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Which of the following costs related to the purchase of a piece of equipment would not be
capitalized?
A. Purchase price of the equipment
B. Transportation (shipping) costs paid by the buyer
C. Cost of installing the equipment
D. Cost of financing the purchase with a bank loan (i.e., interest)
E. None of the above (i.e., all of the above would be capitalized)
2. Which method of depreciation would be most useful when management is seeking to depreciate
an asset based on usage as opposed to the passage of time?
A. Straight line
B. Units of production
C. Double Declining balance
D. Sum-of-the-years digits
E. 150% Declining balance
3. Which of the following costs generally would qualify for recognition as an intangible asset for
financial reporting purposes (U.S. GAAP)?
A. Internally developed goodwill
B. Advertising/marketing expenditures
C. Purchased goodwill
D. Research and Development costs
E. None of the above
5. Which of the following methods of disposing of a fixed asset could result in the recognition of a
loss, but would NEVER result in the recognition of a gain?
A. Sale
B. Retirement
C. Exchange/trade-in
D. Casualty
E. None of the above (i.e., all of these methods could result in recognition of a gain)
6. Related to asset impairment testing, which requires evaluation at the “reporting unit level” of the
entity?
A. Goodwill impairment testing under GAAP
B. Testing of an intangible asset with an indefinite life under GAAP
C. Testing of an intangible asset with a limited life under IFRS
D. Goodwill impairment testing under IFRS
E. All of the above
7. You issue $1,000,000, 10 year, 10% bonds and receive total proceeds of $980,000 from
investors (creditors). Assuming straight-line amortization of the discount, what will be the carrying
value of the bonds at the end of year 1?
A. $0
B. $18,000
C. $998,000
D. $982,000
E. None of the above
9. Which of the following types of bonds would require repayment of the principal in a two or
more payments?
A. Serial Bonds
B. Debenture Bonds
C. Term Bonds
D. Callable Bonds
E. None of the above
10. Which type of bonds may be "repurchased" at the option of the borrower/issuer for a
predetermined price after a predetermined period of time has elapsed?
A. Callable
B. Convertible
C. Redeemable (put option)
D. Exchangeable
E. None of the above
11. All else equal, which of the following types of “special feature” bonds would likely carry a
lower coupon rate than would the same bonds if issued without the “special feature”?
A. Callable
B. Convertible
C. Redeemable
D. Both B and C
E. A, B, and C
14. A zero coupon bond provides for _____ periodic payments of interest while the bond is
outstanding; and the bond requires payment of all _____ at maturity.
A. six month; principal
B. no; principal
C. annual; principal
D. monthly; principal
E. none of the above