Exam (elaborations)
Test bank For Intermediate accounting Part 1 Mid-term (11th Edition by David Spiceland)
- Course
- Institution
Test bank For Intermediate accounting Part 1 Mid-term (11th Edition by David Spiceland)
[Show more]
Content preview
Test bank For Intermediate accountingPart 1 Mid-term (11th Edition by David
Spiceland)
Present and future value tables of $1 at 3% are presented below:
FV $1 PV $1 FVA $1 PVA $1 FVAD $1 PVAD $1
Jose wants to cash in his winning lottery ticket. He can either receive five $5,000 annual
payments starting today, or he can receive one lump-sum payment today based on a 3% annual
interest rate. What would be the lump-sum payment? - ANS$23,586. Use PVAD chart.
N(number of terms)= 5 i(interest rate)= 3%
According to chart of PVAD of $1 5 terms at rate of 3%= 4.71710
Multiply $5,000*4.71710=$23,586
During the year, a company's investment in debt securities increases in fair value, resulting in an
unrealized gain on the investment. The investment is not sold by the end of the year. The
company is considering whether to report the unrealized gain as a component of net income or
as a component of other comprehensive income. Under which reporting requirement would the
company have a higher ending balance of total shareholders' equity? - ANSTotal shareholders'
equity would be the same with either reporting requirement
Of the following, the most important objective for financial reporting is to provide information
useful for:
Making decisions.
Correct
Determining taxable income.
Providing accountability.
Increasing future profits. - ANSMaking decisions
The measure of profit reported on a multiple-step income statement that represents the
primary-revenue generating activities of the company is: - ANSOperating income
If a company has declared bankruptcy, its financial statements likely violate: - ANSThe going
concern assumption
Prepayments occur when: - ANSCash flow precedes expense recognition
, You want to invest $20,000 today to accumulate $32,000 for graduate school. If you can invest
at an interest rate of 10% compounded annually. To find how many years will it take to
accumulate the required amount, you would search the 10% column in the: - ANSPresent value
of $1 table, for the factor closest to 0.625
Explanation
The years it will take is the value of n that will provide a present value of $20,000 when finding
the present value of $32,000 at a rate of 10%:$20,000 (present value) = $32,000 (future value)
× ?** Present value of $1; n = ?, i = 10%Rearranging algebraically, we find that the present
value table factor is 0.625:$20,000 (present value) ÷ $32,000 (future value) = 0.625When you
consult the present value table, you search the 10% column (i = 10%) for this value and find
0.62092 in row five. So it would take approximately five years to accumulate $32,000 in the
situation described.
A cause-and-effect relationship is implicit in: - ANSmatching
An investment product promises to pay $42,000 at the end of 10 years. If an investor feels this
investment should produce a rate of return of 12%, compounded annually, what's the most the
investor should be willing to pay for the investment? - ANS$13,523
PV of $1 chart would be used.
$42,000 × 0.32197* = $13,523 (rounded)*PV of $1: n = 10; i = 12%
The accounting equation can be stated as: - ANSA - L - OE = 0
Ajax Company purchased a five-year certificate of deposit for its building fund in the amount of
$220,000. How much should the certificate of deposit be worth at the end of five years if interest
is compounded at an annual rate of 9%? - ANS$338,496 FV of $1 is used in this situation
FV = $220,000 × 1.53862* = $338,496*FV of $1: n = 5; i = 9%
The balance sheet reports: - ANSAssets and equities at a point in time
The relationship between revenue from selling inventory and the cost of that inventory is
measured as: - ANSGross profit
The principal benefit of separately reporting discontinued operations is to enhance -
ANSPredictive ability of future profitability
An omission in the notes to the financial statements that is so serious that even a qualified
opinion is not justified would result in: - ANSAn adverse option
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AllLegitExams. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75632 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now