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Which of the following is a change in accounting principle?

12. Which of the following is a change in accounting principle?

a. A change in the estimated service life of machinery

b. A change from FIFO to LIFO

c. A change from straight-line to double-declining balance

d. A change from FIFO to LIFO and a change from straight-line to

double-declining balance

13. When a company discontinues an operation and disposes of the

discontinued operation (segment), 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 earnings from continuing

operations.

14. The major elements of the income statement are

a. revenue, cost of goods sold, selling expenses, and general

expense.

b. operating section, nonoperating section, discontinued operations,

extraordinary items, and cumulative effect.

c. revenues, expenses, gains, and losses.

d. all of these.

15. Blass Corp. reports operating expenses in two categories: (1)

selling and (2) general and administrative. The adjusted trial

balance at December 31, 1998 included the following expense and

loss accounts:

Accounting and legal fees $140,000

Advertising 180,000

Freight-out 80,000

Interest 70,000

Loss on sale of long-term investment 30,000

Officers' salaries 225,000

Rent for office space 220,000

Sales salaries and commissions 170,000

One-half of the rented premises is occupied by the sales department.

Blass's total selling expenses for 1998 are

a. $540,000.

b. $460,000.

c. $430,000.

d. $370,000.

16. A measure of a company's financial flexibility is the

a. cash debt coverage ratio.

b. current cash debt coverage ratio.

c. free cash flow.

d. cash debt coverage ratio and free cash flow.

Solution Preview

12. Which of the following is a change in accounting principle?

a. A change in the estimated service life of machinery

b. A change from FIFO to LIFO

c. A change from straight-line to double-declining balance

d. A change from FIFO to LIFO and a change from straight-line to

double-declining balance

Answer: D

13. When a company discontinues an operation and disposes of the

discontinued operation (segment), 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 ...

Solution Summary

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