FRA Quiz 1

A payment received for a subscription service at the beginning of the period will most likely be recorded as:

• A. trade payable.
• B. deferred income.
• C. notes payable.

Shares that have been repurchased and not cancelled by the company that issued them are referred to as:

• A. preferred shares.
• B. contributed capital.
• C. treasury stock.

• A. $25,700.
• B. $26,702.
• C. $27,826.

• A. Inventory management has contributed to improved liquidity.
• B. Management of payables has contributed to improved liquidity.
• C. Management of receivables has contributed to improved liquidity.

Which of the following expense recognition choices is least consistent with conservative accounting of reported net income?

• A. Recognizing expenses later rather than earlier
• B. Reflecting lower warranty expenses due to improved product quality
• C. Estimating lower uncollectible accounts due to stricter credit policies

A firm reports sales of €50,000 for the year ended 31 December 2012. Its accounts receivable balances were €6,000 at 1 January 2012 and €7,500 at 31 December 2012. The company’s cash collections from sales for 2012 is closest to:

• A. €48,500.
• B. €51,500.
• C. €42,500.

A creditor most likely would consider a decrease in which of the following ratios to be positive news?

• A. Interest coverage (times interest earned).
• B. Debt-to-total assets.
• C. Return on assets.

• A. £48,530.
• B. £49,080.
• C. £52,520.

Eric’s Used Book Store prepares its financial statements in accordance with IFRS. Inventory was purchased for £1 million and later marked down to £550,000. One of the books, however, was later discovered to be a rare collectible item, and the inventory is now worth an estimated £3 million. The inventory is most likely reported on the balance sheet at:

• A. £550,000.
• B. £1,000,000.
• C. £3,000,000.

Company A adheres to US GAAP and Company B adheres to IFRS. Which of the following is most likely to be disclosed on the financial statements of both companies?

• A. Any material income resulting from the liquidation of LIFO inventory
• B. The amount of inventories recognized as an expense during the period
• C. The circumstances that led to the reversal of a write down of inventories