In reconciling profit on an accrual basis to net cash from operating activities, what adjustment is needed to profit because of an increase during the period in prepaid expenses and2) the periodic amortization of premium on bonds payable?
Correct Answer: D
An increase in prepaid expenses indicates that cash outlays for expenses exceeded the related expense incurred, thus, profit exceeded net cash from operating activities, and a deduction is needed in the reconciliation. Also, the amortization of premium on bonds payable causes a reduction of interest expense but does not increase cash; therefore, profit exceed net cash from operating activities, and a deduction is needed in the reconciliation. Balance sheets on December 31, Year 1, and December 31, Year 2, are presented below:
Question 32
At the inception of a finance lease, how should the lessee account for guaranteed residual value?
Correct Answer: A
The lessee records a finance lease as an asset and a liability at the inception of the lease at the fair value of the leased property not to exceed the present value of the minimum lease payments). The lessee's minimum lease payments include required payment sex including contingent rent and costs for services and taxes to be paid by and reimbursed to the lesser) during the lease term and the amount of a bargain purchase option. If no bargain purchase option exists, the minimum lease payments equal the sum of the minimum payments payable over the lease term and any amounts guaranteed by the lessee or by a party related to the lessee.
Question 33
Cash collections from customers in Year 2 were:
Correct Answer: A
Cash collections from customers equals beginning accounts receivable, plus sales revenue, minus accounts written off, minus ending accounts receivable. In Year 2, Cash collections from customers were US $341.000$95,000 + $338,000 - $3,000 - $89,000). Balance sheets on December 31, Year 1, and December 31, Year 2, are presented below
Question 34
The Plan-Do-Check-Act PDC}A) cycle is a quality tool devised by\ALE. Denning. How is PDC A best described
Correct Answer: A
PDC is a "management by fact" or scientific method approach to continuous improvement. PDC A creates a process-centered environment because it involves studying the current process, collecting and analyzing data to identify causes of problems, planning for improvement, and deciding how to measure improvement Plan). The plan is then implemented on a small scale if possible Do). The next step is to determine what happened Check). If the experiment was successful, the plan is fully implemented Act). Tin cycle is then repeated using what was learned from the preceding cycle.
Question 35
Under the income approach, gross domestic product GDP) is measured as:
Correct Answer: A
GDP is the total value of goods and services produced within the boundaries of a country. It may be measured using an expenditures approach or an income approach. Under the income approach. GDP equals all income derived from the production of the year's output, with an adjustment for net income earned abroad a positive or negative amount in theory). Two types of nonincome charges or allocations must be added to incomes wages, rents. interest, and profits). Depreciation reflects the consumption of Ford capital during the period. It is the part of the year's receipts that must be allocated to replace the machinery, plant. etc. used up in the production of GDP. Indirect business taxes, such as sales. Excise, and property taxes, are treated by businesses as a cost of production and form part of the total price of goods and Thus. they are not paid as wages. rents, interest, and profits. Accordingly, GDP may be measured as the sum of consumption of fixed capital, indirect business taxes, wages, rents, interest, and profits (proprietors' income. corporate taxes, dividends. and undistributed corporate profits), with an adjustment for net income earned abroad.
