1.

Prepaid expenses are classified as current assets if the services purchased are expected to expire within twelve months or the
operating cycle, if that is longer.
-2-2

True

False

2.
Accrued salaries and wages in a balance sheet represent salary and wages that have been earned by employees but not yet paid.
-2-2

True

False

3.
Segment reporting requires disclosure of each customer that accounts for more than 5% of total enterprise revenue.
-2-2

True

False

4.
Current assets include cash and all other assets expected to become cash or be consumed:
-2-2
 Within one year.

Within one operating cycle.

Within one year or one operating cycle, whichever is shorter.

Within one year or one operating cycle, whichever is longer.

5.
Red Onion Restaurant classifies a six-month prepaid insurance policy as a current asset. Its rationale is based on:
-2-2

Materiality.

Operating cycle.

Definition.

Liquidity.

6.
Rent collected in advance is:
-2-2

An asset account in the balance sheet.

A liability account in the balance sheet.

A shareholders' equity account in the balance sheet.

A temporary account, not in the balance sheet at all.

7.
Assets do not include:
-2-2

Property, plant, and equipment.

Investments.

Paid-in capital.

Unexpired insurance.

8.
Accrued expenses:
-2-2

Are generally paid in services rather than cash.

Result from payment before services are received.

Result from services received before payment.

Are deferred charges to expense.

9.
Which of the following is not a required disclosure for related party transactions?
-2-2

The nature of the relationship.

 A description of the transactions.

The amounts due from or to related parties.

The impact of the transactions on current year's income.

10.
Which of the following is not a financing ratio?
-2-2

Time interest earned ratio.

The debt to equity ratio.

The current ratio.

All of the above are financing ratios.

The following partial balance sheet ($ in thousands) for Paisano Seafood Inc. is shown below.

11.
The acid-test ratio is (rounded):
-2-2

0.25.

0.88.

1.17.

1.58.

12.
Material restructuring costs are reported as an element of income from continuing operations.
-2-2

True

False

13.
An item must meet the subjective criteria of being either unusual or infrequent to be reported as extraordinary.
-2-2

True

False

14.
A change in depreciation method is accounted for by retrospectively revising prior years' financial statements.
 -2-2

True

False

15.
The difference between single-step and multiple-step income statements is primarily an issue of:
-2-2

Consistency.

Presentation.

Measurement.

Valuation.

16.
Popson Inc. incurred a material loss which was not unusual in character, but was clearly an infrequent occurrence. This loss
should be reported as:
-2-2

An extraordinary loss.

A separate line item between income from continuing operations and income from discontinued operations.

A separate line item within income from continuing operations.

A separate line item in the retained earnings statement.

17.
Pro forma earnings:
-2-2

Are management's view of permanent earnings.

Are needed for the correction of errors.

Are standardized under generally accepted accounting principles.

Are useful to compare two different firms' performance

Misty Company reported the following before-tax items during the current year:

Misty's effective tax rate is 40%.

18.

What would be Misty's net income for the current year?

-2-2

$148.

$168.

$112.

None of the amounts given is correct.

0
 19.

What would be Misty's income before extraordinary item(s)?

-2-2

$198.

$210.

$330.

$360.

20.
Cendant Corporation's results for the year ended December 31, 2011, include the following material items:

Cendant Corporation's income from continuing operations before income taxes for 2011 is:
-2-2

$900,000.

$880,000.

$820,000.

$320,000.
21.
Which of the following is not true about EPS?
-2-2

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.

It must be reported on operating income.

22.
Reconciliation between net income and comprehensive income would include:
-2-2

Unrealized losses but not unrealized gains on available for sale securities.

Unrealized gains but not unrealized losses on available for sale securities.

Unrealized losses and unrealized gains on available for sale securities.

Neither unrealized losses nor unrealized gains on available for sale securities.

23.
In comparing the direct method with the indirect method of preparing the statement of cash flows:
-2-2

Only operating activities are presented differently.

Only investing activities are presented differently.

 Only financing activities are presented differently.

All activities are presented differently.

25.
Tropical Tours reported revenue of $400,000 for its year ended December 31, 2011. Accounts receivable at December 31, 2010
and 2011, were $35,000 and $32,000, respectively. Using the direct method for reporting cash flows from operating activities,
Tropical Tours would report cash collected from customers of:
-2-2

$400,000.

$397,000.

$403,000.

$365,000.

24.
The FASB's stated preference for reporting operating cash flows is the:
-2-2

Indirect method.

Direct method.

Working capital method.

All financial resources method.