Proponents of immediately writing-off goodwill acquired in a business

1. Proponents of immediately writing-off goodwill acquired in a business combination argue that A. goodwill implies future profitability thus it has future economic benefit and is an assetB. if written-off it would receive the same treatment as inherent goodwill, as the costs leading to inherent goodwill are also written-offC. it should only be reported as an asset if it is related to the acquisition of a service companyD. the amortization period for writing-off goodwill is too long2. If it is reasonably possible that a contingent liability has occurredA. it should not be accrued (journalized)B. it should be journalized if the amount of the contingent liability can be reasonably estimatedC. it should be journalized if the amount of the contingent liability can be reasonably estimated and it should also be disclosed in the notes to the financial statementsD. it should only be accrued (journalized) if the contingency is a gain contingency3. One of the traits of the asset-liability method for accounting for income taxes is thatA. it’s based on the concept that income tax expense is related to the period in which the income is recognizedB. it’s not allowable to be used under current U.S. GAAPC. it requires the use of discounting future deferred tax liabilities and future deferred tax assets to their present valueD. it’s oriented towards the balance sheet to report the total taxes payable or total tax benefit that will actually be realized or assessed on temporary differences4. Off-balance sheet financingA. can be achieved by the lessor by entering into an operating lease agreementB. can be achieved by the lessee by entering into an operating lease agreement C. can be achieved by the lessor by entering into a capital lease agreementD. can be achieved by the lessee by entering into a capital lease agreement5. When accounting for pension plans, the accounting for defined contribution plan differs significantly from the accounting for defined benefit plan. One of the reasons for these differences is thatA. a defined contribution plan requires the calculation and recording of the projected benefit obligationB. a defined contribution plan requires the calculation and recording of the accumulated benefit obligationC. under a defined benefit plan more risks are borne by the employerD. under a defined benefit plan more risks are borne by the employee6. Under current U.S. GAAP when an entity has long-term debt, one of the criteria necessary to recognize early extinguishment of the long-term debt isA. the entity initiates in-substance defeasanceB. the entity is legally released from being the primary obligorC. the entity’s intent is to refinance the long-term debtD. the entity has the ability to refinance the long-term debt 7. A valuation allowance account may be necessary for deferred tax assets to reduce the deferred tax asset amount to its expected realized value. This criteria for making this determination is referred to as A. more-likely-than-notB. probableC. reasonably possibleD. the objective approach8. Assuming the criteria are met for a capital lease, the lessor will not recognize a direct financing lease whenA. the lease payments received consists of both an element for interest revenue and recovery of the investment B. the lessee depreciates the leased assetC. there is profit or loss in the lease transaction for the lessorD. indirect costs (e.g., maintenance) of the leased asset are borne by the lessee9. Receipt of dividends is treated as a reduction in the carrying value of an investment under theA. consolidated method of accountingB. cost method of accountingC. lower of cost or market method of accountingD. equity method of accounting10. If a bond’s stated rate of interest is greater than the market rate of interest for similar debt instruments having the same level of risk, the bond will sellA. at a premiumB. at a discountC. at its stated (face) amountD. at an amount that cannot be determined with the given informationBonus (10 Points): Costs subsequent to the acquisition of an asset which increase the asset’s life should be A. expensedB. capitalized

 

 

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