28689009-Mock-Board - MOCK BOARD EXAMINATION FINANCIAL...

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MOCK BOARD EXAMINATION FINANCIAL ACCOUNTING THEORY 1. The currently reported net income is based on a. Financial capital c. Borrowed capital b. Physical capital d. Invested and borrowed capital 2. Before 2005, Glen D. Company used the cash basis of accounting As of December 31,2005, Glen D changed to the accrual basis. Glen D cannot determine the beginning supplies inventory. What is the effect of Glen D’s in ability to determine beginning supplies inventory on its 2005 accrual basis net income and December 31, 2005, accrual basis owners’ equity? 2005 net income 12/31/05 owners’ equity 3. The premium on a three-year insurance policy expiring on December 31, 2004 was paid in total on January 1, 2002. The original payment was initially debited to a prepaid asset account. The appropriate journal entry has been recorded on December 31, 2002. The balance in the prepaid asset account on December 31, 2002 should be 4. In a statement of cash flow which of the following items is reported as cash flow from financing activities? I. Payments to retire mortgage notes II. Interest payments on mortgage notes III. Dividends payments 5. A business combination is accounted for appropriately as a purchase. Which of the following should be deducted in determining the combined corporation’s net income for the current period? Direct cost General expenses Of acquisition related to acquisition a. Yes No b. Yes Yes c. No Yes d. No No 6. On January 1,2005, XYZ Company signed a 5-year contract enabling it to use patented manufacturing process beginning in 2005. A royalty is payable for each product produced, subject to a minimum annual Fee. Any royalties in excess of the minimum will be paid annually. On the contract date, XYZ prepaid a sum equal to two years’ minimum annual fees. In 2005, only minimum fees were incurred. The royalty prepayment should be reported on the December 31, 2005 financial statements as
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