.
Referred to as paid-in
capital.
Referred to as retained earnings.
Always below its stated value.
10. Disadvantages of a partnership include:
Limited life.
Mutual agency.
Unlimited liability.
Co-ownership of property.
All of these.
11. When a partner leaves a partnership, the present partnership ends.
True
False
12. Par value of a stock refers to the:
Issue price of the stock.
Value assigned per share
of stock by the corporate charter.
Market value of the stock on the date of the financial statements.
Maximum selling price of the stock.
Dividend value of the stock.
13. A debit balance in retained earnings is referred to as a retained earnings
deficit.
True
False
14. A company had a beginning balance in retained earnings of $43,000. It had
net income of $6,000 and paid out cash dividends of $5,625 in the current
period. The ending balance in retained earnings equals:
$54,625.
$42,625.
$11,625.
$43,375.
$49,000.
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