Question 1

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 2

In general, an enterprise preparing interim financial statements should:

Options :

A : Defer recognition of seasonal revenue.

B : Disregard permanent decreases in the market value of its inventory.

C : Allocate revenues and expenses evenly over the quarters, regardless of when they actually occurred.

D : Use the same accounting principles followed in preparing its latest annual financial statements.

Answer: D

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

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

In financial reporting of segment data, which of the following must be considered in determining if an industry segment is a reportable segment?

Options :

A : Option A

B : Option B

C : Option C

D : Option D

Answer: A

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