D105 Intermediate Accounting III
Access The Exact Questions for D105 Intermediate Accounting III
💯 100% Pass Rate guaranteed
🗓️ Unlock for 1 Month
Rated 4.8/5 from over 1000+ reviews
- Unlimited Exact Practice Test Questions
- Trusted By 200 Million Students and Professors
What’s Included:
- Unlock Actual Exam Questions and Answers for D105 Intermediate Accounting III on monthly basis
- Well-structured questions covering all topics, accompanied by organized images.
- Learn from mistakes with detailed answer explanations.
- Easy To understand explanations for all students.
Free D105 Intermediate Accounting III Questions
Under the completed contract method for long-term contracts
-
revenue and expenses are recognized every year
-
income may be recognized before the completion of the contract
-
Loss may be recognized before the completion of the contract
-
Both income and loss may be recognized only on the completion of the contract
Explanation
The completed contract method recognizes both revenue and expenses only when the contract is finished. This method is used when estimates of costs and progress are not reliable. Income and losses are deferred until the completion of the project, reflecting the uncertainty of interim financial results. Exceptions exist for anticipated losses, which must be recognized immediately to comply with the conservatism principle, but generally, the recognition is reserved for the end of the contract.
If a business entity entered into certain related party transactions, it would be required to disclose all of the following information except the
-
nature of the relationship between the parties to the transactions
-
nature of any future transactions planned between the parties and the terms involved
-
dollar amount of the transactions for each of the periods for which an income statement is presented
-
amounts due from or to related parties as of the date of each balance sheet presented
Explanation
Disclosure of related party transactions is required to provide transparency regarding financial dealings that could influence decisions of financial statement users. Companies must disclose the nature of the relationship, amounts involved in the transactions during the periods presented, and balances due from or to related parties at the balance sheet dates. However, there is no requirement to disclose planned or anticipated future transactions between related parties, as this is not considered past or present financial information.
If Shaw Company had an increase in taxable income due to a change in tax law, how might this affect the deferred tax liability reported on the balance sheet?
-
The deferred tax liability may increase due to higher taxable income leading to more future tax obligations.
-
The deferred tax liability would decrease as taxable income increases.
-
The deferred tax liability would be eliminated entirely.
-
The deferred tax liability would remain unchanged regardless of taxable income changes.
Explanation
Deferred tax liabilities arise from temporary differences between the financial reporting and tax bases of assets and liabilities. If taxable income increases due to a change in tax law, it can increase the amount of taxes the company expects to pay in the future. Consequently, the deferred tax liability is adjusted upward to reflect the higher future tax obligation that will arise when the temporary differences reverse.
Which of the following is accounted for as a change in accounting estimate?
-
A change from LIFO to FIFO method for inventory valuation
-
a change in estimating bad debts from percentage of A/R to Aging of receivable method
-
a change from the cost recovery method to the percentage-of-completion method
-
None of the above
Explanation
A change in accounting estimate occurs when new information or developments lead to a revision of an estimate used in accounting, without changing the underlying accounting principle. Changing the method of estimating bad debts from a flat percentage of accounts receivable to an aging of receivables method reflects a change in the estimated uncollectible accounts and is accounted for prospectively as a change in estimate. Changes in inventory methods or revenue recognition methods are considered changes in accounting principles, not estimates.
In computing the service cost component of pension expense, the FASB concluded that
-
the accumulated benefit obligation using current salary levels provides a more realistic measure of the pension obligation on a going concern basis
-
a company should employ an actuarial funding method to report pension expense that best reflects the cost of benefits to employees
-
the projected benefit obligation using future compensation levels provides a realistic measure of present pension obligation and expense
-
the projected benefit obligation using current compensation levels provides a realistic measure of present pension obligation and expense
Explanation
The FASB requires that the service cost component of pension expense be based on the projected benefit obligation, which takes into account future compensation levels expected at the time of retirement. This approach provides a more accurate estimate of the pension obligation and expense because pension benefits often increase with future salary growth, ensuring that the expense reflects the economic cost of providing retirement benefits to employees over their service period.
Which of the following statements related to loss carrybacks and carryforwards is correct?
-
The benefit due to a loss carryforward can be reported in both the loss year and future years.
-
The benefit due to a loss carryback is reported only in the second year preceding the loss year.
-
The benefit due to a loss carryback can be reported in both the loss year and future years.
-
The benefit due to a loss carryforward is reported only in the loss year.
Explanation
A loss carryforward allows a company to apply a net operating loss (NOL) to offset taxable income in future years, reducing tax expense in those periods. This means the benefit is recognized in the loss year to establish the deferred tax asset and in the future years when the deduction is applied. In contrast, a loss carryback applies the NOL to prior years’ taxable income, generating a tax refund. Only the loss carryforward can be reported in both the current and future periods.
If a company recognizes revenue in its financial statements in Year 1 but does not report it for tax purposes until Year 2, what type of tax effect does this create?
-
It creates a deferred tax liability.
-
It creates a permanent tax difference.
-
It has no tax effect.
-
It creates an immediate tax asset.
Explanation
When revenue is recognized for financial reporting purposes before it is taxable, a temporary difference arises. This creates a deferred tax liability because the company will owe taxes on that revenue in the future, when it becomes taxable. The liability reflects the future tax obligation resulting from the timing difference between financial income and taxable income.
A lessee with a capital lease containing neither a transfer of ownership nor a bargain purchase option should depreciate the leased asset over the
-
asset’s remaining economic life
-
term of the lease
-
economic life of the asset or the term of the lease, whichever is shorter
-
economic life of the asset or the term of the lease, whichever is longer
Explanation
For a capital lease that does not transfer ownership and does not contain a bargain purchase option, the lessee should depreciate the leased asset over the shorter of the lease term or the asset’s useful life. This reflects the period during which the lessee has control over and benefits from the leased asset, ensuring depreciation expense aligns with the asset’s economic use by the lessee.
1. Sale of Treasury Stock
2. Sale of Delivery Truck at book value
3. Sale of Xanthe common stock for cash
4. Issuance of a note payable to a bank for cash
5. Sale of security held as an available-for-sale investment
6. Collection of loan receivable
How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year?
-
Five items
-
Four items
-
Three items
-
Two items
Explanation
Cash inflows from investing activities include the sale of long-term assets and collection of loans receivable. In this list, the sale of a delivery truck (long-term asset), sale of available-for-sale securities, and collection of a loan receivable all qualify as investing cash inflows. The sale of treasury stock, issuance of common stock, and issuance of a note payable are financing activities, not investing activities. Therefore, three items appear as cash inflows from investing activities.
Which of the following post-balance-sheet events require adjustment of the accounts before issuance of the financial statements?
-
Loss of plant as a result of fire
-
Changes in the quoted market prices of securities held as an investment
-
Loss of a major customer
-
Loss on a lawsuit, the outcome of which was deemed uncertain at year end
Explanation
Post-balance-sheet events that provide additional evidence about conditions that existed at the balance sheet date require adjustment of the accounts. A loss on a lawsuit that was already pending and whose outcome was uncertain at year-end represents a condition that existed at the balance sheet date, so the financial statements should be adjusted. In contrast, events such as a plant loss due to fire, changes in market prices, or loss of a major customer occur after the balance sheet date and reflect conditions that did not exist at that time, so they are disclosed but do not require adjustment.
How to Order
Select Your Exam
Click on your desired exam to open its dedicated page with resources like practice questions, flashcards, and study guides.Choose what to focus on, Your selected exam is saved for quick access Once you log in.
Subscribe
Hit the Subscribe button on the platform. With your subscription, you will enjoy unlimited access to all practice questions and resources for a full 1-month period. After the month has elapsed, you can choose to resubscribe to continue benefiting from our comprehensive exam preparation tools and resources.
Pay and unlock the practice Questions
Once your payment is processed, you’ll immediately unlock access to all practice questions tailored to your selected exam for 1 month .