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Unformatted text preview: 10/25/06 Anderson ECON 136A FALL 2006 MIDTERM #1 v. 1 Name _________________________ Answer questions 1-25 on green scantron and #26-30 in your blue-book. WRITE YOUR EXAM VERSION # ON YOUR SCANTRON!!!! AND MAKE SURE THAT THE COLOR OF THE EXAM OF THE PERSON SITTING NEXT TO YOU IS NOT THE SAME AS YOURS!!! 1. Items which do not appear on the income statement above the tax provision should be presented on a "net of tax" basis. a. true b. false 2. The following is an example of a limitation of a balance sheet prepared under generally accepted accounting principles: a. It relies in part upon estimates made by management and which consequently introduces subjectivity to the presentation; b. It presents assets on an historical-cost basis, which may be very different from their fair value; c. A balance sheet is transaction-based, and consequently, important assets, such as the value of human resources, are not reflected as assets; d. All of the above. 3. Which of the following items is presented on a "net of tax" basis in the income statement? a. cumulative effect of a change in accounting principle b. extraordinary items c. discontinued operations d. both extraordinary items and discontinued operations 4. In order for an item to be counted as an asset on the balance sheet, it must be: a. Probable b. A result of a past transaction c. Have a future econcomic benefit d. All of these items must be present. 5. The definition of an asset requires there to be a transaction. Which of the following items have probably future economic value but would not appear as assets on a GAAP balance sheet: a. human resources b. internally generated goodwill c. internally generated branding d. all of these would be excluded from assets. FALL 2006 MIDTERM #1 v. 1--Page 2 6. Which statement below best represents the criteria to classify as a current item in a classified balance sheet: a. The item will convert within one year; b. The item will convert within one year or the operating cycle, whichever is shorter; c. The item will convert within one year or the operating cycle, whichever is longer; d. None of these. 7. It was stated in lecture that the big question with respect to GAAP accounting is "when?", which drives the accrual basis of accounting. Consequently, the following is the most prevalent cause for restatements: a. depreciation b. revenue recognition c. accounts payable d. percentage completion accounting 8. A change in accounting principle relating to depreciation occurs which is required to be treated as a cumulative effect of a change in accounting principle. The cumulative impact to prior periods is an increase to accumulated depreciation of $200,000 while the new method produces $75,000 less depreciation expense in the current year. The Company has an effective tax rate of 30%....
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