1. Which of the following statement is the most true? A. Preferred dividends in arrears are reported as current liability only if related preferred stocks are cumulative. B. A dividend payable in the form of additional shares of stock reported as current liability only when declared. C. Redeemable preferred stock should be reported as liability. D. A&B. E. None of the above. F. All of the above.
2. The Fair Value option under IAS: A. Requires firms to report assets or liabilities at fair value on the balance sheet. B. The resulting unrealized gain or loss should be reported as other comprehensive income in the equity section/BS. C. At the end of each accounting period, the company has the option to report assets or liability either at HC or fair value. D. A&B. E. None of the above is true.
3. Under the equity method, unrealized holding gains (losses) are A. Reported as a separate component of stockholder's equity. B. Part of net income. C. Not recognized. D. Reported as other comprehensive income. E. None of the above.
4. Which of the following is an example of managing earnings up? A. Increasing the estimated salvage value of equipment. B. Decreasing the estimated useful life of equipment. C. Underestimating warranty claims. D. A&C. E. All of the above.
5. Comprehensive income includes all of the following except A. Dividend revenue. B. Losses on disposal of assets. C. Investments by owners. D. Unrealized holding gains.
6. Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because A. Most short-term receivables are not interest-bearing. B. The allowance for uncollectible accounts includes a discount element. C. The amount of the discount is not material.