question

The primary function of financial accounting is to provide relevant financial information to parties external to business enterprises.

answer

True

question

Under federal securities laws, the SEC has the authority to set accounting standards in the United States.

answer

True

question

The FASB issues accounting standards in the form of:

answer

Accounting Research Bulletins. (Accounting Standards Updates) Financial Accounting Standards. Financial Technical Bulletins.

question

The FASB's standard-setting process includes, in the correct order:

answer

Exposure draft, research, discussion paper, Accounting Standards Update. Research, exposure draft, discussion paper, Accounting Standards Update. (Research, discussion paper, exposure draft, Accounting Standards Update.) Discussion paper, research, exposure draft, Accounting Standards Update.

question

When a registrant company submits its annual filing to the SEC, it uses:

answer

Form 10-A. (Form 10-K.) Form 10-Q. Form S-1.

question

Phase A of the new conceptual framework focuses on:

answer

(Objective and qualitative characteristics.) Presentation and disclosure. Recognition and measurement. Elements of financial statements.

question

Enhancing qualitative characteristics of accounting information include each of the following except:

answer

Timeliness. (Materiality) Comparability. Verifiability.

question

Gains are:

answer

Inflows from selling a product or service to a customer. Increases in equity resulting from transfers of assets to the company from owners. (Increases in equity from peripheral transactions of an entity.) None of the above is correct.

question

An important argument in support of historical cost information is:

answer

Relevance. Predictive quality for future cash flows. Materiality. (Verifiability.)

question

Owners' equity can be expressed as assets minus liabilities.

answer

True

question

The adjusted trial balance contains only permanent accounts.

answer

False

question

XYZ Corporation receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a:

answer

Debit to investments. Credit to retained earnings. (Credit to capital stock) Credit to revenue.

question

Incurring an expense for advertising on account would be recorded by:

answer

Debiting liabilities. Crediting assets. (Debiting an expense.) Debiting assets.

question

Making insurance payments in advance is an example of:

answer

An accrued receivable transaction. An accrued liability transaction. An unearned revenue transaction. (A prepaid expense transaction.)

question

On December 31, 2013, the end of Larry's Used Cars' first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the 2013 balance sheet will be valued at:

answer

53,600. $54,800. ($52,400) $1,200. Accounts receivable = $53,600 - 1,200 = $52,400

question

The adjusting entry required when amounts previously recorded as unearned revenues are earned includes:

answer

(A debit to a liability.) A debit to an asset. A credit to a liability. A credit to an asset.

question

When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit entry is made to:

answer

Accounts payable. (Supplies.) Cash. Retained earnings.

question

The balance sheet reports a company's financial position at a point in time.

answer

True

question

Accrued salaries and wages in a balance sheet represent salary and wages that have been earned by employees but not yet paid.

answer

True

question

An asset that is not expected to be converted to cash or consumed within one year or the operating cycle is:

answer

(Goodwill.) Accounts receivable. Inventory. Supplies.

question

Rent collected in advance is:

answer

An asset account in the balance sheet. (A liability account in the balance sheet.) A shareholders' equity account in the balance sheet. A temporary account, not in the balance sheet at all.

question

The Management Discussion and Analysis section of the annual report can best be described as:

answer

Frank but objective. Independent but precise. Legalistic and lengthy. (Biased but informative.)

question

An exception that is so serious that even a qualified opinion is not justified would result in:

answer

A disclaimer. An unqualified opinion. (An adverse opinion.) A consistency exception.

question

Liquidity refers to:

answer

The amount of cash on hand at a given time. (The readiness of an asset to be converted to cash.) The period until cash is used and refinancing becomes necessary. Financial leverage.

question

The quick ratio is:

answer

The liquidity ratio divided by the equity ratio. Current assets minus inventory divided by current liabilities minus accounts payable. (Current assets minus inventory and prepaid items divided by current liabilities.) Cash divided by accounts payable.

question

Gains, but not losses, from discontinued operations must be separately reported in an income statement.

answer

False

question

An item must meet the subjective criteria of being either unusual or infrequent to be reported as extraordinary.

answer

False

question

The difference between single-step and multiple-step income statements is primarily an issue of:

answer

Consistency. (Presentation.) Measurement. Valuation.

question

Pro forma earnings:

answer

(Could be considered management's view of permanent earnings.) Are needed for the correction of errors. Are standardized under generally accepted accounting principles. Are useful to compare two different firms' performance.

question

An extraordinary event for financial reporting purposes is both:

answer

Unusual and material. Infrequent and significant. Material and infrequent. (Unusual and infrequent.)

question

Which of the following is not true about EPS?

answer

It must be reported by all corporations whose stock is publicly traded. It must be reported separately for discontinued operations. It must be reported separately for extraordinary items. (It must be reported on operating income.)

question

In comparing the direct method with the indirect method of preparing the statement of cash flows:

answer

(Only operating activities are presented differently.) Only investing activities are presented differently. Only financing activities are presented differently. All activities are presented differently.

question

The statement of cash flows reports cash flows from the activities of:

answer

Operating, purchasing, and investing. Borrowing, paying, and investing. (Financing, investing, and operating). Using, investing, and financing.

question

Revenue is not recognized under the realization principle unless the earnings process is complete or virtually complete and there is reasonable certainty about the expected collection of the asset received.

answer

True

question

Under the percentage-of-completion method, the percent complete is often estimated by comparing the cost incurred to date with the total estimated cost to complete.

answer

True

question

Under the realization principle, revenue should not be recognized until the earnings process is deemed virtually complete and:

answer

Revenue is realized. Any receivable is collected. (Collection is reasonably certain.) Collection is absolutely assured.

question

Merchandise sold FOB shipping point indicates that:

answer

The seller pays the freight. (The buyer holds title after the merchandise leaves the seller's location.) The common carrier holds the title until the merchandise is delivered. The sale is not consummated until the merchandise reaches the point to which it is being shipped.

question

The rationale for adoption of the percentage-of-completion method is that:

answer

Results are more conservative. (It provides a measure of periodic accomplishment.) It is a better match with legal ownership. It results in a lower income tax.

question

When using the percentage-of-completion method of accounting for long-term contracts, the percentage of completion used to recognize gross profit in the first year usually is determined by measuring:

answer

Costs incurred in the first year, divided by estimated remaining costs to complete the project. (Costs incurred in first year, divided by estimated total costs of the completed project.) Costs incurred in first year, divided by estimated gross profit. None of the other answers is correct.

question

For a typical manufacturing company, the most common critical point for recognizing revenue is the date:

answer

An order is received. Production is completed. (The product is delivered). Payment is received.

question

Boomerang Computer Company sells computers with an unconditional right to return the computer if the customer is not satisfied. Boomerang has a long history selling these computers under this returns policy and can provide precise estimates of the amount of returns associated with each sale. Boomerang most likely should recognize revenue:

answer

(When Boomerang delivers a computer to a customer.) When Boomerang receives cash from the customer. When a customer returns a computer. Never, because the right of return is unconditional. Returns can be estimated at delivery, so an allowance can be created and revenue recognized at that point.

question

Compound interest includes interest earned on interest.

answer

True

question

The calculation of present value eliminates interest from future cash flows.

answer

True

question

Reba wishes to know how much would be in her savings account if she deposits a given sum in an account and leaves it there at 6% interest for five years. She should use a table for the:

answer

Future value of an ordinary annuity of 1. (Future value of 1.) Future value of an annuity of 1. Present value of an annuity due of 1.

question

A series of equal periodic payments that starts more than one period after the agreement is called:

answer

An annuity due. An ordinary annuity. A future annuity. (A deferred annuity.)

question

A series of equal periodic payments in which the first payment is made one compounding period after the date of the contract is:

answer

A deferred annuity. (An ordinary annuity.) An annuity due. A delayed annuity.

question

Loan A has the same original principal, interest rate, and payment amount as Loan B. However, Loan A is structured as an annuity due, while Loan B is structured as an ordinary annuity. The maturity date of Loan A will be:

answer

(Earlier than Loan B.) Later than Loan B. The same as Loan B. Indeterminate with respect to loan B.

question

George Jones is planning on a cruise for his 70th birthday party. He wants to know how much he should set aside at the beginning of each month at 6% interest to accumulate the sum of $4,800 in five years. He should use a table for the:

answer

Future value of an ordinary annuity of 1. (Future value of an annuity due of 1.) Future value of 1. Present value of an annuity due of 1.

INTERMEDIATE ACCOUNTING ONE QUIZES SNHU – Flashcards

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