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ACCT 311 - Exam 1 Multiple Choice

Terms in this set (35)

1. What is the objective of financial reporting?
a. Provide information that is useful to management in making decisions.
b. Provide information that clearly portrays nonfinancial transactions. c. Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors. d. Provide information that excludes claims to the resources.
c. Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.
2. Which of the following is of interest to investors in decision-making?
a. Assessing the company's ability to generate net cash inflows.
b. Assessing management's ability to protect and enhance the capital providers' investments.
c. Both assessing the company's ability to generate net cash inflows and assessing management's ability to protect and enhance the capital provider's investments.
d. Assessing the company's ability to collect debts.
c. Both assessing the company's ability to generate net cash inflows and assessing management's ability to protect and enhance the capital provider's investments.
3. A common set of accounting standards and procedures is called: a. financial accounting standards.
b. generally accepted accounting principles.
c. objectives of financial reporting.
d. statements of financial accounting concepts.
b. generally accepted accounting principles
4. 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:
a. FASB.
b. AICPA.
c. SEC.
d. APB.
c. SEC.
5. Companies that are listed on a stock exchange are required to submit their financial statements to the:
a. AICPA.
b. APB
c. FASB.
d. SEC.
d. SEC.
6. Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States?
a. AICPA
b. FASB
c. IASB
d. SEC
c. IASB
7. What is a purpose of having a conceptual framework?
a. To make sure that economic activity can be identified with a particular legal entity.
b. To segregate activities among different companies.
c. To provide comparable information for different companies.
d. To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.
d. To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.
8. The objective of general-purpose financial reporting is to provide financial information about a reporting entity to each of the following except
a. potential equity investors.
b. potential lenders.
c. present investors.
d. All of these answers are correct.
d. All of these answers are correct.
9. Which of the following is a characteristic describing the fundamental quality of relevance?
a. Predictive value.
b. Neutrality.
c. Verifiability.
d. Understandability.
a. Predictive value.
10. Information about different companies and about different periods of the same company can be prepared and presented in a similar manner. Comparability and consistency are related to which of these objectives?
Comparability Consistency
a. Companies Companies
b. Companies Periods
c. Periods Companies
d. Periods Periods
b. Companies Periods
11. Which of the following is an ingredient of relevance?
a. Completeness
b. Neutrality
c. Timeliness
d. Materiality
d. Materiality
12. Which of the following is an ingredient of faithful representation? a. Predictive value
b. Materiality
c. Neutrality
d. Confirmatory value
c. Neutrality
13. Debit always means:
a. the right side of an account.
b. an increase.
c. a decrease.
d. None of these answer choices are correct
d. None of these answer choices are correct.
14. An accounting record into which the essential facts and figures in connection with all transactions are first recorded is called the
a. ledger.
b. account.
c. trial balance.
d. None of these answer choices are correct
d. None of these answer choices are correct.
15. A trial balance
a. proves that debits and credits are equal in the ledger.
b. supplies a listing of open accounts and their balances that are used in preparing financial statements.
c. is normally prepared three times in the accounting cycle.
d. All of these answer choices are correct.
d. All of these answer choices are correct.
16. Stockholders' equity is not affected by all
a. cash receipts.
b. dividends.
c. revenues.
d. expenses.
a. cash receipts.
17. A prepaid expense can best be described as an amount
a. paid and currently matched with revenues.
b. paid and not currently matched with revenues.
c. not paid and currently matched with revenues.
d. not paid and not currently matched with revenues.
b. paid and not currently matched with revenues
18. An accrued revenue can best be described as an amount
a. collected and currently matched with expenses.
b. collected and not currently matched with expenses.
c. not collected and currently matched with expenses.
d. not collected and not currently matched with expenses.
c. not collected and currently matched with expenses
19. An unearned revenue can best be described as an amount
a. collected and currently matched with expenses.
b. collected and not currently matched with expenses.
c. not collected and currently matched with expenses.
d. not collected and not currently matched with expenses.
b. collected and not currently matched with expenses.
28. Which of the following would represent the least likely use of an income statement prepared for a business enterprise?
a. Use by customers to determine a company's ability to provide needed goods and services.
b. Use by labor unions to examine earnings closely as a basis for salary discussions.
c. Use by government agencies to formulate tax and economic policy.
d. Use by investors interested in the financial position of the entity.
d. Use by investors interested in the financial position of the entity.
29. Which of the following is an advantage of the single-step income statement over the multiple-step income statement?
a. It reports gross profit for the year.
b. Expenses are classified by function.
c. It matches costs and expenses with related revenues.
d. It does not imply that one type of revenue or expense has priority over another.
d. It does not imply that one type of revenue or expense has priority over another.
30. The single-step income statement emphasizes
a. the gross profit figure.
b. total revenues and total expenses.
c. operating and non-operating expenses.
d. the various components of income from continuing operations.
b. total revenues and total expenses
31. Which of the following is true of accounting for changes in estimates?
a. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements.
b. A company accounts for changes in estimates only in the period of change, even though it affects the future periods.
c. Changes in estimates are not carried back to adjust prior years.
d. Changes in estimates are considered as errors.
c. Changes in estimates are not carried back to adjust prior years.
32. A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to: a. beginning retained earnings of the earliest period presented.
b. net income of the period in which the change occurred.
c. comprehensive income for the earliest period presented.
d. stockholders' equity of the period in which the change occurred.
a. beginning retained earnings of the earliest period presented.
33. Which of the following is included in comprehensive income?
a. Investments by owners.
b. Unrealized gains on available-for-sale debt securities.
c. Distributions to owners.
d. Changes in accounting principles.
b. Unrealized gains on available-for-sale debt securities
34. Comprehensive income includes all of the following except
a. dividend revenue.
b. losses on disposal of assets.
c. investments by owners.
d. unrealized holding gains
c. investments by owners.
48. 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
b. analyze cash inflows and outflows for the period
49. Balance sheet information is useful for all of the following except a. assessing a company's risk
b. evaluating a company's liquidity
c. evaluating a company's financial flexibility
d. determining free cash flows.
d. determining free cash flows.
50. A limitation of the balance sheet that is not also a limitation of the income statement is
a. the use of judgments and estimates
b. omitted items
c. the numbers are affected by the accounting methods employed
d. valuation of items at historical cost
d. valuation of items at historical cost
51. Which of the following is a current asset?
a. Cash surrender value of a life insurance policy of which the company is the beneficiary.
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.
d. Trade installment receivables normally collectible in 18 months.
52. Current assets are presented in the balance sheet in
a. ascending order of their balances.
b. descending order of their balances.
c. order of their liquidity.
d. reverse order of their liquidity
c. order of their liquidity.
53. In preparing a statement of cash flows, cash flows from operating activities
a. are always equal to accrual accounting income.
b. are calculated as the difference between revenues and expenses. c. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.
d. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash.
c. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.
59. In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?
a. Sale of equipment at book value
b. Sale of merchandise on credit
c. Declaration of a cash dividend
d. Issuance of bonds payable at a discount
a. Sale of equipment at book value
60. When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will:
a. offset the overdraft against cash account.
b. report the same in the notes to the financial statements.
c. report the bank overdraft amount as account payable.
d. classify the bank overdraft as compensating balance.
a. offset the overdraft against cash account
61. What is "recourse" as it relates to selling receivables?
a. The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay.
b. The obligation of the purchaser of the receivables to pay the seller in case the debtor fails to pay.
c. The obligation of the seller of the receivables to pay the purchaser in case the debtor returns the product related to the sale.
d. The obligation of the purchaser of the receivables to pay the seller if all of the receivables are collected.
a. The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay.
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