FA8 Problem: Financial Statements - MCQ

FA8 Problem: Financial Statements - MCQ

1.

Which of the following events would not be considered an accounting transaction to beentered into the accounting system?a. Payment of fees to an advertising consultant. b. Purchase of advertising for a new product.c. Sales of a new product during the first month on the market.d. Tabulation of the results of a customer satisfaction survey.2. The accounting cycle is:a.

The sequence of procedures used by a business to process economic informationand to produce financial statements. b.

The length of time it takes to complete a set of financial statements after the booksare closed.c.

A process that begins with adjusting entries and ends with the preparation of financial statements.d.

Applicable only to manual systems, not to electronic systems3. The primary function of an account in the accounting system is to:a.

Identify the type of organisation. b.

Determine at what point a transaction should be recorded.c.

Accumulate accounting information.d.

Store accounting transactions until they are classified.4. The income statement format that lists all revenues together and all expenses together iscalled:a.

A standard income statement. b.

A single-step income statement.c.

A multiple-step income statement.d.

An unclassified income statement.5. Which of the following is shown net of income tax?a.

Income from financing activities. b.

Income from discontinued operations.c.

Income from unusual or infrequent events.d.

Income from non-operating sources.6. Investing activities are those that involve:a.

 Non-current assets. b.

Current assets.c.

Long-term liabilities.d.

Shareholders’ equity



CMA Ontario

P-

1697. What is the general purpose of the notes to the financial statements? Give three examplesof typical note disclosure.8. What is the primary limitation of general-purpose financial statements?9. Indicate whether each of the following events immediately gives rise to an asset under generally accepted accounting principles. If an asset is recognized, state the account titleand the amount.(a)

An investment of $8,000 is made in a government bond. The bond will have a maturityvalue of $10,000 in three years. The firm intends to hold the bond to maturity.(b) A cheque for $1,000 is sent to an insurance company for a two-year fire insurance policy in advance. (Consider from the standpoint of the firm issuing the cheque.)(c) A cheque for $2,000 is written to obtain an option to purchase a tract of land. The price of the land is $50,500. (Consider from the standpoint of the firm issuing thecheque.)(d) A baseball team signs a four-year employment agreement with its first baseman for $2,500,000 per year. The contract period begins next month. (Consider from thestandpoint of the team.)(e) A patent has been purchased from its creator for $60,000.(f) A patent has been received on a new invention developed by a firm. Expenditures of $60,000 have been made to develop the patented invention.(g) Notice has been received from a supplier that materials costing $5,000, with payment due in 30 days have been shipped by freight. The terms of sale are FOBdestination.10. 10. The purpose of amortization is to:a.

Measure the change in the value of an asset. b.

Recognize that the asset is wearing out.c.

Allocate the cost of the asset to the periods it is expected to benefit.d.

Adjust the carrying value of the asset to its market value.11. Which of the following statements is true?a.

Dividends are presented on the income statement. b.

Upper management declares dividends.c.

Only the board of directors can declare dividends.d.

Dividends must be paid in cash