Blooms: Remember AACSB: Reflective thinking AICPA: BB Critical Thinking AICPA: FN Measurement 102. Which of the following best describes the additional information that companies use to meet the requirements of full disclosure in financial statements? a. Parenthetical comments or modifying comments placed on the face of the financial statements. b. Disclosure notes conveying additional insights about company operations, accounting principles, contractual agreements, and pending litigation. c. Supplemental schedules and tables that report more detailed information than is in the primary financial statements. d. Comments on the face of the financial statements, and schedules, tables, and narrative disclosures in to the financial statements. Answer: d Level of Learning: 2 Medium Learning Objective: 01-09 Topic Area: Concepts―Recognition–Measurement–Disclosure Blooms: Remember AACSB: Reflective thinking AICPA: FN Measurement 103. Ford Motor Company purchases services from suppliers on account and sells its products to distributors on short-term credit. As a result, do each of these events affect net income faster than they affect net operating cash flows? Purchase Services Sell Products a. Yes Yes b. Yes No c. No Yes d. No No Answer: a Level of Learning: 3 Hard Learning Objective: 01-02 Learning Objective: 01-09 Topic Area: Cash versus accrual accounting Topic Area: Concepts―Recognition–Measurement–Disclosure Blooms: Analyze AACSB: Analytical thinking AICPA: BB Critical Thinking AICPA: FN Measurement 104. The revenue/expense approach emphasizes: a. Recognition of revenues. b. Recognition of expenses. c. The income statement. d. All of the above are correct.
Level of Learning: 2 Medium Learning Objective: 01-03 Learning Objective: 01-05 Topic Area: Development of accounting and reporting standards Topic Area: Encouraging high-quality financial reporting Blooms: Remember AACSB: Reflective thinking AICPA: BB Critical Thinking AICPA: BB Legal Problems Use the following to answer questions 117 and 118: Alpaca Corporation had revenues of $200,000 in its first year of operations. The company has not collected on $20,000 of its sales and still owes $25,000 on $70,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $15,000 in salaries. Owners invested $20,000 in the business and $20,000 was borrowed on a five-year note. The company paid $2,000 in interest that was the amount owed for the year, and paid $6,000 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%. 117. Compute net income for the first year for Alpaca Corporation. Answer: Revenues $200,000 Expenses: Cost of goods sold 70,000 Salaries 15,000 Interest 2,000 Insurance 3,000 90,000 Income before tax 110,000 Income tax at 40% 44,000 Net income $ 66,000 Level of Learning: 3 Hard Learning Objective: 01-02 Topic Area: Cash versus accrual accounting Blooms: Apply AACSB: Knowledge application AICPA: BB Critical thinking FN Measurement 118. Compute the cash balance at the end of the first year for Alpaca Corporation. Answer: Cash receipts: revenue $200,000 Less: Accounts receivable 20,000 $180,000