1. The financial statement presentation of a change in depreciation methods is most similar to that of reporting: (Points : 1)

      Changes in accounting estimates.

      Prior period adjustments.

      Correction of errors.

      Extraordinary items.

2. Merchandise sold FOB destination indicates that: (Points : 1)

      The seller holds title until the merchandise is received at the buyer’s location.

      The buyer is responsible for delivery of the merchandise to the destination.

      The full order is back ordered to its destination.

      The buyer pays the freight to the destination.

3. The financial statement presentation of a change in reporting entity is most similar to the reporting of a: (Points : 1)

      A change in accounting principles.

      Change in accounting estimate.

      Discontinued business operation.

      Correction of a material error discovered after the year the error was made.

4. Using the completed contract method of accounting for long-term contracts: (Points : 1)

      Losses are recognized before the contract is completed.

      Expenses are recorded each period, but revenue is only recognized when the contract is completed.

      Is not permitted under generally accepted accounting principles.

      Neither gains nor losses are recognized until the contract is completed.

5. Which of the following is not true about EPS? (Points : 1)

      It must be reported by all corporations whose stock is publicly traded.

      It must be reported separately for discontinued operations.

      It must be reported separately for extraordinary items.

      All of the above are true.

6. Indiana Co. began a construction project in 2006 that will provide it $150 million when it is completed in 2008. During 2006, Indiana incurred $36 million of costs and estimates an additional $84 million of costs to complete the project.

Using the percentage-of-completion method, Indiana: (Points : 1)

      Recognized no gross profit or loss on the project in 2006.

      Recognized $6 million loss on the project in 2006.

      Recognized $9 gross profit on the project in 2006.

      Recognized $36 million loss on the project in 2006.

7. Shady Lane’s income taxes payable account decreased from $14 million to $12 million during 2006. If its income tax expense was $80 million, what would be shown as an operating cash flow under the direct method? (Points : 1)

      A cash outflow of $12 million.

      A cash outflow of $78 million.

      A cash outflow of $80 million.

      A cash outflow of $82 million.

8. Cash flows from investing does not include cash flows from: (Points : 1)

      Lending.

      The sale of equipment.

      Borrowing.

      The purchase of other corporation’s securities.

9. Bert’s Meat Market sells quarters and sides of beef on the installment basis. Losses on receivables are very difficult to predict, and meat products cannot be repossessed. The revenue recognition method used by Bert would be: (Points : 1)

      Point of sale.

      Installment sales.

      Cost recovery.

      Completed contract.

10. Indiana Co. began a construction project in 2006 that will provide it $150 million when it is completed in 2008. During 2006, Indiana incurred $36 million of costs and estimates an additional $84 million of costs to complete the project.

In 2007, Indiana incurred costs of $58.5 million and estimated an additional $40.5 million in costs to complete the project. Using the percentage-of-completion method, Indiana: (Points : 1)

      Recognized $15 million gross profit on the project in 2007.

      Recognized $13.5 million gross profit on the project in 2007.

      Recognized $6 million gross profit on the project in 2007.

      Recognized $1.5 million gross profit on the project in 2007.