ACC 421 FINAL EXAM
TopsellerACC 421---- FINAL EXAM….36 QUESTIONS ANSWERED
1) An accrued expense can best be described as an amount | ||||||||
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2) When an item of revenue is collected and recorded in advance, it is normally called a(n) ___________ revenue. | ||||||||
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3) When an item of expense is paid and recorded in advance, it is normally called a(n) | ||||||||
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4) A common set of accounting standards and procedures are called | ||||||||
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5) One objective of financial reporting is to provide | ||||||||
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6) The information provided by financial reporting pertains to | ||||||||
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7) The Financial Accounting Foundation | ||||||||
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8) The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is | ||||||||
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9) The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the | ||||||||
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10) Limitations of the income statement include all of the following except | ||||||||
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11) The income statement reveals | ||||||||
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12) Which of the following would represent the least likely use of an income statement prepared for a business enterprise? | ||||||||
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13) The process of formally recording or incorporating an item in the financial statements of an entity is | ||||||||
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14) Which of the following is not a reason why revenue is recognized at time of sale? | ||||||||
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15) Which of the following is not an accurate representation concerning revenue recognition? | ||||||||
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16) One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is | ||||||||
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17) The basis for classifying assets as current or noncurrent is conversion to cash within | ||||||||
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18) The correct order to present current assets is | ||||||||
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19) If a business entity entered into certain related party transactions, it would be required to disclose all of the following information except the | ||||||||
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20) Events that occur after the December 31, 2008 balance sheet date (but before the balance sheet is issued) and provide additional evidence about conditions that existed at the balance sheet date and affect the realizability of accounts receivable should be | ||||||||
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21) The full disclosure principle, as adopted by the accounting profession, is best described by which of the following? | ||||||||
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22) The MD&A section of an enterprise's annual report is to cover the following three items: | ||||||||
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23) If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be | ||||||||
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24) Which of the following best characterizes the difference between a financial forecast and a financial projection? | ||||||||
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25) Theoretically, in computing the receivables turnover, the numerator should include | ||||||||
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26) Which of the following ratios measures long-term solvency? | ||||||||
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27) The rate of return on common stock equity is calculated by dividing | ||||||||
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28) The primary purpose of the statement of cash flows is to provide information | ||||||||
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29) The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements? | ||||||||
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30) To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by | ||||||||
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31) The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) | ||||||||
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32) In determining net cash flow from operating activities, a decrease in accounts payable during a period | ||||||||
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33) In reporting extraordinary transactions on a statement of cash flows (indirect method), the | ||||||||
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34) Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of the asset obtained or liability owed at the date of incurrence? | ||||||||||
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35) Which of the following tables would show the smallest value for an interest rate of 5% for six periods? | ||||||||||
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36) Which table would show the largest factor for an interest rate of 8% for five periods? | ||||||||||
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ACC 421---- FINAL EXAM….26 QUESTIONS ANSWERED
10) Limitations of the income statement include all of the following except | ||||||||||||||||
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11) Which of the following would represent the least likely use of an income statement prepared for a business enterprise? | ||||||||||||||||
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12) Which of the following is not a generally practiced method of presenting the income statement? | ||||||||||||||||
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13) Which of the following is not a reason why revenue is recognized at time of sale? | ||||||||||||||||
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14) In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be | ||||||||||||||||
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15) Which of the following is not an accurate representation concerning revenue recognition? | ||||||||||||||||
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16) The balance sheet contributes to financial reporting by providing a basis for all of the following except | ||||||||||||||||
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17) The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as | ||||||||||||||||
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18) One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is | ||||||||||||||||
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19) Which of the following should be disclosed in a Summary of Significant Accounting Policies? | ||||||||||||||||
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20) The focus of APB Opinion No. 22 is on the disclosure of accounting policies. This information is important to financial statement readers in determining | ||||||||||||||||
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21) Events that occur after the December 31, 2008 balance sheet date (but before the balance sheet is issued) and provide additional evidence about conditions that existed at the balance sheet date and affect the realizability of accounts receivable should be | ||||||||||||||||
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22) If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be | ||||||||||||||||
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23) The MD&A section of an enterprise's annual report is to cover the following three items: | ||||||||||||||||
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24) The required approach for handling extraordinary items in interim reports is to | ||||||||||||||||
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25) The payout ratio is calculated by dividing | ||||||||||||||||
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26) Which of the following ratios measures long-term solvency? | ||||||||||||||||
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27) The calculation of the number of times interest is earned involves dividing | ||||||||||||||||
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28) An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n) | ||||||||||||||||
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29) Of the following questions, which one would not be answered by the statement of cash flows? | ||||||||||||||||
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30) To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by | ||||||||||||||||
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31) In determining net cash flow from operating activities, a decrease in accounts payable during a period | ||||||||||||||||
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32) In a statement of cash flows, the cash flows from investing activities section should report | ||||||||||||||||
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33) Riley Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Wood Co. during the current year, even though no dividends were declared or paid by Wood during the year. On Riley's statement of cash flows (indirect method), the $25,000 should | ||||||||||||||||
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34) Which of the following tables would show the smallest factor for an interest rate of 10% for six periods? | ||||||||||||||||
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35) Which table has a factor of 1.00000 for 1 period at every interest rate? | ||||||||||||||||
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36) Which of the following tables would show the smallest value for an interest rate of 5% for six periods? | ||||||||||||||||
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ACC 421---- FINAL EXAM….35 QUESTIONS ANSWERED
1 General-purpose financial statements are the product of
a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting
2 . Users of financial reports include all of the following except
a. creditors.
b. government agencies.
c. unions.
d. All of these are users.
3 . Which of the following statements is not an objective of financial reporting?
a. Provide information that is useful in investment and credit decisions.
b. Provide information about enterprise resources, claims to those resources, and changes to them.
c. Provide information on the liquidation value of an enterprise.
d. Provide information that is useful in assessing cash flow prospects.
4 . Accrual accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of ability to generate cash flows than the cash basis.
c. it recognizes revenues when cash is received and expenses when cash is paid.
d. none of the above.
5 . Which of the following (a-c) are not true concerning a conceptual framework in accounting?
a. It should be a basis for standard-setting.
b. It should allow practical problems to be solved more quickly by reference to it.
c. It should be based on fundamental truths that are derived from the laws of nature.
d. All of the above (a-c) are true.
6 . In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting?
a. Measurement and recognition concepts such as assumptions, principles, and constraints
b. Qualitative characteristics of accounting information
c. Elements of financial statements
d. Objectives of financial reporting
7 . Accounting information is considered to be relevant when it
a. can be depended on to represent the economic conditions and events that it is intended to represent.
b. is capable of making a difference in a decision.
c. is understandable by reasonably informed users of accounting information.
d. is verifiable and neutral.
8 . According to Statement of Financial Accounting Concepts No. 2, which of the following relates to both relevance and reliability?
a. Materiality
b. Understandability
c. Usefulness
d. All of these
9 . Factors that shape an accounting information system include the
a. nature of the business.
b. size of the firm.
c. volume of data to be handled.
d. all of these.
10 . A journal entry to record the sale of inventory on account will include a
a. debit to inventory.
b. debit to accounts receivable.
c. debit to sales.
d. credit to cost of goods sold.
11 . At the time a company prepays a cost
a. it debits an asset account to show the service or benefit it will receive in the future.
b. it debits an expense account to match the expense against revenues earned.
c. its credits a liability account to show the obligation to pay for the service in the future.
d. more than one of the above.
12 . Which of the following would not be a correct form for an adjusting entry?
a. A debit to a revenue and a credit to a liability
b. A debit to an expense and a credit to a liability
c. A debit to a liability and a credit to a revenue
d. A debit to an asset and a credit to a liability
13 . 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.
14 . Which of the following is not a generally practiced method of presenting the income statement?
a. Including prior period adjustments in determining net income
b. The single-step income statement
c. The consolidated statement of income
d. Including gains and losses from discontinued operations of a component of a business in determining net income
15 . In order to be classified as an extraordinary item in the income statement, an event or transaction should be
a. unusual in nature, infrequent, and material in amount.
b. unusual in nature and infrequent, but it need not be material.
c. infrequent and material in amount, but it need not be unusual in nature.
d. unusual in nature and material, but it need not be infrequent.
16 . Which of the following items will not appear in the retained earnings statement?
a. Net loss
b. Prior period adjustment
c. Discontinued operations
d. Dividends
17 . The revenue recognition principle provides that revenue is recognized when
a. it is realized.
b. it is realizable.
c. it is realized or realizable and it is earned.
d. none of these.
18 . Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract on each appliance sold. Although Dot Point sells the appliances on an installment basis, all service contracts are cash sales at the time of purchase by the buyer. Collections received for service contracts should be recorded as
a. service revenue.
b. deferred service revenue.
c. a reduction in installment accounts receivable.
d. a direct addition to retained earnings.
19 . The percentage-of-completion method must be used when certain conditions exist. Which of the following is not one of those necessary conditions?
a. Estimates of progress toward completion, revenues, and costs are reasonably dependable.
b. The contractor can be expected to perform the contractual obligation.
c. The buyer can be expected to satisfy some of the obligations under the contract.
d. The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of settlement.
20 . The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it
a. is unacceptable for income tax purposes.
b. gives results based upon estimates which may be subject to considerable uncertainty.
c. is likely to assign a small amount of revenue to a period during which much revenue was actually earned.
d. none of these.
21 . Which of the following is a limitation of the balance sheet?
a. Many items that are of financial value are omitted.
b. Judgments and estimates are used.
c. Current fair value is not reported.
d. All of these
22 . The net assets of a business are equal to
a. current assets minus current liabilities.
b. total assets plus total liabilities.
c. total assets minus total stockholders' equity.
d. none of these.
23 . The current assets section of the balance sheet should include
a. machinery.
b. patents.
c. goodwill.
d. inventory.
24 . Which of the following is a current asset?
a. Cash surrender value of a life insurance policy of which the company is the bene-ficiary.
b. Investment in equity securities for the purpose of controlling the issuing company.
c. Cash designated for the purchase of tangible fixed assets.
d. Trade installment receivables normally collectible in 18 months.
25 . An example of an item which is not an element of working capital is
a. accrued interest on notes receivable.
b. goodwill.
c. goods in process.
d. temporary investments.
26 . Which of the following should be disclosed in a Summary of Significant Accounting Policies?
a. Types of executory contracts
b. Amount for cumulative effect of change in accounting principle
c. Claims of equity holders
d. Depreciation method followed
27 . Which of the following subsequent events (post-balance-sheet events) would require adjustment of the accounts before issuance of the financial statements?
a. Loss of plant as a result of fire
b. Changes in the quoted market prices of securities held as an investment
c. Loss on an uncollectible account receivable resulting from a customer’s major flood loss
d. Loss on a lawsuit, the outcome of which was deemed uncertain at year end.
28 . The basic limitations associated with ratio analysis include
a. the lack of comparability among firms in a given industry.
b. the use of estimated items in accounting.
c. the use of historical costs in accounting.
d. all of these.
29 . Cash equivalents are
a. treasury bills, commercial paper, and money market funds purchased with excess cash.
b. investments with original maturities of three months or less.
c. readily convertible into known amounts of cash.
d. all of these.
30 . An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n)
a. addition to net income in arriving at net cash flow from operating activities.
b. deduction from net income in arriving at net cash flow from operating activities.
c. cash outflow from investing activities.
d. cash outflow from financing activities.
31 . Xanthe Corporation had the following transactions occur in the current year:
1. Cash sale of merchandise inventory.
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 a 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?
a. Five items
b. Four items
c. Three items
d. Two items
32 . A series of equal receipts at equal intervals of time when each receipt is received at the beginning of each time period is called an
a. ordinary annuity.
b. annuity in arrears.
c. annuity due.
d. unearned receipt
33 . Which of the following statements is true?
a. The higher the discount rate, the higher the present value.
b. The process of accumulating interest on interest is referred to as discounting.
c. If money is worth 10% compounded annually, $1,100 due one year from today is equivalent to $1,000 today.
d. If a single sum is due on December 31, 2010, the present value of that sum decreases as the date draws closer to December 31, 2010.
34 . Present value is
a. the value now of a future amount.
b. the amount that must be invested now to produce a known future value.
c. always smaller than the future value.
d. all of these.
35 . If an annuity due and an ordinary annuity have the same number of equal payments and the same interest rates, then
a. the present value of the annuity due is less than the present value of the ordinary annuity.
b. the present value of the annuity due is greater than the present value of the ordinary annuity.
c. the future value of the annuity due is equal to the future value of the ordinary annuity.
d. the future value of the annuity due is less than the future value of the ordinary annuity.
ACC 421---- FINAL EXAM….24 QUESTIONS ANSWERED
1. A strength of the income statement as compared to the balance sheet is that items that cannot be measured reliably can be reported in the income statement. False
2. A company that reports a discontinued operation or an extraordinary item has the option of reporting per share amounts for these items. False
3. Limitations of the income statement include all of the following except
a. items that cannot be measured reliably are not reported.
b. only actual amounts are reported in determining net income.
c. income measurement involves judgment.
d. income numbers are affected by the accounting methods employed
4. Carpino Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate of 40%. At what amount should Carpino 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
5. The following items were among those that were reported on Nen Co.'s income statement for the year ended December 31, 2007:
a. Legal and audit fees $130,000
b. Rent for office space 180,000
c. Interest on inventory floor plan 210,000
d. Loss on abandoned equipment used in operations 35,000
e. The office space is used equally by Nen's sales and accounting departments. What amount of the above-listed items should be classified as general and administrative expenses in Nen's multiple-step income statement?
a. $220,000.
b. $255,000.
c. $310,000.
d. $430,000.
$130,000 + $90,000 = $220,000
6. Which of these is generally an example of an extraordinary item?
a. Loss incurred because of a strike by employees.
b. Write-off of deferred marketing costs believed to have no future benefit.
c. Gain resulting from the devaluation of the U.S. dollar.
d. Gain resulting from the state exercising its right of eminent domain on a piece of land used as a parking lot.
7. The most popular input measure used to determine the progress toward completion is the cost-to-cost basis. True
8. In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be
a. the terms of payment in the contract.
b. the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable.
c. the method commonly used by the contractor to account for other long-term construc-tion contracts.
d. the inherent nature of the contractor's technical facilities used in construction.
9. In certain cases, revenue is recognized at the completion of production even though no sale has been made. Which of the following statements is not true?
a. Examples involve precious metals or farm equipment.
b. The products possess immediate marketability at quoted prices.
c. No significant costs are involved in selling the product.
d. All of these statements are true.
10. Reese Construction Corporation contracted to construct a building for $1,500,000. Construction began in 2007 and was completed in 2008. Data relating to the contract are summarized below:
Year ended
December 31,
2007 2008
Costs incurred $600,000 $450,000
Estimated costs to complete 400,000 —
Reese uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2007, and 2008, respectively, Reese should report gross profit of
a. $270,000 and $180,000.
b. $900,000 and $600,000.
c. $300,000 and $150,000.
d. $0 and $450,000.
$600,000
—————————— ×($1,500,000 – $1,000,000) = $300,000
$600,000 + $400,000
($1,500,000 – $1,050,000) – $300,000 = $150,000.
11. Maris, Inc. appropriately used the installment method of accounting to recognize income in its financial statement. Some pertinent data relating to this method of accounting include:
2007 2008
Installment sales $750,000 $900,000
Cost of sales 450,000 630,000
Gross profit $300,000 $270,000
Collections during year:
On 2007 sales 250,000 250,000
On 2008 sales 300,000
What amount to be realized gross profit should be reported on Maris's income statement for 2008?
a. $165,000
b. $190,000
c. $220,000
d. $270,000
($300,000 ÷ $750,000) × $250,000 = $100,000
[($270,000 ÷ $900,000) × $300,000] + $100,000 = $190,000.
12. Penny Farms produced 800,000 pounds of cotton during the 2007 season. Penny sells all of its cotton to Bye Co., which has agreed to purchase Penny's entire production at the prevailing market price. Recent legislation assures that the market price will not fall below $.70 per pound during the next two years. Penny's costs of selling and distributing the cotton are immaterial and can be reasonably estimated. Penny reports its inventory at expected exit value. During 2007, Penny sold and delivered to Bye 600,000 pounds at the market price of $.70. Penny sold the remaining 200,000 pounds during 2008 at the market price of $.72. What amount of revenue should Penny recognize in 2007?
a. $420,000
b. $432,000
c. $560,000
d. $576,000
800,000 lbs. ×$.70 = $560,000
13. According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is
a. recognition.
b. realization.
c. allocation.
d. matching.
1. The following items were among those that were reported on Nen Co.'s income statement for the year ended December 31, 2007:
Legal and audit fees $130,000
Rent for office space 180,000
Interest on inventory floor plan 210,000
Loss on abandoned equipment used in operations 35,000
The office space is used equally by Nen's sales and accounting departments. What amount of the above-listed items should be classified as general and administrative expenses in Nen's multiple-step income statement?
a. $220,000.
b. $255,000.
c. $310,000.
d. $430,000.
$130,000 + $90,000 = $220,000
1. _B_____ Balance sheet information is useful for all of the following except to
a. compute rates of return
b. analyze cash inflows and outflows for the period
c. evaluate capital structure
d. assess future cash flows
2. __C_____ The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as
a. solvency.
b. financial flexibility.
c. liquidity.
d. exchangeability.
3. __B_____ The correct order to present current assets is
a. cash, accounts receivable, prepaid items, inventories.
b. cash, accounts receivable, inventories, prepaid items.
c. cash, inventories, accounts receivable, prepaid items.
d. cash, inventories, prepaid items, accounts receivable.
4. _B_____ Which item below is not a current liability?
a. Unearned revenue
b. Stock dividends distributable
c. The currently maturing portion of long-term debt
d. Trade accounts payable
5. __D_____ Working capital is
a. capital which has been reinvested in the business.
b. unappropriated retained earnings.
c. cash and receivables less current liabilities.
d. none of these.
Quiz 5 continued over . . .
Quiz 5 continued.
6. __D_____ Which of the following is a contra account?
a. Premium on bonds payable
b. Unearned revenue
c. Patents
d. Accumulated depreciation
7. __D_____ Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
a. Cash purchases of equipment.
b. Cash purchases of bonds issued by another company.
c. Cash received as repayment for funds loaned.
d. Cash purchase of treasury stock.
8. __B_____ Houghton Company has the following items: common stock, $720,000; treasury stock, $85,000; deferred taxes, $100,000 and retained earnings, $313,000. What total amount should Houghton Company report as stockholders’ equity?
a. $848,000.
b. $948,000.
c. $1,048,000.
d. $1,118,000.
9. ___B____ Keisler Corporation reports:
Cash provided by operating activities $200,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 70,000
What is Keisler’s ending cash balance?
a. $230,000.
b. $300,000.
c. $450,000.
d. $520,000.
10. __C_____ Sauder Corporation reports the following information:
Net income $250,000
Depreciation expense 70,000
Increase in accounts receivable 30,000
Sauder should report cash provided by operating activities of
a. $150,000.
b. $210,000.
c. $290,000.
d. $350,000.
ACC 421---- FINAL EXAM….23 QUESTIONS ANSWERED
The Financial Accounting Standards Board employs a "due process" system which
(Points: 5) has all CPAs in the United States vote on a new Statement. enables interested parties to express their views on issues under consideration. identifies the accounting issues that are the most important. requires that all accountants receive a copy of financial standards.
2. (TCO A) The IASB: (Points: 5) governs accounting standards in the U.S. is working on a convergence project with the FASB. sets the accounting standards for only European countries. plays only a minor part in accounting rule making throughout the world.
3. (TCO A) International GAAP, or i-GAAP: (Points: 5) has different standards than under U.S. GAAP. has some commonality with U.S. GAAP in many areas. is accepted by many countries throughout the world all of the above are true.
4. (TCO A) Information is neutral if it: (Points: 5) provides benefits which are at least equal to the costs of its preparation. can be compared with similar information about an enterprise at other points in time. would have no impact on a decision maker. is free from bias toward a predetermined result.
5. (TCO A) Which of the following elements of financial statements is not a component of comprehensive income? (Points: 5) Revenues Distributions to owners Losses Expenses
6. (TCO A) Issuance of common stock for cash affects which basic element of financial statements? (Points: 5) Revenues Losses Liabilities Equity
7. (TCO A) Which basic element of financial statements arise from peripheral or incidental transactions? (Points: 5) Assets Liabilities Gains Expenses
8. (TCO A) Which basic assumption may not be followed when a firm in bankruptcy reports financial results? (Points: 5) Economic entity assumption Going concern assumption Periodicity assumption Monetary unit assumption
9. (TCO A) What is the quality of information that enables users to better forecast future operations? (Points: 5) Reliability. Materiality. Comparability. Relevance.
10. (TCO A) Financial information exhibits the characteristic of consistency when (Points: 5) expenses are reported as charges against revenue in the period in which they are paid. accounting entities give accountable events the same accounting treatment from period to period. extraordinary gains and losses are not included on the income statement. accounting procedures are adopted which give a consistent rate of net income
11. (TCO A) Which of the following is true with regard to the element "comprehensive income"? (Points: 5) includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. is optional for financial statement preparers. is not in accordance with GAAP. came into law with the passing of the Sarbanes-Oxley Act.
Not 100% sure about 11
12. (TCO A) Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy? (Points: 5) Monetary unit assumption. Periodicity assumption. Going-concern assumption. Economic entity assumption.
13. (TCO D) One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is (Points: 5) failure to reflect current value information. the extensive use of separate classifications. an extensive use of estimates. failure to include items of financial value that cannot be recorded objectively.
14. (TCO D) The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as (Points: 5) solvency. financial flexibility. liquidity. exchangeability.
15. (TCO D) The net assets of a business are equal to (Points: 5) current assets minus current liabilities. total assets plus total liabilities. total assets minus total stockholders' equity. none of these.
16. (TCO D) Houghton Company has the following items: common stock, $720,000; treasury stock, $85,000; deferred taxes, $100,000 and retained earnings, $313,000. What total amount should Houghton Company report as stockholders' equity? (Points: 5) $848,000 $948,000 $1,048,000 $1,118,000
17. (TCO D) The current assets section of the balance sheet should include (Points: 5) machinery patents goodwill inventory
18. (TCO D) An example of an item which is not an element of working capital is: (Points: 5) accrued interest on notes receivable. goodwill. goods in process. temporary investments.
19. (TCO D) Which of the following is not an acceptable major asset classification? (Points: 5) Current assets Long-term assets Property, plant, and equipment Deferred charges
20. (TCO D) The presentation of long-term liabilities in the balance sheet should disclose: (Points: 5) maturity dates interest rates conversion rights all of the above
21. (TCO D) Equity or debt securities held to finance future construction of additional manufacturing plants should be classified on the balance sheet as: (Points: 5) current assets. property, plant and equipment. intangible assets. long-term investments.
22. (TCO D) Treasury stock should be reported as a(n) (Points: 5) current asset. investment other asset. reduction of stockholder's equity.
If a business entity entered into certain related party transactions, it would be required to disclose all of the following information except the
A. nature of any future transactions planned between the parties and the terms involved.
B. dollar amount of the transactions for each of the periods for which an income state-ment is presented.
C. nature of the relationship between the parties to the transactions.
D. amounts due from or to related parties as of the date of each balance sheet presented.
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