Question 1 1 out of 1 points Theoretically, a bond payable should be reported at the present value of the interest discounted at Answer

Selected Answer: Effective interest rate for both principal and interest Correct Answer: Effective interest rate for both principal and interest Question 2 1 out of 1 points When it is necessary to impute an interest rate in connection with a note payable, the rate should be Answer Selected Answer:

At least equal to the rate at which the debtor can obtain financing of a similar nature from other sources at the date of the transaction

Correct Answer:

At least equal to the rate at which the debtor can obtain financing of a similar nature from other sources at the date of the transaction

Question 3 1 out of 1 points Under a troubled debt restructuring that results in a modification of terms the debtor will report interest expense when

Answer Selected Answer: The debtor reports no gain on restructuring. Correct Answer: The debtor reports no gain on restructuring. Question 4 1 out of 1 points Ace Corporation has a debt to total assets ratio of 65%. This tells the user of Aces financial statements Answer Selected Answer: There is a risk Ace cannot pay its debts as they come due Correct Answer: There is a risk Ace cannot pay its debts as they come due Question 5 1 out of 1 points In general, derivative instruments are Answer Selected Answer:

Reported in the balance sheet at fair value and changes in their fair value are reported in earnings.

Correct Answer:

Reported in the balance sheet at fair value and changes in their fair

value are reported in earnings. Question 6 1 out of 1 points A threat of expropriation of assets that is reasonably possible, and for which the amount of loss can be reasonably estimated, is an example of a (an) Answer Selected Answer: Loss contingency that should be disclosed, but not accrued Correct Answer: Loss contingency that should be disclosed, but not accrued Question 7 1 out of 1 points For a trouble debt restructuring involving only modification of terms, it is appropriate for a debtor to recognize a gain when the carrying amount of the debt Answer Selected Answer:

Is less than the total future cash payments specified by the new terms

Correct Answer: Is less than the total future cash payments specified by the new terms Question 8 1 out of 1 points An unearned revenue is an example of a(an)

Answer Selected Answer: Deferred credit. Correct Answer: Deferred credit. Question 9 1 out of 1 points If bonds are issued initially at a discount and the straight-line method of amortization is used for the discount, interest expense in the earlier years will be Answer Selected Answer: Greater than if the compound interest method were used Correct Answer: Greater than if the compound interest method were used Question 10 1 out of 1 points The current accounting treatment for convertible debt is to treat it as straight debt. This treatment can be defended on what basis? Answer Selected Answer: The debt instrument and the option to convert are not separable. Correct Answer: The debt instrument and the option to convert are not separable.

Question 11 1 out of 1 points Current accounting treatment for gain contingencies is different from the accounting treatment for loss contingencies. Which accounting concept is this differential concept consistent with? Answer Selected Answer: Conservatism Correct Answer: Conservatism Question 12 1 out of 1 points ABC Company has a note payable that is due six months after its year end. Under which of the following conditions will ABC be able to classify the note as a long term debt. Answer Selected Answer:

ABC can classify the note as long term because management intends to refinance it with long term debt and has an agreement to do so with a qualified creditor.

Correct Answer:

ABC can classify the note as long term because management intends to refinance it with long term debt and has an agreement to do so with a qualified creditor.

Question 13 1 out of 1 points

Unamortized debt discount should be reported on the balance sheet of the issuer as Answer Selected Answer: A deferred charge Correct Answer: A deferred charge Question 14 1 out of 1 points An example of an item that is not a liability is Answer Selected Answer: Dividends payable in stock Correct Answer: Dividends payable in stock Question 15 1 out of 1 points When the issuer of bonds exercises the call provision to retire the bonds, the excess of the cash paid over the carrying amount of the bonds should be recognized separately as a (an) Answer Selected Answer: Loss from continuing operations Correct Answer:

Loss from continuing operations Question 16 1 out of 1 points A net operating loss carryover that occurs in a companys second year of operations Answer Selected Answer:

May cause a company to report a tax benefit in the current period income statement.

Correct Answer:

May cause a company to report a tax benefit in the current period income statement.

Question 17 1 out of 1 points A company has four deferred income tax accounts arising from timing differences involving (1) current assets, (2) noncurrent assets, (3) current liabilities, and (4) noncurrent liabilities. The presentation of these four deferred income tax accounts in the statement of financial position should be shown as Answer Selected Answer: A net current and a net noncurrent amount Correct Answer: A net current and a net noncurrent amount Question 18 1 out of 1 points

Which of the following is not an argument that an advocate of nonallocation of deferred taxes might use to support his/her position? Answer Selected Answer:

Income taxes are an expense of doing business and should be treated the same as other expenses of doing business under accrual accounting.

Correct Answer:

Income taxes are an expense of doing business and should be treated the same as other expenses of doing business under accrual accounting.

Question 19 1 out of 1 points Income tax allocation procedures are not appropriate when Answer Selected Answer:

Differences between net income for tax purposes and financial reporting occur that will not reverse.

Correct Answer:

Differences between net income for tax purposes and financial reporting occur that will not reverse.

Question 20 1 out of 1 points Which of the following will result in a deferred tax asset? Answer Selected

Answer:

Reporting an expected loss on from a lawsuit in the income statement, when it cannot be reported on the tax return until it is actually incurred.

Correct Answer:

Reporting an expected loss on from a lawsuit in the income statement, when it cannot be reported on the tax return until it is actually incurred.

Question 21 1 out of 1 points A companys only temporary difference results from using double declining balance depreciation for tax purposes and straight-line depreciation for financial reporting. The company purchases new plant assets each year. If currently enacted tax law will result in a higher tax rate for all future tax years, which accounting approach for deferred taxes will result in the lowest net income for this current year? Answer Selected Answer:

Comprehensive allocation of deferred taxes under the asset/liability method.

Correct Answer: Comprehensive allocation of deferred taxes under the asset/liability method. Question 22 1 out of 1 points A machine with a 10-year useful life is being depreciated on a straight-line basis for financial statement purposes, and over 5 years for income tax purposes under the accelerated recovery cost system. Assuming that the company is profitable and that there are and have been no other timing differences, the related deferred income taxes would be reported in the balance sheet at the end of the first year of the estimated useful life as a Answer

Selected Answer: Noncurrent liability Correct Answer: Noncurrent liability Question 23 1 out of 1 points Which of the following is not affected by tax allocation within a period? Answer Selected Answer: Operating revenues Correct Answer: Operating revenues Question 24 1 out of 1 points Intraperiod tax allocation arises because Answer Selected Answer:

Certain revenues and expenses appear in the financial statements either before or after they are included in taxable income

Correct Answer:

Certain revenues and expenses appear in the financial statements either before or after they are included in taxable income

Question 25

1 out of 1 points A company that has both short-term deferred tax assets of $22,000, long-term deferred tax liabilities of $36,000, short-term deferred tax liabilities of $51,000 and short-term deferred tax assets of $60,000 should report Answer Selected Answer: A current liability for $14,000 and a long-term asset for $9,000. Correct Answer: A current liability for $14,000 and a long-term asset for $9,000. Question 26 1 out of 1 points Which of the following would cause a deferred tax expense? Answer Selected Answer:

Use of equity method where undistributed earnings of a 30 percent owned investee are related to probable future dividends

Correct Answer:

Use of equity method where undistributed earnings of a 30 percent owned investee are related to probable future dividends

Question 27 1 out of 1 points With respect to the difference between taxable income and pretax accounting income, the tax effect of the undistributed earnings of a subsidiary included in consolidated income should normally be Answer

Selected Answer: Accounted for as a timing difference Correct Answer: Accounted for as a timing difference Question 28 1 out of 1 points The tax effect of a difference between taxable income and pretax accounting income attributable to losses of a subsidiary is normally recognized for Answer Selected Answer: Both carrybacks and carryforwards Correct Answer: Both carrybacks and carryforwards Question 29 1 out of 1 points Which of the following is an argument that an advocate of interperiod income tax allocation might use to support his/her position? Answer Selected Answer:

Income taxes are an expense of doing business and should be treated the same as other expenses of doing business under accrual accounting.

Correct Answer:

Income taxes are an expense of doing business and should be treated the

same as other expenses of doing business under accrual accounting. Question 30 1 out of 1 points Which of the following causes a permanent difference between taxable income and financial accounting income? Answer Selected Answer:

A life insurance premium paid by the corporation on a policy that names the corporation as the beneficiary.

Correct Answer:

A life insurance premium paid by the corporation on a policy that names the corporation as the beneficiary.