Acc. final-chapter 2 – Flashcards
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In a classified balance sheet, assets are usually classified as: a. current assets; long-term assets; property, plant, and equipment; and intangible assets. b. current assets; long-term investments; property, plant, and equipment; and common stocks. c. current assets; long-term investments; tangible assets; and intangible assets. d. current assets; long-term investments; property, plant, and equipment; and intangible assets.
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D
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On a classified balance sheet, marketable securities are classified as a. an intangible asset. b. property, plant, and equipment. c. a current asset. d. a long-term investment.
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C
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A current asset is a. the last asset purchased by a business. b. an asset which is currently being used to produce a product or service. c. usually found as a separate classification in the income statement. d. expected to be converted to cash or used in the business within a relatively short period of time.
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D
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Which of the following is not classified properly as a current asset? a. Supplies b. Marketable securities c. A fund to be used to purchase a building within the next year d. A receivable from the sale of an asset to be collected in two years
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D
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An intangible asset a. derives its value from the rights and privileges it provides the owner. b. is worthless because it has no physical substance. c. is converted into a tangible asset during the operating cycle. d. cannot be classified on the balance sheet because it lacks physical substance.
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A
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Which of the following is not considered an asset? a. Equipment b. Dividends c. Accounts receivable d. Inventory
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B
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Trademarks would appear in which balance sheet section? a. Intangible assets b. Investments c. Property, plant, and equipment d. Current assets
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A
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Liabilities are generally classified on a balance sheet as a. small liabilities and large liabilities. b. present liabilities and future liabilities. c. tangible liabilities and intangible liabilities. d. current liabilities and long-term liabilities.
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D
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Which of the following would not be classified as a long-term liability? a. Current maturities of long-term debt b. Bonds payable c. Mortgage payable d. Lease liabilities
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A
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Which of the following is not a current liability? a. Wages payable b. Accounts payable c. Taxes payable d. Bonds payable
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D
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Equipment is classified on the balance sheet as a. a current asset. b. property, plant, and equipment. c. an intangible asset. d. a long-term investment.
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B
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It is not true that current assets are resources that are expected to be a. realized in cash within one year. b. sold within one year. c. consumed within one year. d. acquired within one year.
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D
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The operating cycle of a company is the average time that is required to go from cash to a. sales in producing revenues. b. cash in producing revenues. c. inventory in producing revenues. d. accounts receivable in producing revenues
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B
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On a classified balance sheet, companies usually list current assets a. in alphabetical order. b. with the largest dollar amounts first. c. in the order in which they are expected to be converted into cash. d. in the order of acquisition.
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C
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Intangible assets are a. listed directly under current assets on the balance sheet. b. not listed on the balance sheet because they do not have physical substance. c. listed after property, plant, and equipment. d. listed as a long-term investment on the balance sheet.
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C
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Which statement about long-term investments is not true? a. They will be held for more than one year. b. They are not currently used in the operation of the business. c. They include investments in stock of other companies and land held for future use. d. They can never include cash accounts.
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D
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These are selected account balances on December 31, 2012. Land $100,000 Land (held for future use) 150,000 Buildings 600,000 Inventory 200,000 Equipment 450,000 Furniture 100,000 Accumulated Depreciation 300,000 What is the total amount of property, plant, and equipment that will appear on the balance sheet? a. $1,300,000 b. $1,100,000 c. $1,600,000 d. $950,000
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D
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What is the order in which assets are generally listed on a classified balance sheet? a. current and long-term b. current; property, plant and equipment; long-term investments; intangibles c. current; property, plant and equipment; intangibles; long-term investments d. current; long-term investments; property, plant and equipment, intangibles
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D
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Ratios that measure the income or operating success of a company for a given period of time are a. liquidity ratios. b. profitability ratios. c. solvency ratios. d. trending ratios.
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B
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Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office Supplies Balance Sheet December 31, 2012 Cash $ 130,000 Accounts Payable $ 140,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 100,000 Mortgage Payable 160,000 Inventory 140,000 Total Liabilities $320,000 Land held for Investment 150,000 Land 180,000 Buildings $200,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 160,000 Total Stockholders' Equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,060,000 Stockholders' Equity $1,060,000 a. $580,000. b. $430,000. c. $360,000. d. $290,000.
answer
B
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Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Koonce Office Supplies Balance Sheet December 31, 2012 Cash $ 130,000 Accounts Payable $ 140,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 100,000 Mortgage Payable 160,000 Inventory 140,000 Total Liabilities $320,000 Land held for Investment 150,000 Land 180,000 Buildings $200,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 160,000 Total Stockholders' Equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,060,000 Stockholders' Equity $1,060,000 a. $640,000. b. $340,000. c. $490,000. d. $380,000.
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B
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Use the following data to determine the total dollar amount of assets to be classified as investments. Koonce Office Supplies Balance Sheet December 31, 2012 Cash $ 130,000 Accounts Payable $ 140,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 100,000 Mortgage Payable 160,000 Inventory 140,000 Total Liabilities $320,000 Land held for Investment 150,000 Land 180,000 Buildings $200,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 160,000 Total Stockholders' Equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,060,000 Stockholders' Equity $1,060,000 a. $0. b. $300,000. c. $150,000. d. $360,000.
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C
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Use the following data to determine the total amount of working capital. Koonce Office Supplies Balance Sheet December 31, 2012 Cash $ 130,000 Accounts Payable $ 140,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 100,000 Mortgage Payable 160,000 Inventory 140,000 Total Liabilities $320,000 Land held for Investment 150,000 Land 180,000 Buildings $200,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 160,000 Total Stockholders' Equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,060,000 Stockholders' Equity $1,060,000 a. $270,000. b. $590,000. c. $150,000. d. $120,000.
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A
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Use the following data to determine the total dollar amount of assets to be classified as current assets. Carne Auto Supplies Balance Sheet December 31, 2012 Cash $ 60,000 Accounts Payable $ 65,000 Prepaid Insurance 40,000 Salaries Payable 10,000 Accounts Receivable 50,000 Mortgage Payable 90,000 Inventory 70,000 Total Liabilities $165,000 Land held for investment 80,000 Land 95,000 Buildings $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation (30,000) 70,000 Total stockholders' equity $370,000 Trademarks 70,000 Total Liabilities and Total Assets $535,000 Stockholders' Equity $535,000 a. $220,000. b. $150,000. c. $300,000. d. $180,000.
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A
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Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Carne Auto Supplies Balance Sheet December 31, 2012 Cash $ 60,000 Accounts Payable $ 65,000 Prepaid Insurance 40,000 Salaries Payable 10,000 Accounts Receivable 50,000 Mortgage Payable 90,000 Inventory 70,000 Total Liabilities $165,000 Land held for investment 80,000 Land 95,000 Buildings $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation (30,000) 70,000 Total stockholders' equity $370,000 Trademarks 70,000 Total Liabilities and Total Assets $535,000 Stockholders' Equity $535,000 a. $315,000. b. $245,000. c. $165,000. d. $195,000.
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C
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Use the following data to determine the total dollar amount of assets to be classified as investments. Carne Auto Supplies Balance Sheet December 31, 2012 Cash $ 60,000 Accounts Payable $ 65,000 Prepaid Insurance 40,000 Salaries Payable 10,000 Accounts Receivable 50,000 Mortgage Payable 90,000 Inventory 70,000 Total Liabilities $165,000 Land held for investment 80,000 Land 95,000 Buildings $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation (30,000) 70,000 Total stockholders' equity $370,000 Trademarks 70,000 Total Liabilities and Total Assets $535,000 Stockholders' Equity $535,000 a. $0. b. $150,000. c. $80,000. d. $180,000.
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C
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Use the following data to determine the total amount of working capital. Carne Auto Supplies Balance Sheet December 31, 2012 Cash $ 60,000 Accounts Payable $ 65,000 Prepaid Insurance 40,000 Salaries Payable 10,000 Accounts Receivable 50,000 Mortgage Payable 90,000 Inventory 70,000 Total Liabilities $165,000 Land held for investment 80,000 Land 95,000 Buildings $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation (30,000) 70,000 Total stockholders' equity $370,000 Trademarks 70,000 Total Liabilities and Total Assets $535,000 Stockholders' Equity $535,000 a. $155,000. b. $145,000. c. $60,000. d. $150,000.
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B
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N3 Corporation has assets of $3.6 million, common stock of $936,000, and retained earnings of $571,000. What are the creditors' claims on their assets? a. $3,235,000 b. $1,507,000 c. $2,093,000 d. $3,965,000
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C
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K2 Corporation has assets of $1.80 million, common stock of $468,000, and retained earnings of $285,000. What are the creditors' claims on their assets? a. $1,617,000 b. $ 753,000 c. $1,047,000 d. $1,983,000
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C
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Use the following data to determine the total dollar amount of assets to be classified as current assets. Eddy Auto Supplies Balance Sheet December 31, 2012 Cash $ 100,000 Accounts Payable $ 110,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 80,000 Mortgage Payable 180,000 Inventory 140,000 Total Liabilities $310,000 Land held for investment 160,000 Land 150,000 Buildings $220,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 180,000 Total stockholders' equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,050,000 Stockholders' Equity $1,050,000 a. $540,000. b. $240,000. c. $380,000. d. $260,000.
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C
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Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Eddy Auto Supplies Balance Sheet December 31, 2012 Cash $ 100,000 Accounts Payable $ 110,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 80,000 Mortgage Payable 180,000 Inventory 140,000 Total Liabilities $310,000 Land held for investment 160,000 Land 150,000 Buildings $220,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 180,000 Total stockholders' equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,050,000 Stockholders' Equity $1,050,000 a. $670,000. b. $510,000. c. $410,000. d. $330,000.
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D
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Use the following data to determine the total dollar amount of assets to be classified as investments. Eddy Auto Supplies Balance Sheet December 31, 2012 Cash $ 100,000 Accounts Payable $ 110,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 80,000 Mortgage Payable 180,000 Inventory 140,000 Total Liabilities $310,000 Land held for investment 160,000 Land 150,000 Buildings $220,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 180,000 Total stockholders' equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,050,000 Stockholders' Equity $1,050,000 a. $0. b. $310,000. c. $160,000. d. $370,000.
answer
C
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Use the following data to determine the total amount of working capital. Eddy Auto Supplies Balance Sheet December 31, 2012 Cash $ 100,000 Accounts Payable $ 110,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 80,000 Mortgage Payable 180,000 Inventory 140,000 Total Liabilities $310,000 Land held for investment 160,000 Land 150,000 Buildings $220,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 180,000 Total stockholders' equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,050,000 Stockholders' Equity $1,050,000 a. $410,000. b. $250,000. c. $100,000. d. $160,000.
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B
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A measure of profitability is the a. current ratio. b. debt to total assets ratio. c. earnings per share. d. working capital
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C
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For 2012 Kuhlman Corporation reported net income of $28,000; net sales $400,000; and average share outstanding 12,000. There were no preferred stock dividends. What was the 2012 earnings per share? a. $2.33 b. $0.43 c. $33.33 d. $7.43
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A
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For 2012 Fielder Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 12,000. There were no preferred stock dividends. What was the 2012 earnings per share? a. $2.33 b. $0.40 c. $33.33 d. $2.50
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D
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Earnings per share are calculated by dividing a. gross profit by average common shares outstanding. b. (net income less preferred stock dividends) by average common shares outstanding. c. net income by average common shares outstanding. d. net sales by average common shares outstanding.
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B
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Which of the following statements is true? a. Earnings per share is an internal measure and is not used by shareholders. b. The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period. c. Net income is not adjusted when computing earnings per share. d. By comparing earnings per share of a single corporation over time, a shareholder can evaluate the corporation's relative earnings performance.
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D
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Earnings available to common stockholders is equal to: a. Total revenues b. Net income + Preferred stock dividends c. Preferred stock dividends - Net income d. Net income - Preferred stock dividends
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D
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(in millions) Issued common stock $45 Retired common stock $65 Paid dividends $75 Net income $130 Beginning Common Stock balance $575 Beginning Retained Earnings balance $425 Based in this information, what is Dawson's Common Stock balance at the end of the year? a. $555 b. $685 c. $195 d. $630
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A
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Dawson Corporation has the following information available for 2011: (in millions) Issued common stock $45 Retired common stock $65 Paid dividends $75 Net income $130 Beginning Common Stock balance $575 Beginning Retained Earnings balance $425 Based on this information, what is Dawson's Retained Earnings balance at the end of the year? a. $630 b. $480 c. $370 d. $555
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B
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Which of the following is the least likely consideration that management uses when deciding whether to pay a dividend? a. Does the company have more cash than it has opportunities? b. Is the company's average number of common shares outstanding decreasing? c. Does the company have uses for cash that will increase its value? d. What are the company's cash needs?
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B
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Most companies use a(n) _________ rather than a retained earnings statement. a. balance sheet b. income statement c. statement of cash flows d. statement of stockholders' equity
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D
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Dividends appear on a. the retained earnings statement only. b. the income statement only. c. both the retained earnings statement and the balance sheet. d. the balance sheet only.
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A
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Issuing new shares of common stock will a. increase retained earnings. b. decrease retained earnings. c. increase common stock. d. decrease common stock
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C
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Declaring a cash dividend will a. increase retained earnings. b. decrease retained earnings. c. increase common stock. d. decrease common stock.
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B
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Reporting a net income of $95,000 will a. increase retained earnings. b. decrease retained earnings. c. increase common stock. d. decrease common stock
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A
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McKinney Corporation had beginning retained earnings of $2,292,000 and ending retained earnings of $2,499,000. During the year they issued common stock totaling $141,000. What was their net income for the year? a. $207,000 b. $ 66,000 c. $348,000 d. $273,000
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A
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Wilton Corporation had beginning retained earnings of $764,000 and ending retained earnings of $833,000. During the year they issued common stock totaling $47,000. What was their net income for the year? a. $69,000 b. $22,000 c. $116,000 d. $91,000
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A
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At December 31, 2012 Lowery Company had retained earnings of $2,184,000. During 2012 they issued stock for $98,000, and paid dividends of $34,000. Net income for 2012 was $402,000. The retained earnings balance at the beginning of 2012 was: a. $2,552,000 b. $1,816,000 c. $1,914,000 d. $2,454,000
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B
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At December 31, 2012 Keen Company had retained earnings of $1,092,000. During 2012 they issued stock for $49,000, and paid dividends of $17,000. Net income for 2012 was $201,000. The retained earnings balance at the beginning of 2012 was: a. $1,276,000 b. $908,000 c. $957,000 d. $1,227,000
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B
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The relationship between current assets and current liabilities is important in evaluating a company's a. profitability. b. liquidity. c. market value. d. solvency.
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B
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Which of the following is a measure of liquidity? a. Working capital b. Profit margin c. Earnings per share d. Debt to equity ratio
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A
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Current assets divided by current liabilities is known as the a. working capital. b. current ratio. c. profit margin. d. capital structure
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B
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The most important information needed to determine if companies can pay their current obligations is the a. net income for this year. b. projected net income for next year. c. relationship between current assets and current liabilities. d. relationship between short-term and long-term liabilities
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C
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A short-term creditor is primarily interested in the __________ of the borrower. a. liquidity b. profitability c. consistency d. solvency
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A
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Working capital is calculated by taking a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets times current liabilities
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B
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Working capital is a measure of a. consistency. b. liquidity. c. profitability. d. solvency
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B
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Long-term creditors are usually most interested in evaluating a. liquidity and profitability. b. consistency and profitability. c. liquidity and solvency. d. consistency and solvency
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C
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A liquidity ratio measures the a. income or operating success of a company over a period of time. b. ability of a company to survive over a long period of time. c. short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. d. percentage of total financing provided by creditors.
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C
question
Working capital is a. calculated by dividing current assets by current liabilities. b. used to evaluate a company's liquidity and short-term debt paying ability. c. used to evaluate a company's solvency and long-term debt paying ability. d. calculated by subtracting current assets from current liabilities.
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B
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The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is a. leverage. b. liquidity. c. profitability. d. wealth
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B
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Based on the following data, what is the amount of current assets? Accounts payable................................................................. $62,000 Accounts receivable.............................................................. 100,000 Cash.................................................................................. 30,000 Intangible assets.................................................................. 100,000 Inventory............................................................................ 138,000 Long-term investments.......................................................... 160,000 Long-term liabilities............................................................... 200,000 Short-term investments.......................................................... 80,000 Notes payable...................................................................... 56,000 Plant assets........................................................................ 1,340,000 Prepaid expenses................................................................. 2,000 a. $192,000 b. $350,000 c. $212,000 d. $210,000
answer
B
question
Based on the following data, what is the amount of working capital? Accounts payable................................................................. $64,000 Accounts receivable.............................................................. 114,000 Cash.................................................................................. 40,000 Intangible assets.................................................................. 100,000 Inventory............................................................................ 138,000 Long-term investments.......................................................... 160,000 Long-term liabilities.................................... ......................... 200,000 Short-term investments.......................................................... 80,000 Notes payable (short-term)...................................................... 56,000 Plant assets........................................................................ 1,340,000 Prepaid expenses................................................................. 2,000 a. $254,000 b. $302,000 c. $340,000 d. $296,000
answer
A
question
Using the following balance sheet and income statement data, what is the total amount of working capital? Current assets $ 14,000 Net income $ 24,000 Current liabilities 8,000 Stockholders' equity 42,000 Average assets 80,000 Total liabilities 18,000 Total assets 60,000 Average common shares outstanding was 10,000 a. $ 2,000 b. $14,000 c. $ 4,000 d. $ 6,000
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D
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Using the following balance sheet and income statement data, what is the earnings per share? Current assets $ 14,000 Net income $ 24,000 Current liabilities 8,000 Stockholders' equity 42,000 Average assets 80,000 Total liabilities 18,000 Total assets 60,000 Average common shares outstanding was 10,000 a. $4.20 b. $6.00 c. $2.40 d. $0.42
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C
question
Using the following balance sheet and income statement data, what is the debt to total assets? Current assets $ 14,000 Net income $ 24,000 Current liabilities 8,000 Stockholders' equity 42,000 Average assets 80,000 Total liabilities 18,000 Total assets 60,000 Average common shares outstanding was 10,000 a. 23 percent b. 13 percent c. 70 percent d. 30 percent
answer
D
question
Using the following balance sheet and income statement data, what is the total amount of working capital? Current assets $ 9,000 Net income $ 12,000 Current liabilities 4,000 Stockholders' equity 24,000 Average assets 44,000 Total liabilities 6,000 Total assets 30,000 Average common shares outstanding was 10,000 a. $9,000 b. $7,000 c. $5,000 d. $2,000
answer
C
question
Using the following balance sheet and income statement data, what is the earnings per share? Current assets $ 9,000 Net income $ 12,000 Current liabilities 4,000 Stockholders' equity 24,000 Average assets 44,000 Total liabilities 6,000 Total assets 30,000 Average common shares outstanding was 10,000 a. $1.20 b. $2.00 c. $0.83 d. $0.44
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A
question
Using the following balance sheet and income statement data, what is the debt to total assets? Current assets $ 9,000 Net income $ 12,000 Current liabilities 4,000 Stockholders' equity 24,000 Average assets 44,000 Total liabilities 6,000 Total assets 30,000 Average common shares outstanding was 10,000 a. 13.6 percent b. 20 percent c. 75 percent d. 27.3 percent
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B
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The statement of cash flows begins with cash flows from a. financing activities. b. investing activities. c. operating activities. d. solvent activities.
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C
question
Free cash flow provides an indication of a company's ability to a. generate cash to invest in new capital expenditures. b. generate net income. c. generate cash to pay dividends. d. both a and c.
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D
question
Free cash flow represents a. cash provided by operations less adjustments for capital expenditures and dividends b. a measurement of a company's cash generating ability c. a measure of solvency d. all of the above
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D
question
Which financial statement is used to determine cash generated from operations? a. income statement b. statement of operations c. statement of cash flows d. retained earnings statement
answer
C
question
In 2012 Grider Corporation had cash receipts of $42,000 and cash disbursements of $24,000. Grider's ending cash balance at December 31, 2012 was $66,000. What was Grider's beginning cash balance? a. $48,000 b. $60,000 c. $90,000 d. $84,000
answer
A
question
In 2012 Grider Corporation had cash receipts of $28,000 and cash disbursements of $16,000. Grider's ending cash balance at December 31, 2012 was $44,000. What was Grider's beginning cash balance? a. $32,000 b. $40,000 c. $60,000 d. $56,000
answer
A
question
Suppose that Morgan Corporation produced and sold 4,800 laptop computers during 2012. It reported $250,000 cash provided by operating activities. In order to maintain production at 4,800 laptops, Morgan invested in $8,600 in equipment. Morgan paid $1,400 in dividends. What is Morgan's free cash flow? a. $240,000 b. $260,000 c. $257,000 d. $250,000
answer
A
question
The following information is available for Cooke Corporation: (in million) Cash receipts from operating activities $920 Cash payments from operating activities $240 Net cash used by investing $210 Net cash provided by financing $750 Net increase in cash and equivalents ? Cash and equivalents at start of year $550 Cash and equivalents at year-end ? What is the net increase in cash and equivalents? a. $1,640 b. $1,220 c. $670 d. $2,190
answer
B
question
The following information is available for Cooke Corporation: (in million) Cash receipts from operating activities $920 Cash payments from operating activities $240 Net cash used by investing $210 Net cash provided by financing $750 Net increase in cash and equivalents ? Cash and equivalents at start of year $550 Cash and equivalents at year-end ? What is the cash and equivalents amount at year-end? a. $1,230 b. $670 c. $1,770 d. $2,670
answer
C
question
If Morris Corporation has a negative $131 million free cash flow, which of the following statements is most likely true? a. Morris' capital expenditures plus its cash dividends are less than its cash provided by operations. b. This free cash flow indicates that Morris is in good shape to repay its long-term obligations when they come due. c. This free cash flow indicates that Morris presents good cash generating ability to retire stock. d. Morris' cash provided by operations is less than its cash dividends plus capital expenditures.
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D
question
Which of the following organizations issues accounting standards for countries outside the United States? a. SEC b. GAAP c. IASB d. FASB
answer
C
question
Generally accepted accounting principles a. are accounting rules formulated by the Internal Revenue Service. b. are sound in theory but rarely used in real life. c. are accounting rules that are recognized as a general guide for financial reporting. d. have eliminated all errors in accounting.
answer
C
question
The agency of the United States Government that oversees the U.S. financial markets is the a. Internal Revenue Service b. Security Exchange Commission c. Financial Accounting Standards Board. d. International Auditing Standards Committee
answer
B
question
What organization issues U.S. accounting standards? a. Security Exchange Commission. b. International Accounting Standards Committee. c. International Auditing Standards Committee. d. Financial Accounting Standards Board.
answer
D
question
Which one of the following is not a qualitative characteristic of useful accounting information? a. Relevance b. Faithful representation c. Materiality d. Comparability
answer
C
question
All of the following are characteristics of accounting information except a. Faithful representation. b. Comparability. c. Relevance. d. Flexibility.
answer
D
question
Two of the major characteristics that make accounting information useful are a. Relevance and Faithful representation. b. Verifiability and timeliness. c. Comparability and flexibility. d. Understandability and consistency
answer
A
question
The convention of consistency refers to consistent use of accounting principles a. among firms. b. among accounting periods. c. throughout the accounting periods. d. within industries.
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B
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The characteristic of consistency relates most closely to a. relevance. b. materiality. c. comparability. d. faithful representation.
answer
C
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Information that is presented in a clear fashion, so that reasonably informed users of that information can interpret it is an example of a. relevance. b. faithful representation. c. understandability. d. comparability.
answer
C
question
In order for accounting information to be relevant, it must a. have very little cost. b. help predict future events or confirm prior expectations. c. not be reported to the public. d. be used by a lot of different firms
answer
B
question
Accounting information should be verifiable in order to enhance a. comparability. b. faithful representation. c. consistency. d. relevance.
answer
B
question
Accounting information is relevant to business decisions because it a. has been verified by external audit. b. is prepared on an annual basis. c. confirms prior expectations. d. is neutral in its representations.
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C
question
If accounting information has relevance, it is useful in making predictions about a. future IRS audits. b. new accounting principles. c. foreign currency exchange rates. d. the future events of a company.
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D
question
Relevant accounting information a. is information that has been audited. b. must be reported within the operating cycle or one year, whichever is longer. c. has been objectively determined. d. is information that is capable of making a difference in a business decision.
answer
D
question
Which of the following is not a qualitative characteristic associated with faithful representation? a. Verifiable b. materiality c. Neutral d. All of the above are a qualitative characteristic
answer
B
question
Accounting information should be neutral in order to enhance a. faithful representation. b. consistency. c. comparability. d. relevance
answer
A
question
Qualitative characteristics associated with relevant accounting information are a. consistency, faithful representation, and timely. b. predict future events, confirm prior expectations, and timely. c. neutral, predict future events, and verifiable. d. consistency and materiality
answer
B
question
Qualitative characteristics associated with faithfully representative accounting information are a. verifiable and timely. b. materiality and neutral. c. neutral and verifiable. d. relevance and verifiable.
answer
C
question
Which of the following statements is not true? a. Comparability means using the same accounting principles from year to year within a company. b. Faithful representation is the quality of information that gives assurance that it is free of error or bias. c. Relevant accounting information must be capable of making a difference in the decision. d. The FASB's overriding criterion is that the accounting rule adopted should be the one that generates the most useful financial information for making a decision
answer
A
question
A company can change to a new method of accounting if management can justify that the new method results in a. more meaningful financial information. b. a higher net income. c. a lower net income for tax purposes. d. less likelihood of clerical errors.
answer
A
question
An item is considered material if a. it doesn't costs a lot of money. b. it is of a tangible good. c. it is likely to influence the decision of an investor or creditor. d. the cost of reporting the item is greater than its benefits
answer
C
question
The practice of large corporations reporting all financial statement amounts to the nearest thousand dollars is an example of the application of a. consistency. b. periodicity. c. full disclosure. d. materiality.
answer
D
question
A company using the same accounting principles from year to year is an application of a. timeliness. b. consistency. c. full disclosure. d. materiality
answer
B
question
Expensing the purchase of a waste paper basket with an estimated useful life of 10 years is an application of a. materiality. b. consistency. c. going concern. d. economic entity.
answer
A
question
Different companies using the same accounting principles is an application of a. consistency. b. materiality. c. full disclosure. d. comparability
answer
D
question
A practical decision to expense small capital expenditures rather than record them as property, plant, and equipment and depreciate them probably is made on the basis of the characteristic of a. consistency. b. materiality. c. full disclosure. d. relevance
answer
B
question
Which of the following is a constraint in accounting? a. Comparability b. Materiality c. Consistency d. Relevance
answer
B
question
To determine the materiality of an account, an accountant would compare it with any of the following except a. total assets. b. total liabilities. c. total employees. d. net income
answer
C
question
A common application of the conservatism constraint is the use of the 1. straight-line depreciation method for plant assets. 2. lower of cost or market method for inventories. 3. FIFO method for inventory valuation. a. 1 b. 2 c. 3 d. 1 and 2
answer
B
question
The periodicity assumption states that the economic life of a business can be divided into a. equal time periods. b. cyclical time periods. c. artificial time periods. d. perpetual time periods
answer
C
question
The going concern assumption underlies the a. cost principle. b. monetary unit assumption. c. periodicity assumption. d. full disclosure principle
answer
A
question
The going concern assumption is inappropriate when a. the business is just starting up. b. liquidation appears likely. c. market values are higher than costs. d. the business is organized as a proprietorship.
answer
B
question
Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Monetary unit assumption b. Economic entity assumption c. Periodicity assumption d. Going concern assumption
answer
D
question
It is assumed that the activities of Ford Motor Corporation can be distinguished from those of General Motors because of the a. going concern assumption. b. economic entity assumption. c. monetary unit assumption. d. periodicity assumption
answer
B
question
The going concern assumption assumes that the business a. will be liquidated in the near future. b. will be purchased by another business. c. is in a growth industry. d. will remain in operation for the foreseeable future.
answer
D
question
The economic entity assumption states that economic events a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners. d. of every entity can be separately identified and accounted for
answer
D
question
The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the a. economic entity assumption. b. monetary unit assumption. c. periodicity assumption. d. going concern assumption.
answer
D
question
Which of the following is not an accounting assumption? a. Integrity b. Going concern c. Periodicity d. Economic entity
answer
A
question
The periodicity assumption states a. the business will remain in operation for the foreseeable future. b. the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared. c. every economic entity can be separately identified and accounted for. d. only those things that can be expressed in money are included in the accounting records.
answer
B
question
The TNT Company has five plants nationwide that cost $300 million. The current market value of the plants is $500 million. The plants will be reported as assets at a. $200 million. b. $800 million. c. $300 million. d. $500 million
answer
C
question
The Mac Company has four plants nationwide that cost $400 million. The current market value of the plants is $300 million. The plants will be reported as assets at a. $400 million. b. $800 million. c. $300 million. d. $500 million
answer
A
question
The cost principle requires that when assets are acquired, they be recorded at a. market value. b. the amount paid for them. c. selling price. d. list price.
answer
B
question
Valuing assets at their fair value rather than at their cost is inconsistent with the: a. economic entity assumption. b. cost principle. c. periodicity assumption. d. full disclosure principle.
answer
B
question
Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following characteristics of useful information has Jackson most likely violated? a. comparability b. relevance c. faithful representation d. consistency
answer
C
question
Connor Corporation hired a new accountant. Over than next four years, the accountant used four different accounting methods to depreciation for Connor's equipment. Which of the following characteristics of useful information has Connor most likely violated? a. comparability b. relevance c. faithful representation d. consistency
answer
D
question
Garrison Company prepares quarterly reports, which it distributes to all stockholders and other entities that rely on its accounting information. Which of the following is the best term for the key assumption in financial reporting that Garrison is following? a. monetary unit assumption b. going concern assumption c. economic entity assumption d. periodicity assumption
answer
D
