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 should be disclosed for each reportable operating segment of an enterprise?

Options :

A : Option A

B : Option B

C : Option C

D : Option D

Answer: A

Question 3

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 4

If a company is not presenting comparative financial statements, the correction of an error in the financial statements of a prior period should be reported, net of applicable income taxes, in the current:

Options :

A : Retained earnings statement after net income but before dividends.

B : Retained earnings statement as an adjustment of the opening balance.

C : Income statement after income from continuing operations and before extraordinary items.

D : Income statement after income from continuing operations and after extraordinary items.

Answer: B

Question 5

Which of the following should be disclosed in a summary of significant accounting policies?

I. Management's intention to maintain or vary the dividend payout ratio.

II. Criteria for determining which investments are treated as cash equivalents.

III. Composition of the sales order backlog by segment.

Options :

A : I only.

B : I and III.

C : II only.

D : II and III.

Answer: C