Question 1

In which of the following situations should a company report a prior-period adjustment?

Options :

A : A change in the estimated useful lives of fixed assets purchased in prior years.

B : The correction of a mathematical error in the calculation of prior years' depreciation.

C : A switch from the straight-line to double-declining balance method of depreciation.

D : The scrapping of an asset prior to the end of its expected useful life.

Answer: B

Question 2

Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies?

Options :

A : Option A

B : Option B

C : Option C

D : Option D

Answer: C

Question 3

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 4

In April 30, 20X4, Deer Corp. approved a plan to dispose of a component of its business. For the period January 1 through April 30, 20X4, the component had revenues of $500,000 and expenses of $800,000. The assets of the component were sold on October 15, 20X4 at a loss. In its income statement for the year ended December 31, 20X4, how should Deer report the component's operations from January 1 to April 30, 20X4?

Options :

A :

$500,000 and $800,000 should be included with revenues and expenses, respectively, as part of continuing operations.

B :

$300,000 should be reported as part of the loss on disposal of a component and included as part of continuing operations.

C : $300,000 should be reported as an extraordinary loss.

D :

$300,000 should be reported as a loss from operations of a component and included in loss from discontinued operations.

Answer: D

Question 5

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