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Chapter 04- MCB

1) All of the following are examples of subsequent events that would be disclosed in the notes to the financial statements except

a. a litigation settlement.

b. a bond issuance after the balance sheet date.

c. the write-off of a significant uncollectible account.

d. fire or flood loss.

2) Which of the following is a measurement method that reflects historical value?

a. Net realizable value

b. Replacement cost

c. Fair value

d. Acquisition cost

3) AreaWhich of the following statements about fair value is true?

a. Level 2 inputs should be used for investments in publicly traded common stock.

b. Fair value accounting is also known as “mark-to-market” accounting.

c. Level 3 inputs are observable market prices for similar assets in active markets.

d. Level 1 inputs should be used to determine fair value only when Level 2 and Level 3 inputs are not available.

4) Certain differences exist between IFRS and U.S. GAAP financial statement reporting. Which of the following is false?

a. IFRS financial statements are similar to U.S. GAAP.

b. IFRS does not require a statement of cash flows.

c. IFRS presents a different ordering of the liabilities and shareholders’ equity sections.

d. IFRS allows the upward revaluation of property, plant, and equipment.

5) Activities between affiliated entities such as subsidiaries must be disclosed in the financial statements of a corporation as

a. significant events.

b. contingent activities.

c. related party transactions.

d. segment analysis.

6) An asset is valued by the price that would be received by selling it in an orderly transaction between market participants on the date of measurement. Which measurement method is being used in this case?

a. Reliable value

b. Fair value

c. Present value

d. Historical cost

7) A negative balance for retained earnings due to cumulative net losses is called a(n)

a. retained debit.

b. other comprehensive loss.

c. retained loss.

d. deficit.

8) A subsequent event is an event that occurs

a. anytime before the annual report is issued.

b. after the annual report is issued.

c. between the end of the accounting period and the date the annual report is issued.

d. anytime after the end of the accounting period.

9) Under IFRS, liabilities and shareholders’ equity on the balance sheet usually appear in which order?

a. Current liabilities, noncurrent liabilities, and equity

b. Noncurrent liabilities, current liabilities, and equity

c. Equity, noncurrent liabilities, and current liabilities

d. Equity, current liabilities, and noncurrent liabilities

10) Which of the following may be used to determine fair value based on Level 3 inputs?

a.

Estimated Market ValuePresent Value
NoYes

b.

Estimated Market ValuePresent Value
YesNo

c.

Estimated Market ValuePresent Value
YesYes

d.

Estimated Market ValuePresent Value
NoNo

11) The measurement of an asset’s value based on the discounted future cash flows relating to the asset is

a. future value.

b. net realizable value.

c. present value.

d. historical value.

12) A company’s ability to meet its currently maturing financial obligations is known as

a. financial flexibility.

b. liquidity.

c. capital maintenance.

d. operating capability.

13) The amount a company would pay to acquire an asset it now holds is the asset’s

a. current replacement cost.

b. current exit value.

c. historical cost.

d. present value.

14) Disclosure of Accounting Policies

Which of the following should be disclosed in the Summary of Significant Accounting Policies?

a. maturity dates of long-term debt

b. rent expense amount

c. methods of amortizing intangibles

d. composition of plant assets

15) A reader might find information about gain contingencies in an annual report by examining

a. a deferred revenue.

b. an accrued revenue.

c. note disclosures.

d. a contingent account receivable.

16) A deficit occurs when a company’s

a. retained earnings are less than its common stock.

b. retained earnings are less than assets minus liabilities.

c. dividends distributed are greater than comprehensive income.

d. dividends and cumulative losses are greater than cumulative net income.

17) Contingencies

Which of the following contingencies should generally be accrued on the balance sheet when the occurrence of the contingent event is probable and its amount can be reasonably estimated?

a.

Gain ContingencyLoss Contingency
YesYes

b.

Gain ContingencyLoss Contingency
YesNo

c.

Gain ContingencyLoss Contingency
NoYes

d.

Gain ContingencyLoss Contingency
NoNo

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