ACCT 207 CH2 Questions – Flashcards

The full disclosure principle dictates that: -financial statements should disclose all events and circumstances that would matter to users of financial statements. -financial statements should not be relied on unless an auditor has expressed an unqualified opinion on them. -financial statements should disclose all assets at their cost. -financial statements should disclose only those events that can be measured in dollars.

Current assets are economic resources that are expected to be converted to cash or used up by the business within one year or the normal operating cycle, whichever is shorter. True False

In what order are current assets listed? Alphabetically By longevity By liquidity By importance

The correct order of presentation in a classified balance sheet for the following current assets is -accounts receivable, cash, prepaid insurance, inventories. -inventories, cash, accounts receivable, prepaid insurance. -cash, accounts receivable, inventories, prepaid insurance. -cash, inventories, accounts receivable, prepaid insurance.

Current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings totals $70,000. How much is total stockholders' equity? $140,000 $120,000 $70,000 $150,000

At December 31, 2014, Shorts Company had retained earnings of $2,184,000. During 2014, the company issued stock for $98,000, and paid dividends of $34,000. Net income for 2014 was $402,000. How much was the retained earnings balance at the beginning of 2014? $1,816,000 $1,914,000 $2,454,000 $2,552,000

Issuing new shares of common stock will increase common stock. decrease common stock. increase retained earnings. decrease retained earnings.

Which of the following ratios measures the ability of the company to survive over a long period of time? Liquidity ratios Current ratios Profitability ratios Solvency ratios

If a company has the ability to pay obligations that are expected to become due within the next year or operating cycle whichever is longer, what is the term that describes this measure? Solvency Working capital Liquidity Profitability

In 2014, Bombay Corporation had cash receipts of $21,000 and cash disbursements of $12,000. The company's ending cash balance at December 31, 2014 was $33,000. What was the beginning cash balance? $45,000 $24,000 $30,000 $42,000

What are generally accepted accounting principles? Fundamental truths that can be derived from the laws of nature A set of accounting rules and practices that have authoritative support Usually established by the Internal Revenue Service The guidelines used to resolve ethical dilemmas

What organization issues International Financial Reporting Standards? IFRS International Accounting Standards Board Financial Accounting Standards Board International Auditing Standards Committee

What is the primary accounting standard-setting body in the United States? Public Company Accounting Oversight Board (PCAOB) Securities and Exchange Commission IFRS Financial Accounting Standards Board

What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U. S.? Generally accepted accounting principles Generally accepted auditing principles Generally accepted accounting standards General accounting principles

Going concern is the qualitative characteristic of accounting information that allows a statement reader to compare a company's performance from one year to the next. True False

Consistency means that a company uses the same accounting principles and methods as the other companies in the same industry. True False

The monetary unit assumption assures that all important information needed by investors, creditors, and managers is contained in the financial statements. True False

The historical cost principle requires that if a company buys a building for $2,000,000 in 2012 that increases in value to $2,900,000 in 2014, the company will have to report the building at $2,000,000 in the balance sheet for 2014. True False

An item is ________ if it is likely to influence the decision of an investor or creditor. faithful representation material comparable consistent

A company can change to a new method of accounting if management can justify that the new method results in terms of a higher net income. more meaningful financial information. a lower net income for tax purposes. less likelihood of clerical errors.

What is the primary criterion by which accounting information can be judged? Usefulness for decision making Predictive value Comparability Consistency

Under IFRS, which of the following selections properly refer to what GAAP signifies as a "balance sheet"? Statement of financial resources Statement of financial position Statement of balance Statement of financial wherewithal