Question 1

How should the effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate be reported?

Options :

A : As a component of income from continuing operations.

B : By restating the financial statements of all prior periods presented.

C : As a correction of an error.

D : By footnote disclosure only.

Answer: A

Question 2

While preparing its 1991 financial statements, Dek Corp. discovered computational errors in its 1990 and 1989 depreciation expense. These errors resulted in overstatement of each year's income by $25,000, net of income taxes. The following amounts were reported in the previously issued financial statements:

Dek's 1991 net income is correctly reported at $180,000. Which of the following amounts should be reported as prior period adjustments and net income in Dek's 1991 and 1990 comparative financial statements?

Options :

A : Option A

B : Option B

C : Option C

D : Option D

Answer: C

Question 3

What is the purpose of information presented in notes to the financial statements?

Options :

A : To provide disclosures required by generally accepted accounting principles.

B : To correct improper presentation in the financial statements.

C : To provide recognition of amounts not included in the totals of the financial statements.

D : To present management's responses to auditor comments.

Answer: A

Question 4

On March 15, 1992, Krol Co. paid property taxes of $90,000 on its office building for the calendar year 1992. On April 1, 1992, Krol paid $150,000 for unanticipated repairs to its office equipment. The repairs will benefit operations for the remainder of 1992. What is the total amount of these expenses that Krol should include in its quarterly income statement for the three months ended June 30, 1992?

Options :

A : $172,500

B : $97,500

C : $72,500

D : $37,500

Answer: C

Question 5

Reclassification adjustments must be shown in the financial statement that discloses comprehensive income:

Options :

A : To show what portion of comprehensive income is from the realization of current assets.

B : To show the tax effect of items of comprehensive income.

C : To avoid double counting in comprehensive income items, which are currently displayed in net income.

D : To avoid including transactions with shareholders in items of comprehensive income.

Answer: C

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