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ACC 421 Final Exam

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1) An accrued expense can best be described as an amount;A. not paid and currently matched with earnings.;B. not paid and not currently matched with earnings.;C. 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. cash;B. accrued;C. prepaid;D. unearned;3) When an item of expense is paid and recorded in advance, it is normally called a(n);A. cash expense.;B. prepaid expense.;C. accrued expense.;D. estimated expense.;4) The information provided by financial reporting pertains to;A. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries.;B. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.;C. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.;D. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers.;5) The two primary qualities that make accounting information useful for decision making are;A. reliability and comparability.;B. comparability and consistency.;C. materiality and timeliness.;D. relevance and reliability.;6) A common set of accounting standards and procedures are called;A. statements of financial accounting concepts.;B. financial accounting standards.;C. generally accepted accounting principles.;D. objectives of financial reporting.;7) The Financial Accounting Standards Board (FASB) was proposed by the;A. Special Study Group on establishment of Accounting Principles (Wheat Committee).;B. American Institute of Certified Public Accountants.;C. Accounting Principles Board.;D. Study Group on the Objectives of Financial Statements.;8) The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), is;A. a majority of the members of the FASB are CPAs drawn from public practice.;B. the FASB issues exposure drafts of proposed standards.;C. all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.;D. all members of the FASB possess extensive experience in financial reporting.;9) The Financial Accounting Foundation;A. works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.;B. oversees the operations of the FASB.;C. oversees the operations of the AICPA.;D. provides information to interested parties on financial reporting issues.;10) 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.;11) The single-step income statement emphasizes;A. the gross profit figure.;B. extraordinary items and accounting changes more than these are emphasized in the multiple-step income statement.;C. the various components of income from continuing operations.;D. total revenues and total expenses.;12) Which of the following is not a generally practiced method of presenting the income statement?;A. Including prior period adjustments in determining net income;B. The consolidated statement of income;C. Including gains and losses from discontinued operations of a component of a business in determining net income;D. The single-step income statement;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) Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract on each appliance sold. Although Dot Point sells the appliances on an installment basis, all service contracts are cash sales at the time of purchase by the buyer. Collections received for service contracts should be recorded as;A. service revenue.;B. a reduction in installment accounts receivable.;C. a direct addition to retained earnings.;D. deferred service revenue.;15) In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be;A. the terms of payment in the contract.;B. the method commonly used by the contractor to account for other long-term construc-tion contracts.;C. the inherent nature of the contractor's technical facilities used in construction.;D. the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable.;16) The balance sheet contributes to financial reporting by providing a basis for all of the following except;A. computing rates of return.;B. determining the increase in cash due to operations.;C. assessing the liquidity and financial flexibility of the enterprise.;D. evaluating the capital structure of the enterprise.;17) The correct order to present current assets is;A. Cash, accounts receivable, prepaid items, inventories.;B. Cash, inventories, accounts receivable, prepaid items.;C. Cash, inventories, prepaid items, accounts receivable.;D. Cash, accounts receivable, inventories, prepaid items.;18) The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as;A. solvency.;B. exchangeability.;C. liquidity.;D. financial flexibility.;19) 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. discussed only in the MD&A (Management's Discussion and Analysis) section of the annual report.;B. used to record an adjustment directly to the Retained Earnings account;C. used to record an adjustment to Bad Debt Expense for the year ending December 31, 2008.;D. disclosed only in the Notes to the Financial Statements.;20) The focus of APB Opinion No. 22 is on the disclosure of accounting policies. This information is important to financial statement readers in determining;A. net income for the year.;B. whether the working capital position is adequate for future operations.;C. the value of obsolete items included in ending inventory.;D. whether accounting policies are consistently applied from year to year.;21) Which of the following should be disclosed in a Summary of Significant Accounting Policies?;A. Types of executory contracts;B. Depreciation method followed;C. Claims of equity holders;D. Amount for cumulative effect of change in accounting principle;22) 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 includes data which can be verified about future expectations, while the data in a projection is not susceptible to verification.;C. 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.;D. A forecast is normally for a full year or more and a projection presents data for less than a year.;23) Companies should disclose all of the following in interim reports except;A. basic and diluted earnings per share.;B. seasonal revenue, cost, or expenses.;C. post-balance-sheet events.;D. changes in accounting principles.;24) A financial forecast per professional pronouncements presents to the best of the responsible party's knowledge and belief;A. an entity's expected financial position, results of operations, and cash flows.;B. an assessment of the company's ability to be successful in the future under a number of different assumptions.;C. given one or more hypothetical assumptions, an entity's expected financial position, results of operations, and cash flows.;D. an assessment of the company's ability to be successful in the future.;25) The payout ratio is calculated by dividing;A. dividends per share by earnings per share.;B. cash dividends by net income less preferred dividends.;C. cash dividends by market price per share.;D. cash dividends by net income plus preferred dividends.;26) The calculation of the number of times interest is earned involves dividing;A. net income by annual interest expense.;B. net income plus income taxes by annual interest expense.;C. none of these.;D. net income plus income taxes and interest expense by annual interest expense.;27) The rate of return on common stock equity is calculated by dividing;A. net income by average common stockholders? equity.;B. net income less preferred dividends by average common stockholders? equity.;C. net income less preferred dividends by ending common stockholders? equity.;D. net income by ending common stockholders? equity.;28) A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n);A. addition adjustment to net income in the cash flows from operating activities section.;B. cash outflow from investing activities.;C. cash inflow from financing activities.;D. cash inflow from investing activities.;29) An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n);A. addition to net income in arriving at net cash flow from operating activities.;B. deduction from net income in arriving at net cash flow from operating activities.;C. cash outflow from financing activities.;D. cash outflow from investing activities.;30) Of the following questions, which one would not be answered by the statement of cash flows?;A. Where did the cash come from during the period?;B. What was the cash used for during the period?;C. What was the change in the cash balance during the period?;D. Were all the cash expenditures of benefit to the company during the period?;31) In determining net cash flow from operating activities, a decrease in accounts payable during a period;A. means that income on an accrual basis is less than income on a cash basis.;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. requires an increase adjustment to cost of goods sold under the direct method.;32) Riley Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Wood Co. during the current year, even though no dividends were declared or paid by Wood during the year. On Riley's statement of cash flows (indirect method), the $25,000 should;A. not be shown.;B. be shown as cash inflow from investing activities.;C. be shown as a deduction from net income in the cash flows from operating activities section.;D. be shown as cash outflow from financing activities.;33) In a statement of cash flows, the cash flows from investing activities section should report;A. the issuance of common stock in exchange for a factory building.;B. stock dividends received.;C. the assignment of accounts receivable.;D. a major repair to machinery charged to accumulated depreciation.;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 capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.;B. A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 7%.;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 one month subse-quent to the signing of the lease agreement.;35) Which of the following tables would show the smallest factor for an interest rate of 10% for six periods?;A. Future value of an ordinary annuity of 1;B. Future value of an annuity due of 1;C. Present value of an annuity due of 1;D. Present value of an ordinary annuity of 1;36) Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today?;A. Future value of 1 or present value of 1;B. Future value of an ordinary annuity of 1;C. Present value of an ordinary annuity of 1;D. Future value of an annuity due of 1

 

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