Hock Section A Questions.pdf - Hock 2020 Part 1 Section A \u2013 External Financial Reporting Decisions Questions only Financial Statements Other Than

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Unformatted text preview: Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only Financial Statements - Other Than Statement of Cash Flows Financial Statements - Statement of Cash Flows Financial Statements - Integrated Reporting Cash & Cash Equiv., Accounts Receivable, and Inventory Investments, PP&E (Fixed Assets), and Intangible and Other Assets Liabilities and Taxes Profitability Ratios and Profitability Analysis Owners' Equity Revenue Recognition 22 45 9 62 57 27 1 31 7 276 Financial Statements - Other Than Statement of Cash Flows 1. Question ID: ICMA 19.P1.010 (Topic: Financial Statements - Other Than Statement of Cash Flows) A company is preparing its financial statements in accordance with U.S. GAAP. Listed below are select financial data for the company. Net income = $950,000 Depreciation = $40,000 Investment by owners = $60,000 Unrealized gain on available-for-sale securities = $90,000 Foreign currency translation loss = $20,000 What is the amount that would be reported as comprehensive income? A. $1,120,000. B. $1,020,000. C. $1,060,000. D. $970,000. 2. Question ID: ICMA 19.P1.002 (Topic: Financial Statements - Other Than Statement of Cash Flows) An income statement could be used by an external investor for all of the following purposes except to A. analyze the company’s performance compared to the budget. B. assess the risk of the company achieving future profitability. C. compare the company’s results to those of its competitors. D. predict the company’s future revenues. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 3. Question ID: HOCK LR P2E 1 (Topic: Financial Statements - Other Than Statement of Cash Flows) The balance sheet (or statement of financial position) helps users to assess the liquidity, financial flexibility, solvency and risk of a company. A company with financial flexibility has the ability to A. decide whether to settle a liability or write it off. B. respond to unexpected needs and opportunities. C. choose the valuation methods it will use to report its assets. D. meet its financial obligations as they come due. 4. Question ID: CIA 1192 P4 Q37 (Topic: Financial Statements - Other Than Statement of Cash Flows) Because of inexact estimates of the service life and the residual value of a plant asset, a fully depreciated asset was sold in the current year at a material gain. This gain should be reported: A. As part of sales revenue on the current year income statement. B. In the income from continuing operations section of the current year income statement. C. As an adjustment to prior periods' depreciation on the statement of retained earnings. D. As an unusual or infrequent event in the unusual and infrequent events section of the current year income statement. 5. Question ID: ICMA 10.P2.004 (Topic: Financial Statements - Other Than Statement of Cash Flows) The statement of changes in stockholders' equity shows a A. listing of all stockholders' equity accounts and their corresponding dollar amounts. B. computation of the number of shares outstanding used for earnings per share calculations. C. reconciliation of the beginning and ending balances in the Retained Earnings account. D. reconciliation of the beginning and ending balances in the individual stockholders' equity accounts. 6. Question ID: ICMA 1603.P1.053 (Topic: Financial Statements - Other Than Statement of Cash Flows) All of the following are limitations of the balance sheet except that A. the balance sheet provides information on the liquidity and solvency of the company. B. assets and liabilities are usually recorded at historical cost, which might differ significantly from current fair value. C. the balance sheet is prepared using management judgments and estimates. D. the balance sheet omits many items that cannot be recorded objectively but which have financial value to the company. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 7. Question ID: HOCK MP2 AF16 (Topic: Financial Statements - Other Than Statement of Cash Flows) In times of rising prices, what effect does the use of the historical cost concept have on a company's asset values and profit? A. Asset values will be overstated and profit understated in the financial statements. B. Asset values and profit will both be understated in the financial statements. C. Asset values will be understated and profit overstated in the financial statements. D. Asset values and profit will both be overstated in the financial statements. 8. Question ID: ICMA 10.P2.002 (Topic: Financial Statements - Other Than Statement of Cash Flows) The financial statements included in the annual report to the shareholders are least useful to which one of the following? A. Managers in charge of operating activities. B. Competing businesses. C. Stockbrokers. D. Bankers preparing to lend money. 9. Question ID: ICMA 1603.P1.006 (Topic: Financial Statements - Other Than Statement of Cash Flows) A company’s net income totaled $12,000,000. The company had an unusual loss of $250,000, an unrealized after-tax gain of $25,000 on available-for-sale debt securities, and a $900,000 distribution of cash dividends. The company’s comprehensive income was A. $10,875,000. B. $11,775,000. C. $11,750,000. D. $12,025,000. 10. Question ID: ICMA 10.P2.016 (Topic: Financial Statements - Other Than Statement of Cash Flows) All of the following are limitations to the information provided on the statement of financial position except the A. quality of the earnings reported for the enterprise. B. judgments and estimates used regarding the collectibility, salability, and longevity of assets. C. omission of items that are of financial value to the business such as the worth of the employees. D. lack of current valuation for most assets and liabilities. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 11. Question ID: HOCK MP2 AF15 (Topic: Financial Statements - Other Than Statement of Cash Flows) The accounting concept or convention which, in times of rising prices, tends to understate asset values and overstate profits, is the A. going concern concept. B. historical cost convention. C. conservatism concept. D. prudence concept. 12. Question ID: HOCK MP2 AF1 (Topic: Financial Statements - Other Than Statement of Cash Flows) According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on A. generally accepted accounting principles. B. the needs of investors and creditors in making decisions about providing resources to the entity. C. reporting on management's stewardship. D. the need for conservatism. 13. Question ID: ICMA 1603.P1.046 (Topic: Financial Statements - Other Than Statement of Cash Flows) Blue Fox Industries had the following account balances at year end. Sales $452,000 Cash 23,400 Accounts payable 14,300 Rent expense 3,700 Accounts receivable 9,400 Cost of goods sold 214,000 Land 104,000 Contract liability 6,800 Gain on sale 17,500 Equipment 28,800 Inventories 2,200 Notes payable 67,000 What is the amount of total current assets reported on the balance sheet? A. $59,300. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only B. $63,800. C. $35,000. D. $39,900. 14. Question ID: ICMA 1603.P1.033 (Topic: Financial Statements - Other Than Statement of Cash Flows) A company reported first quarter revenues of $10,000,000, gross profit margin of 25%, and operating income of 15%. To reduce overhead expenses, a consultant recommends that the company outsource some of its operating activities beginning with the second quarter. This recommendation is anticipated to reduce operating expenses by 20% without affecting sales volume. The company has an income tax rate of 35%. Assuming cost of sales remains at 75%, what is the impact on the quarterly income statement if the company implements the recommendation? A. Operating expenses will be reduced by $300,000. B. Operating income will increase by $200,000. C. Gross profit will increase by 8.0%. D. Operating income will increase by 8.7%. 15. Question ID: ICMA 10.P2.019 (Topic: Financial Statements - Other Than Statement of Cash Flows) When a fixed asset is sold for less than book value, which one of the following will decrease? A. Total current assets. B. Net working capital. C. Current ratio. D. Net profit. 16. Question ID: HOCK MP2 AF14 (Topic: Financial Statements - Other Than Statement of Cash Flows) The historical cost convention A. has been replaced in accounting records by a system of current cost accounting. B. fails to take into account changing price levels over time. C. values all assets at their cost to the business, without any adjustment for depreciation. D. records only past transactions. 17. Question ID: HOCK MP2 AF20 (Topic: Financial Statements - Other Than Statement of Cash Flows) Which of the following is the best definition of the going concern concept? A. The entity will continue in existence forever. B. The entity will continue in operational existence for the foreseeable future. C. The entity will continue to make profits for the foreseeable future. D. The entity will not incur losses in the next three years. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 18. Question ID: ICMA 10.P2.009 (Topic: Financial Statements - Other Than Statement of Cash Flows) All of the following are elements of an income statement except A. expenses. B. gains and losses. C. revenue. D. shareholders' equity. 19. Question ID: HOCK MP2 AF11 (Topic: Financial Statements - Other Than Statement of Cash Flows) According to the FASB conceptual framework, revenue may result from A. An increase in a liability from incidental transactions. B. A decrease in a liability from primary operations. C. An increase in an asset from incidental transactions. D. A decrease in an asset from primary operations. 20. Question ID: ICMA 13.P2.017 (Topic: Financial Statements - Other Than Statement of Cash Flows) When using fair value accounting, it would be to a firm's benefit to report the liability at fair value when it has A. $28 million in outstanding bonds trading at $98. B. $25 million in putable bonds trading at $102. C. $50 million in variable rate preferred shares outstanding. D. $32 million in outstanding bonds trading at $101. 21. Question ID: ICMA 1603.P1.067 (Topic: Financial Statements - Other Than Statement of Cash Flows) A company uses the calendar year as its financial results reporting time period. On May 31 of the prior year, the company committed to a plan to sell a line of business. The sale represents a strategic shift that will have a major effect on the company's operations and financial results. For the period January 1 through May 31 of the prior year, the line of business had revenues of $1,000,000 and expenses of $1,600,000. The assets of the line of business were sold on November 30, at a loss for which no tax benefit is available. In its income statement for the year ended December 31 of the prior year, how should the company report the line of business operations from January 1 through May 31? A. $600,000 should be reported as an unusual or infrequent loss. B. $1,000,000 and $1,600,000 should be included with revenues and expenses, respectively, as part of continuing operations. C. $600,000 should be reported as part of the loss on disposal of a component. D. $600,000 should be included in the determination of income or loss from operations of a discontinued component. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 22. Question ID: ICMA 1603.P1.026 (Topic: Financial Statements - Other Than Statement of Cash Flows) According to U.S. GAAP, where on the income statement should a multinational company report the loss from the disposal sale of a major operating unit? A. Report the loss, pretax, in a separate section between income from operations and income before income tax. B. Report the loss, net of tax, in a separate section between income before tax and net income. C. Report the loss, pretax, in a separate section between income from continuing operations and net income. D. Report the loss, net of tax, in a separate section between income from continuing operations and net income. Financial Statements - Statement of Cash Flows 23. Question ID: ICMA 19.P1.012 (Topic: Financial Statements - Statement of Cash Flows) Which one of the following items could be identified on the cash flow statement prepared using the indirect method? A. The payment of interest expense of $200,000. B. A change in unrealized holding gains of $50,000. C. A settlement of a lawsuit that was previously accrued. D. Depreciation related to buildings and equipment. 24. Question ID: ICMA 10.P2.095 (Topic: Financial Statements - Statement of Cash Flows) Carlson Company has the following payments recorded for the current period. Dividends paid to Carlson shareholders $150,000 Interest paid on bank loan 250,000 Purchase of equipment 350,000 The total amount of the above items to be shown in the Operating Activities Section of Carlson's Cash Flow Statement should be A. $350,000. B. $150,000. C. $250,000. D. $750,000. 25. Question ID: CMA 1296 P2 Q22 (Topic: Financial Statements - Statement of Cash Flows) Which one of the following transactions should be classified as a financing activity in a statement of cash flows? A. Sale of trademarks. B. Purchase of treasury stock. C. Purchase of equipment. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only D. Payment of interest on a mortgage note. 26. Question ID: ICMA 10.P2.011 (Topic: Financial Statements - Statement of Cash Flows) All of the following are classifications on the Statement of Cash Flows except A. operating activities. B. equity activities. C. investing activities. D. financing activities. 27. Question ID: ICMA 1602.P1.054 (Topic: Financial Statements - Statement of Cash Flows) For a manufacturing firm, which of the following would be included in cash outflows from financing activities on the Statement of Cash Flows? A. Payment of salaries and wages. B. Repayment of the principal portion of firm's debt. C. Issuance of new stock. D. Interest payments on firm debt. 28. Question ID: ICMA 10.P2.098 (Topic: Financial Statements - Statement of Cash Flows) Selected financial information for Kristina Company for the year just ended is shown below. Net income $2,000,000 Increase in accounts receivable 300,000 Decrease in inventory 100,000 Increase in accounts payable 200,000 Depreciation expense 400,000 Gain on the sale of available-for-sale debt securities 700,000 Cash received from the issue of common stock 800,000 Cash paid for dividends 80,000 Cash paid for the acquisition of land 1,500,000 Cash received from the sale of available-for-sale debt securities 2,800,000 Kristina's cash flow from investing activities for the year is A. $1,220,000. B. $1,300,000. C. $(1,500,000). D. $2,800,000. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 29. Question ID: ICMA 13.P2.014 (Topic: Financial Statements - Statement of Cash Flows) To calculate cash flows using the indirect method, which one of the following items must be added back to net income? A. Revenue. B. Marketing expense. C. Depreciation expense. D. Interest income. 30. Question ID: CMA 1295 P2 Q4 (Topic: Financial Statements - Statement of Cash Flows) Royce Company had the following transactions during the fiscal year ended December 31, 20X1: Accounts receivable decreased from $115,000 on December 31, 20X0 to $100,000 on December 31, 20X1. Royce's board of directors declared dividends on December 31, 20X1 of $0.05 per share on the 2.8 million shares outstanding, payable to shareholders of record on January 31, 20X2. The company did not declare or pay dividends for fiscal 20X0. Sold a truck with a net book value of $7,000 for $5,000 cash, reporting a loss of $2,000. Paid interest to bondholders of $780,000. The cash balance was $106,000 on December 31, 20X0 and $284,000 on December 31, 20X1. The total of cash provided/used by operating activities plus cash provided/used by investing activities plus cash provided/used by financing activities is A. cash used of $582,000. B. equal to net income reported for fiscal year ended December 31, 20X1. C. cash provided of $178,000. D. cash provided of $284,000. 31. Question ID: CMA 0693 P2 Q13 (Topic: Financial Statements - Statement of Cash Flows) With respect to the content and form of the statement of cash flows, A. the direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments B. the indirect method adjusts ending retained earnings to reconcile it to net cash flows from operations. C. accounting standards covering the statement of cash flows encourage the use of the indirect method. D. the reconciliation of the net income to net operating cash flow need not be presented when using the direct method. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 32. Question ID: CMA 1296 P2 Q24 (Topic: Financial Statements - Statement of Cash Flows) When using the indirect method to prepare a statement of cash flows, which one of the following should be deducted from net income when determining net cash flows from operating activities? A. A loss on the sale of plant assets. B. Amortization of premiums on bonds payable. C. An increase in accrued liabilities. D. Depreciation expense. 33. Question ID: ICMA 10.P2.015 (Topic: Financial Statements - Statement of Cash Flows) Which one of the following should be classified as an operating activity on the statement of cash flows? A. The payment of a cash dividend from money arising from current operations. B. The purchase of additional equipment needed for current production. C. A decrease in accounts payable during the year. D. An increase in cash resulting from the issuance of previously authorized common stock. 34. Question ID: ICMA 10.P2.003 (Topic: Financial Statements - Statement of Cash Flows) Which one of the following would result in a decrease to cash flow in the indirect method of preparing a statement of cash flows? A. Amortization expense. B. Proceeds from the issuance of common stock. C. Decrease in income taxes payable. D. Decrease in inventories. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ Hock 2020 Part 1 Section A – External Financial Reporting Decisions Questions only 35. Question ID: CIA 1188 P4 Q33 (Topic: Financial Statements - Statement of Cash Flows) The following data were extracted from the financial statements of a company for the year ended December 31: Net income $70,000 Depreciation expense 14,000 Amortization of intangibles 1,000 Decrease in accounts receivable 2,000 Increase in inventories 9,000 Increase in accounts payable 4,000 Increase in plant assets 47,000 Increase in contributed capital 31,000 Decrease in short-term notes payable 55,000 There were no disposals of plant assets during the year. Based on the above, a statement of cash flows will report a net increase in cash of A. $17,000 B. $11,000 C. $54,000 D. $69,000 36. Question ID: ICMA 10.P2.092 (Topic: Financial Statements - Statement of Cash Flows) Larry Mitchell, Bailey Company's controller, is gathering data for the Statement of Cash F...
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