Quiz
Financial accounting standard setting and FASB
Erstelle ein kostenloses Konto, um dieses Quiz zu beenden
Speichere deinen Fortschritt und sieh dir dein Endergebnis an.
oder mit deiner E-Mail registrieren
Schon ein Konto? Anmelden
Fragen in diesem Quiz (191)
1Which of the following is NOT a user of financial reports?
- Acreditors
- Bgovernment agencies
- Cunions
- DAll of these are users.
2The information provided by financial reporting pertains to
- Abusiness industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.
- Bindividual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.
- Cindividual business enterprises industries, and an economy as a whole, rather than to member of society as consumers.
- Dan economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.
3The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is
- Athe FASB issues exposure drafts of proposed standards.
- Ball members of the FASB possess extensive experience in financial reporting.
- Call members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.
- Da majority of the members of the FASB are CPAs drawn from public practice.
4Which of the following is a general limitation of "general purpose financial statements"?
- AGeneral purpose financial statements may not be the most informative for a specific enterprise
- BGeneral purpose financial statements are assumed to present fairly the company's financial operations
- CGeneral purpose financial statements are comparable.
- DNone of the above.
5Rule 203 of the Code of Professional Conduct addresses:
- Aethical requirements.
- Bfinancial statements should be based on generally accepted accounting principles.
- Cadvertising to obtained clients.
- Dauditing financial statements.
6Which of the following is a true statement about the objective of general-purpose financial reporting?
- AFinancial reporting is ordinarily focused on industries rather than individual entities.
- BThe objective applies only to information that is useful for investment professionals.
- CThe information provided relates to the entity's economic resources and claims.
- DFinancial reporting directly measures management performance.
7Which of the following publications does not qualify as a statement of generally accepted accounting principles?
- AStatements of financial standards issued by the FASB
- BAccounting interpretations issued by the FASB
- CAPB Opinions
- DAccounting research studies issued by the AICPA
8What is the purpose of Emerging Issues Task Force?
- AProvide interpretation of existing standards.
- BProvide a consensus on how to account for new and unusual financial transactions.
- CProvide interpretive guidance.
- DProvide timely guidance on select issues.
9What is a possible danger if politics play too big a role in a accounting standard setting
- AAccounting standards that are not truly generally accepted.
- BIndividuals may influence the standards.
- CUser groups become active.
- DThe FASB delegates its authority to elected officials.
10What is the purpose of a FASB Staff Position?
- AProvide interpretation of existing standards.
- BProvide a consensus on how to account for new and unusual financial transactions.
- CProvide interpretive guidance.
- DProvide timely guidance on select issues.
11Financial statements in the early 2000s provide information related to
- Anon-financial measurements.
- Bforward-looking data.
- Chard assets (inventory and plant assets).
- Dnone of these
12Which perspective is adopted as part of the objective of general-purpose financial reporting?
- ADecision-usefulness perspective.
- BProprietary perspective.
- CEntity perspective.
- DFinancial reporting perspective.
13What is due process in the context of standard setting at the FASB?
- AFASB operates in full view of the public.
- BPublic hearings are held on proposed accounting standards.
- CInterested parties can make their views known.
- DAll of the above.
14The purpose of the Emerging Issues Task Force is to
- Adevelop a conceptual framework as a frame of reference for the solution of future problems.
- Blobby the FASB on issues that affect a particular industry.
- Cdo research on issues that relate to long-term accounting problems.
- Dissue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly.
15According to the FASB's conceptual framework, the objective of general-purpose financial reporting is most likely based on
- AGenerally accepted accounting principles.
- BReporting on how well management has discharged its responsibilities
- CThe need for conservatism.
- DThe needs of the users of the information.
16Financial accounting standard-setting in the United States
- Acan be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.
- Bis based solely on research and empirical findings.
- Cis a legalistic process based on rules promulgated by governmental agencies.
- Dis democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.
17Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight?
- ASmaller membership
- BDue process
- CFASB board members are well-paid
- DFASB board members must be CPAs.
18When making decisions, investors are interested in assessing
- Athe company's ability to generate net cash inflows.
- Bmanagement's ability to protect and enhance the capital providers' investments.
- CBoth a and b.
- Dthe company's ability to generate net income.
19Which of the following represents a form of communication through financial reporting but not through financial statements?
- ABalance sheet
- BManagement forecasts
- CIncome statement
- DNotes to financial statements
20Which of the following is an ethical concern of accountants?
- AEarnings manipulation.
- BConservative accounting
- CIndustry practices.
- DNone of the above.
21The purpose of Statements of Financial Accounting Concepts is to
- Aestablish GAAP.
- Bmodify or extend the existing FASB Standards Statement
- Cform a conceptual framework for solving existing and emerging problems.
- Ddetermine the need for FASB involvement in an emerging issue.
22Which of the following is a source of pressure that may influence the accounting standard setting process?
- ACongress.
- BLobbyist.
- CCPA firms.
- DAll of these answers are correct.
23Generally accepted accounting principles
- Ainclude detailed practices and procedures as well as broad guidelines of general application
- Bare influenced by pronouncements of the SEC and IRS
- Cchange over time as the nature of the business environment changes.
- Dall of these.
24What would be an advantage of having all countries adopt and follow the same accounting standards?
- AConsistency
- BComparability
- CLower preparation costs
- Db and c
25How does accounting help the capital allocation process attract investment capital?
- AProvides useful (timely, relevant) information
- BEncourages innovation.
- CPromotes productivity.
- Da and b above.
26Which of the following basic elements of financial statements is more associated with the balance sheet than the income statement?
- AEquity
- BRevenue
- CGains
- DExpenses
27Which of the following statements about materiality is NOT correct?
- AAn item must make a difference or it need not be disclosed.
- BMateriality is a matter of relative size or importance.
- CAn item is material if its inclusion or omission would influence or change the judgment of a reasonable person.
- DAll of theses are correct statements about materiality.
28The concept of consistency is sacrificed in the accounting for which of the following income statement items?
- ADiscontinued operations
- BLoss on disposal of a component of entity.
- CExtraordinary items.
- DChange in accounting principle when the cumulative effect on any prior period is not known.
29Which of the following is a fundamental characteristic of useful accounting information?
- AComparability
- BRelevance
- CNeutrality
- DMateriality
30During the lifetime of an entity accountants produce financial statements at artificial points in times in accordance with the concept of:
Relevance Periodicity- ANo No
- BYes No
- CNo Yes
- DYes Yes
31Generally, revenue from sales should be recognized at a point when
- Amanagement decides it is appropriate to do so.
- Bthe product is available for sale to the ultimate consumer.
- Cthe entire amount receivable has been collected from the customer and there remains no further warranty liability
- DNone of these answer choices are correct.
32Which of the following serves as the justification for the periodic recording of depreciation expense?
- AAssociation of efforts (expense) with accomplishments (revenue).
- BSystematic and rational allocation of cost over the periods benefited
- CImmediate recognition of an expense.
- DMinimization of income tax liability
33In classifying the elements of financial statements, the primary distinction between revenues and gains is
- Athe materiality of the amounts involved.
- Bthe likelihood that the transactions involved will recur in the future.
- Cthe nature of the activities that gave rise to the transaction involved.
- Dthe costs versus the benefits of the alternative methods of disclosing the transactions involved.
34What is meant by comparability when discussing financial accounting information?
- AInformation has predictive or confirmatory value.
- BInformation is reasonably free form error.
- CInformation that is measured and reported in a similar fashion across companies
- DInformation is timely.
35What is the general approach as to when product costs are recognized as expenses?
- AIn the period when the expenses are paid.
- BIn the period when the expenses are incurred.
- CIn the period when the vendor invoice is received.
- DIn the period when the related revenue is recognized.
36The elements of financial statements include investments by owners. These are increases in an entity's newt assets resulting from owners'
- Atransfers of assets to the entity.
- Brendering services to the entity.
- Csatisfaction of liabilities of the entity.
- Dall of these.
37A decrease in net assets arising from peripheral or incidental transaction is called a(n)
- Acapital expenditure
- Bcost
- Closs
- Dexpense
38According to the FASB Conceptual Framework, the elements - assets, liabilities, and equity - describe amounts of resources and claims to resources at/during a
Moment in Time Period of Time- AYes No
- BYes Yes
- CNo Yes
- DNo No
39All of the following represent costs of providing financial information except
- Apreparing
- Bdisseminating
- Caccessing capital
- Dauditing
40The pervasive criterion by which accounting information can be judged is that of
- Adecision usefulness
- Bfreedom from bias
- Ctimeliness
- Dcomparability
41Which basic assumption may not be allowed when a firm in bankruptcy reports financial results?
- AEconomic entity assumption
- BGoing concern assumption
- CPeriodicity assumption
- DMonetary unit assumption
42A company has a factory building that originally cost the company $250,000. The current fair value of the factory building is $3 million. The president would like to report the difference as a gain. The write-up would represent a violation of which accounting assumption or principle?
- ARevenue recognition
- BGoing concern
- CHistorical cost
- DMonetary unit
43Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company's stock price?
- AFull disclosure
- BGoing concern
- CHistorical cost
- DExpense recognition
44Charging off the cost of a wastebasket with an estimated useful life of 10 years as an expense of the period when purchased is an example of the application of the
- Aconsistency characteristic
- Bexpense recognition principle
- Cmateriality characteristic
- Dhistorical cost principle
45Which of the following is an argument against using historical cost in accounting?
- AFair values are more relevant.
- BHistorical costs are based on an exchange transaction
- CHistorical costs are reliable
- DFair values are subjective.
46The primary purpose of the statement of financial position of a business is to reflect
- AThe fair value of the entity's assets at some moment in time.
- BThe status of the entity's assets in case of forced liquidation.
- CThe entity's potential for growth in stock values in the stock market.
- DItems of value, debts, and net worth.
47The basic accounting concept that refers to the tendency of accountants to resolve uncertainty in favor of understating assets and revenues and overstating liabilities and expenses is known as
- Aprudence or conservatism
- Bthe materiality constraint
- Cthe substance over form principle
- Dthe industry practices constraint
48The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the
- Aconsistency characteristic
- Bexpense recognition principle
- Cmateriality constraint
- Drevenue recognition principle
49The objectives of financial reporting include all of the following except to provide information that
- Ais useful to the Internal Revenue Service in allocating the tax burden to the business community.
- Bis useful to those making investment and credit decisions.
- Cis helpful in assessing future cash flows.
- Didentifies the economic resources (assets), the claims to those resources (liabilities), and the changes in those resources and claims.
50Financial information does not demonstrate consistency when
- Afirms in the same industry use different accounting methods to account for the same type of transaction.
- Ba company changes its estimate of the salvage value of a fixed asset.
- Ca company fails to adjust its financial statements for changes in the value of the measuring unit.
- Dnone of these
51Trade-offs between the characteristics that make information useful may be necessary or beneficial. issuance of interim financial statements is an example of a trade-off between
- Arelevance and faithful representation
- Bfaithful representation and periodicity
- Ctimeliness and materiality
- Dunderstandability and timeliness
52What is meant by consistency when discussing financial accounting information?
- AInformation that is measured and reported in a similar fashion across points in time
- BInformation is timely
- CInformation is measured similarly across the industry
- DInformation is verifiable
53Under a royalty agreement with another entity, a company will receive royalties from the assignment of a patent for 2 years. The royalties received should be reported as revenue
- AAt the date of the royalty agreement.
- BIn the period earned
- CIn the period received.
- DEvenly over the life of the royalty agreement.
54Which of the following is not a basic assumption underlying the financial accounting structure?
- AEconomic entity assumption
- BGoing concern assumption
- CPeriodicity assumption
- DHistorical cost assumption
55According to the FASB conceptual framework, which of the following elements describes transactions or events that affect a company during a period of time?
- AAssets
- BExpenses
- CEquity
- DLiabilities
56ABC Company issuing its annual financial reports within one month of the end of the year is an example of which ingredient of fundamental quality of accounting information?
- ANeutrality
- BTimeliness
- CPredictive value
- DCompleteness
57Which of the following is an implication of the going concern assumption?
- AThe historical cost principle is credible
- BDepreciation and amortization policies are justifiable and appropriate
- CThe current-noncurrent classification of assets and liabilities is justifiable and signify-cant
- DAll of these
58Proponents of historical cost ordinarily maintain that in comparison with all other valuation alternatives for general purpose financial reporting, statements prepared using historical costs are more
- Afaithfully representative
- Brelevant
- Cindicative of the entity's purchasing poser
- Dconservative
59According to the Statement of Financial Accounting Concepts No. 2, materiality is an ingredient of the fundamental quality of
Relevance Faithful Representation- AYes Yes
- BNo Yes
- CYes No
- DNo No
60A trial balance
- Asupplies a listing of open accounts and their balances that are used in preparing financial statements
- Bproves that debits and credits are equal in the ledger
- Cis normally prepared three times in the accounting cycle
- Dall of these
61A 1-year insurance policy was purchased on September 1 for $6,000, and prepaid insurance was debited. Assuming a December 31 year-end, what is the adjusting entry on December 31?
- ADebit prepaid insurance for $1,000 and credit insurance expense for $1,000.
- BDebit insurance expense for $2,000 and credit prepaid insurance for $2,000.
- CDebit insurance expense for $1,000 and credit prepaid insurance for $1,000
- DDebit prepaid insurance for $2,000 and credit insurance expense for $2,000
62Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles?
- ATo reduce the federal income tax liability
- BTo aid management in cash-flows analysis
- CTo match the costs of production with revenues as earned
- DTo adhere to the accounting constraint of conservatism
63Pappy Corporation received cash of $18,000 on May 1, 2012 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The December 31, 2012 adjusting entry is
- Adebit Rent Revenue and credit Unearned Rent Revenue, $6,000
- Bdebit Rent Revenue and credit Unearned Rent Revenue, $12,000
- Cdebit Unearned Rent Revenue and credit Rent Revenue, $12,000
- Ddebit Unearned Rent Revenue and credit Rent Revenue, $6,000
64Which of the following is a real (permanent) account?
- AGoodwill
- BSales
- CAccounts Payable
- DBoth Goodwill and Accounts Payable
65Which of the following is a nominal (temporary) account?
- AUnearned Revenue
- BSales Returns
- CInventory
- DRetained Earnings
66When a corporation pays a note payable and interest,
- Athe account notes payable will be increased
- Bthe account interest expense will be decreased
- Cthey will debit notes payable and interest expense
- Dthey will debit cash
67When an item of revenue or expense has been earned or incurred but not yet collected or paid, it is normally called a(n) ___________ revenue or expense.
- Aprepaid
- Badjusted
- Caccrued
- Destimated
68Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for
- Aan unearned revenue
- Ba prepaid expense
- Can accrued revenue
- Dan accrued expense
69Which type of account is always debited during the closing process?
- ADividends
- BExpense
- CRevenue
- DRetained earnings
70Adjusting entries are necessary to
1. obtain a proper matching of revenue and expense.
2. adjust assets and liabilities to their fair market value.
3. achieve an accurate statement of assets and equities.- A1, 2, and 3
- B2 and 3
- C1 and 2
- D1 and 3
71The purpose of nominal accounts is
- ATo provide temporary accumulation certain account balances for a meaningful period of time.
- BTo facilitate accounting for small amounts
- CTo correct errors as they are detected
- DTo record all transactions initially
72Which of the following criteria must be met before an event or item should be recorded for accounting purposes?
- AThe event or item can be measured objectively in financial terms.
- BThe even or item is relevant and reliable
- CThe event or item is an element.
- DAll of these must be met.
73Which of the following is NOT an internal event?
- ADepreciation
- BUsing raw material in the production process
- CDividend declaration and subsequent payment
- DAll of these are internal transactions
74A company receives interest on a $50,000, 9%, 5-year note receivable each September 1. Assuming that the company does NOT use reversing entries, what entry should be made on September 1 when the annual interest payment is received?
- ACash...............................4,500
Interest Receivable.....................3,000
Interest Revenue.........................1,500 - BCash.............................4,500
Interest Receivable....................4,500 - CCash............................4,500
Interest Receivable...................1,500
Interest Revenue.......................3,000 - DCash..........................4,500
Interest Revenue......................4,500
- ACash...............................4,500
75Which of the following errors will cause an imbalance in the trial balance?
- AOmission of a transaction in the journal.
- BPosting an entire journal entry twice to the ledger.
- CPosting a credit of $720 to Accounts Payable as a credit of $720 to Accounts Receivable
- DListing the balance of an account with a debit balance in the credit column of the trial balance
76Which of the following properly describes a deferral?
- ACash is received after revenue is earned
- BCash is received before revenue is earned
- CCash is paid after expense is incurred
- DCash is paid in the same time period that an expense is incurred.
77Which of the following is an example of an accrued expense?
- AOffice supplies purchased at the beginning of the year and debited to an expense account.
- BProperty taxes incurred during the year, to be paid in the first quarter of the subsequent year.
- CDepreciation expense
- DRent earned during the period, to be received at the end of the year
78How would the proceeds received from the advance sale of nonrefundable tickets for a theatrical performance be reported by the seller before the performance?
- ARevenue for the entire proceeds.
- BRevenue to the extent of related costs expended.
- CUnearned revenue for the entire proceeds.
- DUnearned revenue to the extend of related costs expended
79A prepaid expense can best be described as an amount
- Apaid and currently matched with revenues
- Bpaid and not currently matched with revenues
- Cnot paid and currently matched with revenues
- Dnot paid and not currently matched with revenues
80Which of the following is a recordable event or item?
- AChanges in managerial policy
- BThe value of human resources
- CChanges in personnel
- DNone of these
81A machine costing $30,000 with a salvage value of $5,000 is to be depreciated on a straight-line basis over 5 years. The failure to properly record the adjusting entry for the depreciation of the machine will result in an:
- Aunderstatement of expenses and an understatement of liabilities.
- Bunderstatement of expenses and an understatement of assets.
- Coverstatement of expenses and an overstatement of liabilities.
- Dunderstatement of expenses and an overstatement of assets.
82The major distinction made between the multiple-step and single-step income statement formats is the separation of
- Aoperating and non-operating data
- BIncome tax expense and administrative expenses
- CCost of goods sold expense and administrative expenses
- DThe effect on income taxes due to extraordinary items and the effect on income taxes due to income before extraordinary items
83Which of the following is false about an income statement?
- AItems that cannot be measured reliably are not reported in the income statement
- BIt is used to measure the solvency of a company
- CIncome measurement involves judgment
- DIncome numbers are affected by the accounting methods employed.
84The income statement provides investors and creditors with information to predict all of the following EXCEPT the:
- Aamount of future cash flows
- Bsources of future cash flows
- Ctiming of future cash flows
- Duncertainty of future cash flows
85Which of the following is an example of managing earnings up?
- AChanging estimated bad debts from 3 percent to 2.5 percent of sales
- BRevising the estimated life of equipment from 10 years to 8 years
- CWriting off obsolete inventory
- DIncreasing research and development expenditures
86What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income?
- AIncrease research and development activities
- BRelax credit policies for customers
- CDelay shipments to customers until after the end of the fiscal year.
- DDelay purchases from suppliers until after the end of the fiscal year
87The occurrence that most likely would have no effect on 2014 net income is the
- Asale in 2014 of an office building contributed by a stockholder in 1961
- Bcollection in 2014 of a dividend from an investment
- Ccorrection of an error in the financial statements of a prior period discovered subsequent to their issuance
- Dstock purchased in 1996 deemed worthless in 2014
88Which of the following is true of accounting for changes in estimates?
- AA company does not recognize a change in estimate by making a retrospective adjustment to the financial statements
- BA company accounts for changes in estimates only in the period of change, even though it affects the future periods
- CChanges in estimates are carried back to adjust prior years
- DChanges in estimates are considered as errors or extraordinary items
89Which of these is generally an example of an extraordinary item?
- ALoss incurred because of a strike by employees.
- BWrite-off of deferred marketing costs believed to have no future benefit.
- CGain resulting from the devaluation of the U.S. dollar.
- DGain resulting from the state exercising its right of eminent domain on a piece of land used as a parking lot.
90How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements?
- AShown as a separate item in operating revenues or expenses if material and combined with other items if not material in amount
- BShown in operating revenues or expenses if material but not shown as a separate item.
- CShown net of income tax after ordinary net earnings but before extraordinary items.
- DShown net of income tax after extraordinary items but before net earnings.
91A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to:
- Abeginning retained earnings of the earliest period presented.
- Bnet income of the period in which the change occurred.
- Ccomprehensive income for the earliest period presented.
- Dstockholders' equity of the period in which the change occurred.
92Companies use intraperiod tax allocation for all of the following items EXCEPT
- Adiscontinued operations
- Bextraordinary items
- Cchanges in accounting estimates
- Dincome form continuing operations
93Which of the following items would be reported net of tax on the face of the income statement?
- Aprior period adjustment
- BUnusual gain
- CChange in realizability of receivables
- DDiscontinued operations
94Which of the following items would be reported at its gross amount on the face of the income statement?
- AExtraordinary loss
- BPrior period adjustment
- CCumulative effect of a change in an accounting principle
- DUnusual loss
95Which of the following earnings per share figures must be disclosed on the face of the income statement?
- AEPS for income before taxes.
- BThe effect on EPS form unusual items.
- CEPS for gross profit.
- DEPS for income from continuing operations
96In calculating earnings per share, companies deduct preferred dividends from net income if:
- Athey are noncumulative though not declared.
- Bthe dividends are declared.
- Cthey are convertible preferred shares.
- Dthey are callable preferred shares.
97A correction of an error in prior periods' income will be reported
In the Income Statement Net of Tax- AYes Yes
- BNo No
- CYes No
- DNo Yes
98Which one of the following types of losses is excluded from the determination of net income in income statements?
- AMaterial losses resulting from transactions in the company's investments account.
- BMaterial losses resulting from unusual sales of assets not acquired for resale.
- CMaterial losses resulting from the write-off of intangibles.
- DMaterial losses resulting from correction of errors related to prior periods.
99Which of the following is NOT an acceptable way of displaying the components of other comprehensive income?
- ACombined statement of retained earnings
- BOne statement approach
- CTwo statement approach
- DAll of these are acceptable ways
100Comprehensive income includes all of the following EXCEPT
- Adividend revenue
- Blosses on disposal of assets
- Cinvestments by owners
- Dunrealized holding gains
101Which of the following is a limitation of the balance sheet?
- AMany items that are of financial value are omitted
- Bjudgments and estimates are used
- CCurrent fair value is not reported.
- DAll of these answer choices are correct.
102Balance sheet information is useful for all of the following EXCEPT to
- Acompute rates of return
- Banalyze cash inflows and outflows for the period
- Cevaluate capital structure
- Dassess future cash flows
103The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as
- Asolvency
- Bfinancial flexibility
- Cliquidity
- Dexchangeability
104The basis for classifying assets as current or concurrent is conversion to cash within
- Athe accounting cycle or one year, whichever is shorter.
- Bthe operating cycle or one year, whichever is longer.
- Cthe accounting cycle or one year, whichever is longer.
- Dthe operating cycler one year, whichever is shorter.
105Which of the following is a current asset?
- ACash surrender value of a life insurance policy of which the company is the beneficiary.
- BInvestment in equity securities for the purpose of controlling the issuing company.
- CCash designated for the purchase of tangible fixed assets.
- DTrade installment receivables normally collectible in 18 months.
106Current assets are presented in the balance sheet in
- Aascending order of their balances.
- Bdescending order of their balances.
- Corder of their liquidity.
- Dreverse order of their liquidity.
107When a portion of inventories has been pledged as security on a loan.
- Athe value of the portion pledged should be subtracted from the debt.
- Ban equal amount of retained earnings should be appropriated.
- Cthe fact should be disclosed but the amount of current assets should not be affected.
- Dthe cost of the pledged inventories should be transferred from current assets to concurrent assets.
108Which item below is NOT a current liability?
- AUnearned revenue
- BStock dividends distributable
- CThe currently maturing portion of long-term debt
- DTrade accounts payable
109Treasury stock should be reported as a(n)
- Acurrent asset
- Binvestment
- Cother asset
- Dreduction of stockholders' equity
110The financial statement which summarizes operating, investing, and financing activities of an entity for a period of time is the
- Aretained earnings statement.
- Bincome statement.
- Cstatement of cash flows.
- Dstatement of financial position.
111The statement of cash flows reports all of the following EXCEPT
- Athe net change in cash for the period.
- Bthe cash effects of operations during the period.
- Cthe free cash flows generated during the period.
- Dinvesting transactions.
112If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows?
- AIt would depend on whether you are using the direct or the indirect method.
- BIt would be a positive $8,000 in the financing section and a negative $8,000 in the investing section.
- CIt would be a negative $8,000 in the financing section and a positive $8,000 in the invention section.
- DIt would not appear on the statement of cash flows but rather on a schedule of non-cash investing and financing activities.
113Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
- ACash purchases of equipment.
- BCash purchases of bonds issued by another company.
- CCash received as repayment for funds loaned.
- DCash purchase of treasury stock.
114In preparing a statement of cash flows, sale of treasury stock at an amount greater than cost would be classified as a(n)
- Aoperating activity
- Bfinancing activity
- Cextraordinary activity
- Dinvesting activity
115In preparing a statement of cash flows, cash flows from operating activities
- Aare always equal to accrual accounting income.
- Bare calculated as the difference between revenues and expenses.
- Ccan be calculated by appropriately adding to or deducting from net income those items in the income statement that do no affect cash.
- Dcan be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.
116Free cash flow is calculated as net cash provided by operating activities less
- Acapital expenditures.
- Bdividends.
- Ccapital expenditures and dividends.
- Dcapital expenditures and depreciation.
117Which of the following is not a required supplemental disclosure for the balance sheet?
- AContingencies
- Bfinancial forecasts
- Caccounting policies
- Dcontractual situations
118Which of the following best exemplifies a contingency that is reported in the notes to the financial statements?
- ALosses from potential future lawsuits
- BLoss from a lawsuit settled out of court prior to the end of the fiscal year
- CWarranty claims on future sales
- DEstimated loss from an ongoing lawsuit
119Which of the following is a contra account?
- APremium on bonds payable
- BUnearned revenue
- CPatents
- DAccumulated depreciation
120Cash held to finance future construction of additional plants should be classified on a balance sheet as
- Along-term investments
- Bproperty, plant, and equipment
- Ccurrent assets
- Dintangible assets
121In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for
- Alending activities
- Bfinancing activities
- Coperating activities
- Dborrowing activities
122Hellespont Company uses the indirect method to prepare its statement of cash flows. It should present the recognition of a loss from the impairment of goodwill as a(n)
- ACash flow from investing activities
- BCash flow from financing activities
- CDeduction from net income.
- DAddition to net income.
123Travel advances should be reported as
- Areceivables
- Bcash because they represent the equivalent of money
- Cinvestments
- Dnone of these answers are correct
124In which account are postage stamps classified?
- ACash
- BReceivables
- COffice Supplies
- DInventory
125Bank overdrafts, if material, should be
- Areported as a current liability.
- Breported as a deduction from the current asset section.
- Creported as a deduction from cash.
- Dnetted against cash and a net cash amount reported.
126Which of the following should be recorded in the category "trade receivables"
- Aadvances to officers and employees
- Bincome tax refunds receivable
- COpen accounts resulting from short-term extensions of credit to customers
- Dclaims against insurance companies for casualties sustained
127If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as
- Aan item of "other expense" in the income statement
- Ba deduction from accounts receivable in determining the net realizable value of accounts receivable
- Csales discounts forfeited in the cost of goods sold section of the income statement
- Da deduction from sales in the income statement.
128Of the approaches to record cash discounts related to accounts receivable, which is more theoretically correct?
- AGross approach
- BNet approach
- CAllowance approach
- DAll three approaches are theoretically correct
129Why is the allowance method preferred over the direct write-off method of accounting for bad debts?
- AAllowance method is used for tax purposes.
- Bimproved matching of bad debt expense with revenue.
- CEstimates are used.
- DDetermining worthless accounts under direct write-off method is difficult to do.
130How can accounting for bad debts be used for earnings management?
- ADetermining which accounts to write-off.
- BChanging the percentage of sales recorded as bad debt expense.
- CUsing an aging of the accounts receivable balance to determine bad debt expense.
- DReversing previous write-offs.
131What is the normal journal entry for recording bad debt expense under the allowance method?
- ADebit Allowance for Doubtful Accounts, credit Accounts Receivable
- BDebit Allowance for Doubtful Accounts, credit Bad Debt Expense.
- CDebit Bad Debt Expense, credit Allowance for Doubtful Accounts.
- DDebit Accounts Receivable, credit Allowance for Doubtful Accounts.
132What is the normal journal entry when writing-off an account as uncollectible under the allowance method?
- ADebit Allowance for Doubtful Accounts, credit Bad Debt Expense.
- BDebit Allowance for Doubtful Accounts, credit Accounts Receivable
- CDebit Bad Debt Expense, credit Allowance for Doubtful Accounts
- DDebit Accounts Receivable, credit Allowance for Doubtful Accounts
133Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because
- Amost short-term receivables are not interest-bearing
- Bthe allowance for uncollectible accounts includes a discount element
- Cthe amount of the discount is not material
- Dmost receivables can be sold to a bank or factor.
134Which of the following methods of determining annual bad debt expense best achieves the matching concept?
- ABalance sheet approach
- BPercentage of average accounts receivable
- CIncome statement approach
- DDirect write-off
135At the beginning of 2013, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2013 year-end statement of financial position and $1,000 as sales revenue for 2013. What effect did this accounting for the note have on Gannon's net earnings for 2013, 2014, 2015, respectively?
- AOverstate, overstate, understate
- BOverstate, understate, understate
- COverstate, overstate, overstate
- DNoe of these answer choices are correct.
136Antique Company has notes receivable that have a fair value of $920,000 and a carrying amount of $710,000. Antique decides December 31, 2014, to use the fair value option for these recently-acquired receivables. The adjusting entry to record this change will include a:
- Adebit to Unrealized Holding Gain or Loss--Income for $210,000
- Bcredit to Notes Receivable for $210,000
- Ccredit to Unrealized Holding Gain or Loss--Income for $210,000
- Ddebit to Notes Receivable for $920,000
137Which of the following items should be included in accounts receivables reported on the balance sheet?
- ANotes receivable
- BIntrest receivable
- CAllowance for doubtful accounts
- DAdvances to related parties and officers.
138Lawrence Company has cash in bank of $22,000, restricted cash in a separate account of $4,000, and a bank overdraft in an account at another bank of $2,000. Lawrence should report cash of
- A$20,000
- B$22,000
- C$25,000
- D$26,000
139Which of the following methods is also referred as "parking transactions"?
- AConsignment sales
- BSales on installment
- CSales with high rates of return
- DSales with buyback agreement
140Under what circumstances should a company with high rate of return on sales consider the inventory sold?
- AWhen it can reasonably estimate the amount of returns
- BShen the retailer gives a confirmation that the goods won't be returned
- CWhen the goods are sold on installment
- DWhen the payment for goods is received
141How is a significant amount of consignment inventory reported in the balance sheet?
- AThe inventory is reported separately on the consignor's balance sheet.
- BThe inventory is combined with other inventory on the consignor's balance sheet.
- CThe inventory is reported separately on the consignee's balance sheet.
- DThe inventory is combined with other inventory on the consignee's balance sheet.
142Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet?
- AAccounts payable
- Binventory
- CEquipment
- DNot on the balance sheet.
143If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit f.o.b. shipping point in purchases, but not ending inventory?
- AOverstate the current ratio
- BUnderstate the current ratio
- CNo effect on the current ratio
- DNot sufficient information to determine effect on the current ratio
144Goods in transit which are shipped f.o.b. shipping point should be
- Aincluded in the inventory of the seller.
- Bincluded in the inventory of the buyer.
- Cincluded in the inventory of the shipping company
- Dnone of these answers are correct
145During 2014 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2015. Nolan then used the inventory as collateral to borrow form Norwalk Bank, remitting the proceeds to Carne. In 2015 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan. On whose books should the cost of the inventory appear at the December 31, 2014 balance sheet date?
- ACarne Corporation
- BNolan Corporation
- CNorwalk Bank
- DNolan Corporation, with Carne making appropriate note disclosure of the transaction
146Valuation of inventories requires the determination of all of the following EXCEPT
- Athe costs to be included in inventory
- Bthe physical goods to be included in inventory
- Cthe cost of goods held on consignment from other companies
- Dthe cost flow assumption to be adopted
147If the beginning inventory for 2014 is overstated, the effects of this error on cost of goods sold for 2014, net income for 2014, and assets at December 31,2015, respectively, are
- Aoverstatement, understatement, overstatement
- Boverstatement, understatement, no effect
- Cunderstatement, overstatement, overstatement
- Dunderstatement, overstatement, no effect
148Green Co. received merchandise on consignment. As of January 31, Green included the goods in inventory, but did not record the transaction. The effect of this on its financial statements for January 31 would be
- Anet income, current assets, and retained earnings were overstated.
- Bnet income was correct and current assets were understated
- Cnet income and current assets were overstated and current liabilities were understated
- Dnet income, current assets, and retained earnings were understated
149What is the effect of a $50,000 overstatement of last year's inventory on current years ending retained earning balance?
- AUnderstated by $50,000
- BNo effect
- COverstated by $50,000
- DNeed more information to determine
150All of the following costs should be charged against revenue in the period in which costs are incurred EXCEPT for
- Amanufacturing overhead costs for a product manufactured and sold in the same accounting period
- Bcosts which will not benefit any future period
- Ccosts from idle manufacturing capacity resulting from an unexpected plant shutdown
- Dcosts of normal shrinkage and scrap incurred for the manufacture of a product in ending inventory
151The use of a Purchase Discounts Lost account implies that the recorded cost of a purchased inventory item is its
- Ainvoice price
- Binvoice price plus the purchase discount lost.
- Cinvoice price less the purchase discount taken.
- Dinvoice price less the purchase discount allowable whether take or not.
152During 2014, which was the first year of operations, Oswald Company had merchandise purchases of $985,000 before cash discounts. All purchases were made on terms of 2/10, n/30. Three-fourths of he items purchased were paid for within 10 days of purchase. All of these goods available had been sold at year end. Which of the following recording procedures would result in the highest cost of goods sold for 2014?
1) Recording purchases at gross amounts
2) Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement- A1
- B2
- CEither 1 or 2 will result in the same cost of goods sold
- DCannot be determined from the information provided
153The pricing of issues from inventory must be deferred until the end of the accounting period under the following method of inventory valuation:
- Amoving-average
- Bweighted-average
- CLIFO perpetual
- DFIFO
154An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the cost of goods sold is
- AFIFO
- BLIFO
- Cbase stock
- Dweighted-average
155Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method?
- Aprices decreased
- Bprices remained unchanged
- Cprices increased
- Dprice trend cannot be determined form information given
156In a period of rising prices, the inventory method which tends to give the highest reported cost go goods sold is
- AFIFO
- Baverage cost
- CLIFO
- DNoe of these choices are correct
157The acquisition cost of a certain raw material changes frequently. The book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory method only if the book value is computed under the
- Aweighted-average method
- Bmoving average method
- CLIFO method
- DFIFO method
158In a period of rising prices which inventory method generally provides the lowest amount of net income?
- AAverage cost
- BFIFO
- CLIFO
- DSpecific identification
159In a period of falling prices, which inventory method generally provides the greatest amount of net income?
- AAverage cost
- BFIFO
- CLIFO
- DSpecific identification
160In no case can "market" in the lower-of-cost-or-market full be more than
- Aestimated selling price in the ordinary course of business
- Bestimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal.
- Cestimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin.
- Destimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible further losses.
161The designated market value
- Ais always the middle value of replacement cost, net realizable value, and net realizable value less is normal profit margin.
- Bshould always be equal to net realizable value.
- Cmay sometimes exceed net realizable value.
- Dshould always be equal to net realizable value less a normal profit margin.
162Lower-of-cost-or-market
- Ais most conservative if applied to the total inventory.
- Bis most conservative if applied to major categories of inventory.
- Cis most conservative if applied to individual items of inventory.
- Dmust be applied to major categories for taxes.
163An item of inventory purchased this period for $15.00 has been incorrectly written down to its current replacement cost of $10.00. It sells during the following period for $30.00, its normal selling price, with disposal costs of $3.00 and normal profit of $12.00. Which of the following statements is NOT true?
- Athe cost of sales of the following year will be understated.
- BThe current year's income is understated.
- CThe closing inventory of the current is understated.
- DIncome of the following year will be understated.
164Why are inventories stated at lower-of-cost-or-market?
- Ato report a loss when there is a decrease in the future utility.
- BTo keep track of the market value of the inventory.
- CTo report a loss when there is a decrease in the future utility below the original cost.
- DTo permit future profits to be recognized.
165Why might inventory be reported at sales prices (net realizable value or market price) rather than cost?
- AWhen there is a controlled market with a quoted price applicable to all quantities and when there are no significant costs of disposal.
- BWhen there are no significant costs of disposal.
- CWhen a non-cancelable contract exists to sell the inventory.
- DWhen there is a controlled market with a quoted price applicable to all quantities.
166If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is
- Anet realizable value
- Boriginal cost
- Cmarket value
- Dnet realizable value less a normal profit margin
167In 2014, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2015 for $700,000. Before the December 31, 2014 balance sheet day, the market price for these material dropped to $510,000. The journal entry to record this situation at December 31, 2014 will result in a credit that should be reported
- Aas a valuation account to inventory on the balance sheet.
- Bas a current liability.
- Cas an appropriation of retained earnings.
- Don the income statement.
168At the end of the fiscal year, Apha Airlines has an outstanding non-cancellable purchase commitment for the purchase of 1 million gallons of jet fuel at a price of $4.10 per gallon for delivery during the coming summer. The company prices its inventory at the lower of cost or market. If the market price for jet fuel at the end of the year is $4.50, how would this situation be reflected in the annual financial statements?
- ARecord unrealized gains of $400,000 and disclose the existence of the purchase commitment.
- BNo impact.
- CRecord unrealized losses of $400,00 and disclose the existence of the purchase commitment.
- DOnly disclose the existence of the purchase commitment.
169A major advantage of the retail inventory method is that it
- Aprovides reliable results in cases where the distribution of items in the inventory is different from that of items sold during the period.
- Bhides costs from competitors and customers
- Cgives a more accurate statement of inventory costs than other methods.
- Dprovides a method for inventory control and facilitates determination of the periodic inventory for certain types of companies.
170An inventory method which is designed to approximate inventory valuation t the lower of cost or market is
- Alast-in, first-out
- Bfirst-in, first-out
- Cconventional retail method
- Dspecific identification
171To produce an inventory valuation which approximates the lower of cost or market using the conventional retail inventory method, the computation of the ratio of cost to retail should
- Ainclude markups but not markdowns
- Binclude markups and markdowns
- Cignore both markups and markdowns
- Dinclude markdowns but not markups
172Which of the following is NOT a reason the retail inventory method is used widely?
- AAs a control measure in determining inventory shortages
- BFor insurance information
- CTo permit the computation of net income without a physical count of inventory
- DTo defer income tax liability
173Which of the following is true of normal shortages?
- Ait is ignored in the income statement of a company.
- Bit is deducted from both the cost and retail columns.
- CThese goods are o longer available for sale.
- DThis loss is considered in calculating cost-to-retail ratio.
174What is the effect of freight-in on the cost-to-retail ratio when using the conventional retail method?
- AIncreases the cost-to-retail ratio
- BNo effect on the cost-to-retail ratio
- CDepends on the amount of the net markups
- DDecreases the cost-to-retail ratio
175Which of the following is NOT a common disclosure for inventories?
- Ainventory composition
- Binventory location
- Cinventory financing arrangements
- Dinventory costing methods employed
176Which of the following statements is false regarding an assumption of inventory cost flow?
- AThe cost flow assumption need not correspond to the actual physical flow of goods.
- BThe assumption selected may be changed each accounting period.
- CThe FIIFO assumption uses the earliest acquired prices to cost the items sold during a period.
- DThe LIFO assumption uses the earliest acquired prices to cost the items on hand at the end of an accounting period.
177Under the lower-cost-of-market method, the replacement cost of an inventory item would be used as the designated market value
- Awhen it is below the net realizable value less the normal profit margin.
- Bwhen it is below the net realizable value and above the net realizable value less the normal profit margin.
- Cwhen it is above the net realizable value
- Dregardless of net realizable value
178Which of the following principles best describes the conceptual rational for the methods of matching depreciation expense with revenues?
- AAssociating cause and effect
- BSystematic and rational allocation
- Cimmediate recognition
- DPartial recognition
179Which of the following most accurately reflects the concept of depreciation as used in accounting?
- AThe process of charging the decline in value of an economic resource to income in the period in which the benefit occurred.
- BThe process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.
- CA method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved.
- DAn accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets.
180The term "depreciable base," or "depreciation base," sit is used in accounting, refers to
- Athe total amount to be charged (debited) to expense over an asset's useful life.
- Bthe cost of the asset less the related depreciation recorded to date.
- Cthe estimated market value of the asset at the end of its useful life.
- Dthe acquisition cost of the asset.
181For income statement purposes, depreciation is a variable expense if the depreciation method used is
- Aunits-of-production
- Bstraight-line
- Csum-of-the-years'-digits
- Ddeclining-balance
182Use of the sum-of-the-years'-digits method
- Aresults in salvage value being ignored
- Bmeans the denominator is the years remaining at the beginning of the year.
- Cmeans the book value should not be reduced below salvage value.
- Dall of these answers are correct.
183A graph is set up with "yearly depreciation expense" on the vertical axis and "time" on the horizontal axis. Assuming linear relationships, how would the graphs for straight-line and sum-of-the-years'-digits depreciation, respectively, be drawn?
- AVertically and sloping down to the right
- BVertically and sloping up the right
- CHorizontally and sloping down to the right
- DHorizontally and sloping up the right
184McDonald Company acquired machinery on January 1, 2009 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 2014, McDonald estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by McDonald?
- AAs a prior period adjustment
- BAs the cumulative effect of a change in accounting principle in 2014.
- CBy setting future annual depreciation equal to one-sixth of the book value on January 1, 2014
- DBy continuing to depreciate the machinery over the original fifteen year life
185Lamar Printing Company detainees that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should
- Arecognize an extraordinary loss for the period
- Binclude a credit to the equipment accumulated depreciation account
- Cinclude a credit to the equipment account
- Dnot be made if the equipment is still being used
186Which of the following disclosure is NOT required in the financial statements regarding depreciation?
- AAccumulated depression, either by major classes of depreciable assets or in total
- BDetails demonstrating how depreciation was calculated.
- CDepreciation expense for the period.
- DBalances of major classes of depreciable assets, by nature and function.
187The book value of a plant asset is
- Athe fair market value for the asset at a balance sheet date.
- Bthe asset's acquisition cost less the total related depreciation recoded to date.
- Cequal to the balance of the related accumulated depreciation account.
- Dthe assessed value of the asset for property tax purposes.
188A general description of the depreciation methods applicable to major classes of depreciable assets
- Ais not a current practice in financial reporting.
- Bis not essential to a fair presentation of financial position.
- Cis needed in financial reporting when company policy offers from income tax policy.
- Dshould be included in corporate financial statements or notes thereto.
189A depreciable asset has an estimated 15% salvage value. At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods?
Straight-Line Productive Output- AYes No
- BYes Yes
- CNo Yes
- DNo No
190Net income is understated if, in the first year, estimated salvage value is excluded from the depreciation computation when using the
Straight-line Method Production or Use Method- AYes No
- BYes Yes
- CNo No
- DNo Yes
191A plant asset with a five-year estimated useful life and no residual value is sold at the end of the second year of its useful life. How would using the sum-of-the years'-digits method of depreciation instead of the double-declining balance method of depreciation affect a gain or loss on the sale of the plant asset?
Gain Loss- ADecrease Decrease
- BDecrease Increase
- CIncrease Decrease
- DIncrease Increase
Informationen
- Beschreibung
- Quiz am Ohne Titel, erstellt von alink0324 am 05/05/2015.
- Autor
- alink0324
- Sprache
- English
- Aufrufe
- 7
- Bewertung
- Noch keine Bewertungen Bewerte dieses Quiz