Accounting 381 Winter 2010 Name ________________________________
Quiz 2: 15 points (1 point each)
1. Which of the following is an example of managing earnings down?
a. Changing estimated bad debts from 3 percent to 2.5 percent of sales.
b. Revising the estimated life of equipment from 10 years to 8 years.
c. Not writing off obsolete inventory.
d. Reducing research and development expenditures.
2. Prophet Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate of 40%. At what amount should Prophet report each item? Extraordinary loss Unusual gain
a. $(200,000) $140,000
b. (200,000) 84,000
c. (120,000) 140,000
d. (120,000) 84,000
3. What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?
a. Increase research and development activities.
b. Relax credit policies for customers.
c. Delay shipments to customers until after the end of the fiscal year.
d. Delay purchases from suppliers until after the end of the fiscal year.
4. When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as
a. a prior period adjustment.
b. an extraordinary item.
c. an amount after continuing operations and before extraordinary items.
d. a bulk sale of plant assets included in income from continuing operations.
5. Which of the following should be reported as a prior period adjustment? Change in Estimated Lives Change from Unaccepted of Depreciable Assets Principle to Accepted Principle a. Yes Yes b. No Yes c. Yes No d. No No
6. In 2010, Linz Corporation reported an extraordinary loss of $1,000,000, net of tax. It declared and paid preferred stock dividends of $100,000 and common stock dividends of $300,000.