ACC 421 Final Exam Set-1 - 31212

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ACC 421---- FINAL EXAM….36 QUESTIONS ANSWERED

 

 

 

1) An accrued expense can best be described as an amount 

A.paid and currently matched with earnings.

B.not paid and not currently matched with earnings.

C.not paid and currently matched with earnings.

D.paid and not currently matched with earnings.

 

 

2) When an item of revenue is collected and recorded in advance, it is normally called a(n) ___________ revenue. 

A.unearned

B.prepaid

C.accrued

D.cash

 

 

3) When an item of expense is paid and recorded in advance, it is normally called a(n) 

A.estimated expense.

B.accrued expense.

C.prepaid expense.

D.cash expense.

 

 

4) A common set of accounting standards and procedures are called 

A.objectives of financial reporting. 

B.generally accepted accounting principles.

C.financial accounting standards.

D.statements of financial accounting concepts.

 

 

5) One objective of financial reporting is to provide 

A.information that is useful in assessing cash flow prospects.

B.information about the liquidation values of the resources held by the enterprise.

C.information about the investors in the business entity.

D.information that will attract new investors.

 

 

6) The information provided by financial reporting pertains to 

A.individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers.

B.business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.

C.individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.

D.an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.

 

 

7) The Financial Accounting Foundation 

A.provides information to interested parties on financial reporting issues.

B.oversees the operations of the AICPA.

C.oversees the operations of the FASB.

D.works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.

 

 

8) The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is 

A.all members of the FASB possess extensive experience in financial reporting.

B.all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.

C.the FASB issues exposure drafts of proposed standards.

D.a majority of the members of the FASB are CPAs drawn from public practice.

 

 

9) 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.SEC.

C.APB.

D.AICPA.

 

 

10) Limitations of the income statement include all of the following except 

A.items that cannot be measured reliably are not reported.

B.income measurement involves judgment.

C.income numbers are affected by the accounting methods employed.

D.only actual amounts are reported in determining net income.

 

 

11) The income statement reveals 

A.resources and equities of a firm at a point in time.

B.net earnings (net income) of a firm at a point in time.

C.net earnings (net income) of a firm for a period of time.

D.resources and equities of a firm for a period of time.

 

 

12) 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 government agencies to formulate tax and economic policy.

C.Use by investors interested in the financial position of the entity.

D.Use by labor unions to examine earnings closely as a basis for salary discussions.

 

 

13) The process of formally recording or incorporating an item in the financial statements of an entity is 

A.allocation.

B.realization.

C.recognition.

D.articulation.

 

 

14) Which of the following is not a reason why revenue is recognized at time of sale? 

A.Realization has occurred.

B.Title legally passes from seller to buyer.

C.All of these are reasons to recognize revenue at time of sale.

D.The sale is the critical event.

 

 

15) Which of the following is not an accurate representation concerning revenue recognition? 

A.Revenue from selling products is recognized at the date of sale, usually interpreted to mean the date of delivery to customers.

B.Revenue from permitting others to use enterprise assets is recognized as time passes or as the assets are used.

C.Revenue from disposing of assets other than products is recognized at the date of sale.

D.Revenue from services rendered is recognized when cash is received or when services have been performed.

 

 

16) One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is 

A.an extensive use of estimates.

B.the extensive use of separate classifications.

C.failure to reflect current value information.

D.failure to include items of financial value that cannot be recorded objectively.

 

 

17) The basis for classifying assets as current or noncurrent is conversion to cash within 

A.the accounting cycle or one year, whichever is longer.

B.the operating cycle or one year, whichever is longer.

C.the accounting cycle or one year, whichever is shorter.

D.the operating cycle or one year, whichever is shorter.

 

 

18) The correct order to present current assets is 

A.Cash, inventories, accounts receivable, prepaid items.

B.Cash, accounts receivable, inventories, prepaid items.

C.Cash, accounts receivable, prepaid items, inventories.

D.Cash, inventories, prepaid items, accounts receivable.

 

 

19) If a business entity entered into certain related party transactions, it would be required to disclose all of the following information except the 

A.dollar amount of the transactions for each of the periods for which an income state-ment is presented.

B.nature of any future transactions planned between the parties and the terms involved.

C.nature of the relationship between the parties to the transactions.

D.amounts due from or to related parties as of the date of each balance sheet presented.

 

 

20) Events that occur after the December 31, 2008 balance sheet date (but before the balance sheet is issued) and provide additional evidence about conditions that existed at the balance sheet date and affect the realizability of accounts receivable should be 

A.used to record an adjustment to Bad Debt Expense for the year ending December 31, 2008.

B.disclosed only in the Notes to the Financial Statements.

C.discussed only in the MD&A (Management's Discussion and Analysis) section of the annual report.

D.used to record an adjustment directly to the Retained Earnings account

 

 

21) The full disclosure principle, as adopted by the accounting profession, is best described by which of the following? 

A.Enough information should be disclosed in the financial statements so a person wishing to invest in the stock of the company can make a profitable decision.

B.Information about each account balance appearing in the financial statements is to be included in the notes to the financial statements.

C.All information related to an entity's business and operating objectives is required to be disclosed in the financial statements.

D.Disclosure of any financial facts significant enough to influence the judgment of an informed reader.

 

 

22) The MD&A section of an enterprise's annual report is to cover the following three items: 

A.liquidity, capital resources, and results of operations.

B.income statement, balance sheet, and statement of cash flows.

C.income statement, balance sheet, and statement of owners' equity.

D.changes in the stock price, mergers, and acquisitions.

 

 

23) If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be 

A.unqualified.

B.adverse.

C.qualified.

D.exceptional.

 

 

24) Which of the following best characterizes the difference between a financial forecast and a financial projection? 

A.Forecasts include a complete set of financial statements, while projections include only summary financial data.

B.A forecast attempts to provide information on what is expected to happen, whereas a projection may provide information on what is not necessarily expected to happen.

C.A forecast is normally for a full year or more and a projection presents data for less than a year.

D.A forecast includes data which can be verified about future expectations, while the data in a projection is not susceptible to verification.

 

 

25) Theoretically, in computing the receivables turnover, the numerator should include 

A.net sales.

B.sales.

C.net credit sales.

D.credit sales.

 

 

26) Which of the following ratios measures long-term solvency? 

A.Acid-test ratio

B.Debt to total assets

C.Receivables turnover

D.Current ratio

 

 

27) The rate of return on common stock equity is calculated by dividing 

A.net income by average common stockholders' equity.

B.net income by ending common stockholders' equity.

C.net income less preferred dividends by average common stockholders' equity.

D.net income less preferred dividends by ending common stockholders' equity.

 

 

28) The primary purpose of the statement of cash flows is to provide information 

A.about the operating, investing, and financing activities of an entity during a period.

B.about the cash receipts and cash payments of an entity during a period.

C.that is useful in assessing cash flow prospects.

D.about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.

 

 

29) The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements? 

A.Statements of cash flows

B.Income statements

C.Balance sheets

D.Statements of retained earnings

 

 

30) To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by 

A.eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash.

B.estimating the percentage of income statement transactions that were originally reported on a cash basis and projecting this amount to the entire array of income statement transactions.

C.eliminating all transactions that have no current or future effect on cash, such as depreciation, from the net income computation.

D.re-recording all income statement transactions that directly affect cash in a separate cash flow journal.

 

 

31) The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) 

A.investing activity.

B.deduction from net income.

C.financing activity.

D.addition to net income.

 

 

32) In determining net cash flow from operating activities, a decrease in accounts payable during a period 

A.requires an increase adjustment to cost of goods sold under the direct method.

B.requires an addition adjustment to net income under the indirect method.

C.requires a decrease adjustment to cost of goods sold under the direct method.

D.means that income on an accrual basis is less than income on a cash basis.

 

 

33) In reporting extraordinary transactions on a statement of cash flows (indirect method), the 

A.net of tax amount of an extraordinary gain should be deducted from net income.

B.net of tax amount of an extraordinary gain should be added to net income.

C.gross amount of an extraordinary gain should be added to net income.

D.gross amount of an extraordinary gain should be deducted from net income.

 

 

34) Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of the asset obtained or liability owed at the date of incurrence? 

A.A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 7%.

B.A capital lease is entered into with the initial lease payment due one month subse-quent to the signing of the lease agreement.

C.A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 9%.

D.A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.

 

 

35) Which of the following tables would show the smallest value for an interest rate of 5% for six periods? 

A.Future value of an ordinary annuity of 1

B.Present value of 1

C.Present value of an ordinary annuity of 1

D.Future value of 1

 

 

36) Which table would show the largest factor for an interest rate of 8% for five periods? 

A.Future value of an annuity due of 1

B.Present value of an ordinary annuity of 1

C.Present value of an annuity due of 1

D.Future value of an ordinary annuity of 1

 

 

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Which table would show the largest factor for an interest r

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