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ACCT 415 - MIDTERM
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Questions in this quiz (59)
1Which ethics theorist suggested that inside each one of us, there is an objective third party
that will judge our behavior?- AAristotle
- BImmanuel Kant.
- CAdam Smith
- DThomas Hobbes
2Which of the following philosophical approaches requires that an ethical decision depends
upon the duty of the decision maker?- AConsequentialism
- BVirtue ethics
- CUtilitarianism
- DDeontology
3Which of the following theories argues that a set of character traits disposes a person to act
ethically and thereby make that person a morally good human being:- AEthical egoism
- BSocial contract theory
- CVirtue ethics
- DDeontology
4Adam Smith’s book, Theory of Moral Sentiment, provided ethics foundation for pursuit of
profit and accumulation of wealth. At the same time, Smith’s ethics theory was built on prior
work. Which of the following ethics theory was incorporated in Smith’s theory?- AAristotle's virtue ethics
- BKant's deontology
- CAncient China's Confucianism
- DRawls’ justice theory
5Which of the following approaches presupposes that happiness, utility, pleasure, pain and
anguish can be quantified- ADeontology
- BDistributive Justice
- CUtilitarianism
- DVirtue Ethics
6In class, we watched a video clip of how Carl Icahn works as an active shareholder (hedge
fund activist). Which of the following problem is Carl Icahn trying to solve?- AInternational trade deficit
- BExternality of producing oil
- CGovernment deficit
- DCorporate governance
7Institutional shareholding has escalated in recent decades. What is the proportion of stocks
held by institutional investors 2010s?- A10%
- B20%
- C40%
- D60%
8n class, we used prospect theory to explain that short-termism is part of commonly observed
human behavior. Which of the following description about prospect theory is NOT right?- APeople evaluate their wealth relative to a reference point in their mind
- BPeople experience more decrease in their utility when they suffer losses of their
wealth than the increase in their utility when they have the same amount of gains. - CPeople experience more increase in their utility when they have gains in their
wealth than the decrease in their utility when they suffer the same amount of
losses - DThe utility function of gains has a different shape than the utility function of
losses
9Which of the following is true about the ethical decision making framework proposed by the
Markkula Center for Ethics atFrta Clara University?- AThe framework has theoretical foundation
- BThe framework provides a variety of perspectives on a decision to make.
- CThe framework provides an opportunity for a decision maker to think deeper
about different choices he/she faces. - DAll of the options are right.
10Which of the following meets the criteria for classification as a finance lease?
- AAt the end of the lease term, the asset has an alternative future use.
- BThe lessee has the option of acquiring the asset during or at the end of the lease term
at a price of fair value plus 10% - CThe lease term is 8 years, and the asset’s economic life is 9 years.
- DThe present value of the minimum lease payments is approximately 70% of the fair
value of the leased asset
11Classification of leases is important for financial accounting. The newest accounting
standards require companies to classify leases into two categories: finance leases and
operating leases. Which type of leases will result in lease liability to be reported on the
balance sheet?- AFinance leases
- BOperating leases.
- CBoth finance leases and operating leases.
- DNeither finance leases nor operating leases.
12Eubank Company, as lessee, enters into a lease agreement on July 1, 2014, for equipment.
The following data are relevant to the lease agreement:
a. The term of the non-cancelable lease is 4 years, with no renewal option. Payments of
$782,757 are due on July 1 of each year.
b. The fair value of the equipment on July 1, 2014 is $2,800,000. The equipment has an
economic life of 6 years with no salvage value.
c. Eubank amortize the right of use using the straight-line method.
d. The lessee is aware that the lessor used an implicit rate of 8% in computing the lease
payments. The present value of the minimum lease payments discounted at 8% is
$2,800,000.
How much is the amortization expense from the right of use asset for year 2014?- A$2,800,000.
- B$1,400,000.
- C$700,000
- D$350,000.
13On January 2, 2021, Hemingway, Inc. signed a ten-year noncancelable lease for a
heavy duty drill press. The lease stipulated annual payments of $300,000 starting
at the beginning of the first year, with title passing to Hernandez at the expiration
of the lease. Hemingway treated this transaction as a finance lease. The drill press
has an estimated useful life of 15 years, with no salvage value. Hemingway uses
straight-line depreciation for all of its plant assets. Aggregate lease payments were
determined to have a present value of $1,800,000, based on implicit interest of
10%.
In its 2021 income statement, what amount of interest expense should Hernandez report
from this lease transaction?- A$0
- B$135,000
- C$150,000
- D$180,000
1414) The deregulation ruling by the Department of Justice and Federal Trade
Commission in 1979 was a big event in accounting history. What impact did that
deregulation have?- AGave SEC the authority to set up accounting standards.
- BGave FASB the author to set up accounting standards
- CAllowed CPA firms to compete with each other with advertising and uninvited
solicitation. - DAllowed states to issue and revoke CPA license.
15In class we discussed accounting standard setting for employee stock options.
Which of the following is true about the current accounting standard on employee
stock options?- AThe standard was a result of a long debate on purely accounting measurement
from 1992 to 2005 - BThe standard requires companies to report employee stock options as long term
liability on the balance sheet - CThe standard requires companies to report employee stock options as an expense
on the income statement - DThe standard requires companies to report employee stock options only after
employees exercise stock options.
- AThe standard was a result of a long debate on purely accounting measurement
16For a short term lease (lease term is one year or shorter) under the current GAAP,
the appropriate asset value reported in the balance sheet by the lessee is:- APresent value of the minimum lease payments
- BSum of the minimum lease payments.
- CFair value of the leased asset at the inception of the lease
- DZero
17Francisco leased a piece of equipment from Julio on December 31, 2009. The lease
is a 10-year lease with annual payments of $150,000 due on December 31 of each
year. The implicit interest rate of the lessor, which is 10%, is known by the lessee.
The present value of the minimum lease payments is $1,013,850. What should be
the balance in Francisco lease liability at December 31, 2010 after the second lease
payment?- A$824,400
- B$817,000
- C$800,400
- D$792,000
18Who will use the accounting information to monitor the management team of the
company?- AActive shareholders.
- BCreditors such as banks and bond holders.
- CBoard of directors.
- DAll of the choices
19Ronald Coase was famous for writing on which of the following topic?
- ATheory of firm, which explains why firms exist.
- BAgency theory, which explains the costs of separation of ownership and
management of assets - CFree trade and division of labor
- DAll of the above
20CEO compensation has escalated in recent decades. Out of total CEO pay, what is
the average proportion of the CEO salary in 2010s?- A1-5%
- B15-20%
- C50-55%
- DMore than 60%
21On January 1, 2016, Telespace Inc. grants 6 million non-qualified stock options to its employees.
The stock options have exercise price of $20, which is equal to the grant-date price. All options
will vest in three years. The grant date fair value of the options is $15 per option. All 6 million
options are expected to vest. On January 1, 2019, all 6 million vested options are exercised when
the stock price is $50. The applicable tax rate for all periods is 40%. The company has sufficient
taxable income for the stock option tax deductions to reduce income taxes payable in all periods.
How much compensation expense should Telespace recognize for the year of
2016?- A$0 million
- B$18 million
- C$30 million
- D$60 million
22On January 1, 2016, Telespace Inc. grants 6 million non-qualified stock options to its employees.
The stock options have exercise price of $20, which is equal to the grant-date price. All options
will vest in three years. The grant date fair value of the options is $15 per option. All 6 million
options are expected to vest. On January 1, 2019, all 6 million vested options are exercised when
the stock price is $50. The applicable tax rate for all periods is 40%. The company has sufficient
taxable income for the stock option tax deductions to reduce income taxes payable in all periods.
How much deferred tax asset should Telespace recognize for the year of 2017?- A$0 million
- B$12 million
- C$30 million
- D$36 million
23Compensation expense resulting from a grant of stock options by a company to its employees is generally
- Arecognized in the period of exercise.
- Brecognized in the period of the grant.
- Callocated to the periods benefited by the employee's required service.
- Dallocated over the periods of the employee lifetime until the employee leaves the
company.
24 Reporting inventory at the lower of cost or market is a departure from the accounting principle of:
- AHistorical cost.
- BConsistency
- CConservatism.
- DFull disclosure.
25In Class, we watched a video clip about earnings management by Sunbeam under the
leadership of Al Dunlap. One primary accounting issue in the Sunbeam case is:- AFraudulent recording of revenues on sales to customers
- BFraudulent use of company resources by top management for personal purposes
- CFraudulent inflation of earnings using deceptive income tax accounting
- DFraudulent inflation of fixed assets to reduce losses on the income statement
26Who is the ethics and/or economics scholar that proposed that it is not the
merchant’s charity that helps us meet our need but his/her pursuit of profit that
allow us to trade with him/her and meet our needs?- AThomas Hobbes
- BAdam Smith
- CMichael Jensen
- DImmanuel Kant
27Which of the following is NOT part of the fraud triangle?
- AIncentives
- BOpportunity
- CMateriality
- DRationalization
28If a company’s top executives manage its earnings in annual reports, which of the
following ethical theories is most likely to be used by the company’s top managers in
their decision making?- AVirtue ethics
- BRights theory
- CFairness/justice theory
- DEgoism
29Which of the statement about earnings management is true?
- AIt uses a non-GAAP financial measure to manipulate earnings
- BIt is illegal
- CIt brings into question the reliability of earnings
- DIt improves shareholder returns over time
30What should be the first step in decision making when faced with an ethical dilemma?
- AChoose an ethical theory to follow
- BDiscuss with others your options
- CGet the facts surrounding the dilemma
- DDetermine consequences
31 QUIZ 1 - When was double entry system invented to track flow of assets and
liabilities?- AAround 1900s
- BAround 1000s
- CAround 1500s
- DAround 1800S
32QUIZ 1 - What was the status of financial accounting standards in 1920s?
- AIt was established by the Securities and Exchange Commission
- BPublic traded companies did not need to report any financial statements
to the shareholders - CIt was incorporated in company law
- Dit was based on norms that were informally accepted by accountants
33QUIZ 1 - When was FASB established?
- AIn 1900s
- Bin 1970s
- CIn 1950S
- DIn 1930s
34QUIZ 1 - What is true about the accounting standard setting process by FASB?
- AIt is purely a political negotiation process
- BIt is purely an economic theory based exercise
- CIt is a combination of economic and political decision process
- DIt is a closed door policy making by the board members
35QUIZ 1 - When was the law passed to limit non-audit service that auditors can
provide to their clients?- A2000s
- B1970s
- C1980s
- D1990s
36QUIZ 2 - seasons Construction is constructing an office building under contract for Cannon Company
and uses the percentage-of-completion method. The contract calls for progress billings and
payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons
estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to
complete, and commences construction on January 2, 2018.
At December 31, 2018, Seasons estimates that it is 30% complete with the construction, based
on costs incurred. What is the amount of Revenue from Long-Term Contracts recognized for
2018?- A$5,580,000
- B$5,025,000
- C$5,325,000
- D$6,200,000
37QUIZ 2 - Which of the following is recorded by a credit to Accounts receivable?
- ASale of inventory on account
- BWrite-off of bad debts
- CNo answer text provided.
- DEstimating the annual allowance for uncollectible accounts
- EEstimating annual sales returns
38QUIZ 2 - Holtzman Corporation had a 1/1/07 balance in the Allowance for Doubtful Accounts of $10,000.
During 2007, it wrote off $7,200 of accounts and collected $2,100 on accounts previously
written off. The balance in Accounts Receivable was $200,000 at 1/1 and $240,000 at 12/31.
At 12/31/07, Holtzman estimates that 5% of accounts receivable will prove to be uncollectible.
What is Bad Debt Expense for 2007?- A$2,000
- B$9,200
- C$7,100
- D$12,000
39QUIZ 2 - Lynch Company reports the following information for its most recent fiscal year, before
adjustments:
Sales---- $821,500
Beginning Accounts Receivable Balance --- $72,500
Sales Returns and Allowances -- $12,200
Ending Accounts Receivable Balance -- $68,845
Allowance for Doubtful Accounts ---- $4,100 (debit balance)
An accounts receivable aging schedule results in $7,100 of estimated bad debts. If Lynch uses
the percentage-of-receivables basis to estimate bad debts, how much is the bad debt expense?- A$7,100
- B$8,200
- C$11,200
- D$3,000
40QUIZ 2 - Seasons Construction is constructing an office building under contract for Cannon Company
and uses the percentage-of-completion method. The contract calls for progress billings and
payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons
estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to
complete, and commences construction on January 2, 2018. In 2018, it incurs cost of
$5,325,000.
At December 31, 2019, Seasons Construction estimates that it is 75% complete with
the building; however, the estimate of total costs to be incurred has risen to $18,000,000 due to
unanticipated price increases. What is the cost that Seasons has incurred during the year
ended December 31, 2019?- A$13,500,000
- B$8,175,000
- C$7,875,000
- D$7,987,500
41quiz 3 - At the beginning of 2021, Pitman Co. purchased an asset for
$1,800,000 with an estimated useful life of 5 years and an estimated
salvage value of $150,000. For financial reporting purposes the asset is
being depreciated using the straight-line method; for tax purposes the
double-declining-balance method is being used. Pitman Co.’s tax rate is
20% for 2021 and all future years.
At the end of 2021, which of the following deferred tax accounts and
balances is reported on Pitman’s balance sheet?- ADeferred tax liability --- 78,000
- BDeferred tax asset ---- $117,000
- CDeferred tax asset ---- $78,000
- DDeferred tax liability ------ $117,000
42quiz 3 - In 2021, Krause Company accrued, for financial statement reporting,
estimated losses on disposal of unused plant facilities of $3,600,000.
The facilities were sold in March 2022 and a $3,600,000 loss was
recognized for tax purposes. Also in 2021, Krause paid $150,000 in
premiums for a two-year life insurance policy in which the company was
the beneficiary. Assuming that the enacted tax rate is 20% in both 2021
and 2022, and that Krause paid $1,170,000 in income taxes to IRS in
2021, the amount reported as net deferred income taxes on Krause's
balance sheet at December 31, 2021, should be a- Adeferred tax asset of $680,000
- Bdeferred tax asset of $360,000
- Cdefered tax liability of $360,000
- Ddeferred tax asset of $720,000
43quiz 3 - Compensation expense resulting from a compensatory stock option plan is generally
- Aallocated to the periods benefited by the employee's required service
- Brecognized in the period of exercise
- Crecognized in the period of the grant
- Dallocated over the periods of the employee's service life to retirement
44quiz 3 - On January 1, 2009, D Corp. granted an employee an option to
purchase 6,000 shares of D's $5 par common stock at $20 per share.
The options became exercisable on December 31, 2010, after the
employee completed two years of service. The option was exercised on
January 10, 2011. The market prices of D's stock were as follows:
January 1, 2009, $30; December 31, 2010, $50; and January 10, 2011,
$45. An option pricing model estimated the value of the options at $8
each on the grant date. Ignoring the tax effects, for 2009, D should
recognize compensation expense of:- A$24,000
- B$30,000
- C$90,000
- D$ 0
45quiz 3 - On January 1, 2009, D Corp. granted an employee an option to
purchase 6,000 shares of D's $5 par common stock at $20 per share.
The options became exercisable on December 31, 2010, after the
employee completed two years of service. The option was exercised on January 10, 2011. The market prices of D's stock were as follows:
January 1, 2009, $30; December 31, 2010, $50; and January 10, 2011,
$45. An option pricing model estimated the value of the options at $8 each on the grant date. Assume that the company's tax rate is 20% for all years. For 2009, D should recognize after-tax compensation expense of:- A$48,000
- B$19,200
- C$24,000
- D$4,800
46quiz 4 - On June 1, 2017, the stockholders of Best Seal Company approve a plan that grants 100
million stock options to the company’s executives and rank-and-file employees to purchase
100 million shares of the company’s $1 par value common stock. The company grants 60
million options on January 1, 2018. All executives and employees have to work for the
company for three years before they may exercise the options at any time within the next 10
years. The option’s exercise price per share is $50, and the market price of the shares at the
date of grant is $50 per share. Under the fair value method, the company computes total
compensation expense by applying an acceptable fair value option-pricing model. The fair
value option-pricing model determines the unit cost of stock options is $25 (total compensation
expense to be $1,500 million. The tax rates are 20% for all years.
On November 1, 2021, 15 million stock options are exercised when the market price is $90
How much is the ending balance of deferred tax regarding the stock options by the end of year
2020?- ADeferred tax liability $100 million
- BDeferred tax asset $100 million
- CDeferred tax liability $300 million
- DDeferred tax asset $300 million
47quiz 4 - On June 1, 2017, the stockholders of Best Seal Company approve a plan that grants 100
million stock options to the company’s executives and rank-and-file employees to purchase
100 million shares of the company’s $1 par value common stock. The company grants 60
million options on January 1, 2018. All executives and employees have to work for the
company for three years before they may exercise the options at any time within the next 10
years. The option’s exercise price per share is $50, and the market price of the shares at the
date of grant is $50 per share. Under the fair value method, the company computes total
compensation expense by applying an acceptable fair value option-pricing model. The fair
value option-pricing model determines the unit cost of stock options is $25 (total compensation
expense to be $1,500 million. The tax rates are 20% for all years.
On November 1, 2021, 15 million stock options are exercised when the market price is $90
How much cash does the company collect when the employees exercise stock options?- A$0
- B$750 million
- C$375 million
- D$1125 million
48quiz 4 - On June 1, 2017, the stockholders of Best Seal Company approve a plan that grants 100
million stock options to the company’s executives and rank-and-file employees to purchase
100 million shares of the company’s $1 par value common stock. The company grants 60
million options on January 1, 2018. All executives and employees have to work for the
company for three years before they may exercise the options at any time within the next 10
years. The option’s exercise price per share is $50, and the market price of the shares at the
date of grant is $50 per share. Under the fair value method, the company computes total
compensation expense by applying an acceptable fair value option-pricing model. The fair
value option-pricing model determines the unit cost of stock options is $25 (total compensation
expense to be $1,500 million. The tax rates are 20% for all years.
On November 1, 2021, 15 million stock options are exercised when the market price is $90
How much gain did the employees realize when they exercised stock options?- A$600 million
- B$750 million
- C$1125 million
- D$375 million
49quiz 4 - On June 1, 2017, the stockholders of Best Seal Company approve a plan that grants 100
million stock options to the company’s executives and rank-and-file employees to purchase
100 million shares of the company’s $1 par value common stock. The company grants 60
million options on January 1, 2018. All executives and employees have to work for the
company for three years before they may exercise the options at any time within the next 10
years. The option’s exercise price per share is $50, and the market price of the shares at the
date of grant is $50 per share. Under the fair value method, the company computes total
compensation expense by applying an acceptable fair value option-pricing model. The fair
value option-pricing model determines the unit cost of stock options is $25 (total compensation
expense to be $1,500 million. The tax rates are 20% for all years.
On November 1, 2021, 15 million stock options are exercised when the market price is $90
How much tax expense (NOT tax payable) is reduced as a result of the employees’ exercising
of stock options on November 1, 2021?- A$75 million
- B$0
- C$45 million
- D$120 million
50quiz 4 - On June 1, 2017, the stockholders of Best Seal Company approve a plan that grants 100
million stock options to the company’s executives and rank-and-file employees to purchase
100 million shares of the company’s $1 par value common stock. The company grants 60
million options on January 1, 2018. All executives and employees have to work for the
company for three years before they may exercise the options at any time within the next 10
years. The option’s exercise price per share is $50, and the market price of the shares at the
date of grant is $50 per share. Under the fair value method, the company computes total
compensation expense by applying an acceptable fair value option-pricing model. The fair
value option-pricing model determines the unit cost of stock options is $25 (total compensation
expense to be $1,500 million. The tax rates are 20% for all years.
On November 1, 2021, 15 million stock options are exercised when the market price is $90
How much is the ending balance of the account “Additional Paid in Capital – Stock options”
after the employees exercised stock options on November 1, 2021?- A$1500 million
- B$0
- C$1125 million
- D$375 million
51quiz 5 - Martin Marquees makes neon signs to order. Customers can choose
from four colors of neon, three letter fonts, and two sizes of signs. Signs
typically take one week to make, require between $200 and $300 in
materials costs, and can consume from 5 to 10 direct labor hours, and 6
to 14 machine hours, depending on the number of letters and the font.
Martin charges customers a 50% markup. Which cost system should
Martin use and why?- AThe process cost system because each sign Martin makes has a set
number of available color, font, and size options - BThe standard costing system because each sign Martin makes goes
through a similar process - CThe job order cost system because each sign Martin makes requires
materials, labor hours, and machine hours - DThe job order cost system because each sign Martin makes is a specific
job with its own set of direct material costs, labor hours, and machine
hours.
- AThe process cost system because each sign Martin makes has a set
52quiz 5- Lucy Sportswear manufactures a specialty line of T-shirts using a job
order costing system. Lucy started and completed Job ICU2. During
March the following costs were incurred:
• Direct materials: $13,700
• Direct labor: $4,800
• Administrative expenses: $1,400
• Selling expenses: $5,600
Factory overhead was applied at the rate of $25 per machine hour. Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 shirts, what was the cost of goods sold per unit?- A$5.7
- B$5.5
- C$6.0
- D$6.3
53Elite Watches makes three models of wristwatch. Manufacturing
information for each model is provided below:
Model Direct Materials Cost Direct Labor Hours
Bronze --- $22.50 --- 2.00
Silver ---- $33.70 --- 2.25
Gold ---- $48.75 --- 3.25
Elite's direct labor costs are $30 per hour. Elite also allocates overhead based on direct labor hours, with a predetermined rate of $45 per hour. Given these figures, what is the total cost of producing one Gold model watch?- A$146.25
- B$172.50
- C$292.50
- D$202.45
54quiz 5 - A company implements a new process to manufacture its product and
spends $500 on labor to produce 50 units. It expects that the new
process will be subject to an 80% learning curve. If the company
assumes the learning curve will follow the cumulative average-time
learning model, what will be the total labor cost to produce 200 units?- A$320
- B$1,600
- C$1,024
- D$1,280
55quiz 6 - Which theory argues that the best ethical alternative is the one that will produce the greatest amount of happiness to the largest number of stakeholders:
- AUtilitarianism
- BVirtue ethics
- CDeontology
- DDistributive Justice
56quiz 6- Ethical dilemmas arise when:
- AThere is only one alternative course of action available
- BAlways arise when we make decisions.
- CThere are several theories of ethical decision making
- DChoices and values are in conflict
57quiz 6 - A real-world difficulty of applying utilitarianism is that:
- AIt can be difficult to measure utility
- BSome benefits, such as the enjoyment of privacy, are difficult to quantify
- CAll responses are correct
- DIt can be difficult to identify all stakeholders affected by a decision
58quiz 6 - Virtue ethics focuses on:
- AAccomplishing sound decision-making
- BThe achievement of due care in all personal and professional interactions
- CImplementing a systematic approach to the resolution of ethical dilemmas
- DThe development of personal integrity
59The law of eminent domain allows a local government to take a
person’s property for public use, such as building a freeway that has
been designed to cross land owned by this landowner. The landowner,
by law, is entitled to be paid the fair market value of her land. The law of
eminent domain is an example of- Adeontology
- Bvirtue ethics
- Cutilitarianism
- Degoism
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- Quiz on ACCT 415 - MIDTERM, created by Orfa Cartagena on 04/10/2022.
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- Orfa Cartagena
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