Test bank for financial reporting and analysis using financial accounting information 12th

e.none of the answers are correct All but one of the following statements indicates a difference between the Financial Accounting Standards Board FASB and prior approaches.. e.none of th

Test Bank for Financial Reporting and Analysis Using Financial Accounting Information 12th

Multiple Choice Questions

The organization that has by federal law the responsibility to adopt auditing standards is the:

1 a.New York Stock Exchange

2 b.Public Company Accounting Oversight Board

3 c.Accounting Principles Board

4 d.Financial Accounting Standards Board

5 e.AICPA Committee on Accounting Procedure

Which of these measurement attributes is not currently used in practice?

An accounting period that ends when operations are at a low ebb is:

1 a.a calendar year

2 b.a fiscal year

3 c.the natural business year

4 d.an operating year

5 e.none of the answers are correct.

Accountants provide for inflation using which of the following accounting principles?

1 a.going concern

2 b.time period

3 c.conservatism

4 d.materiality

5 e.none of the answers are correct

Valuing inventory at the lower of cost or market is an application of the:

1 a.time period assumption

2 b.realization principle

3 c.going concern principle

4 d.conservatism principle

5 e.none of the answers are correct

At the end of the fiscal year, an adjusting entry is made that increases salaries payable and increases salaries expense This entry is an application of which accounting principle?

1 a.full disclosure

2 b.materiality

3 c.matching

4 d.realization

5 e.historical cost

The most significant current source of generally accepted accounting

principles is the:

1 a.New York Stock Exchange

2 b.Accounting Principles Board

3 c.Accounting Research Studies

4 d.AICPA committee on Accounting Procedure

5 e.Financial Accounting Standards Board

The assumption that deals with when to recognize the costs that are

associated with the revenue that is being recognized is:

1 a.matching

2 b.going concern

3 c.consistency

4 d.materiality

5 e.none of the answers are correct

All but one of the following statements indicates a difference between the Financial Accounting Standards Board (FASB) and prior approaches Select the one that is not a difference

1 a.The FASB is independent of the AICPA.

2 b.The size of the board is much smaller.

3 c.The FASB has broader representation.

4 d.The FASB is the primary board for the development of generally accepted accounting principles.

5 e.Members of the FASB serve on a full-time basis.

Understating assets and revenues is justified based on:

1 a.realization assumption

2 b.matching

3 c.consistency

4 d.realization

5 e.none of the answers are correct

The principle that assumes the reader of the financial statements is not

interested in the liquidation values is:

1 a.conservatism

2 b.matching

3 c.time period

4 d.realization

5 e.none of the answers are correct

Accountants face a problem of when to recognize revenue Which of the

following methods of recognizing revenue is not used in practice?

1 a.point of sale

2 b.point of order acceptance

3 c.end of production

4 d.receipt of cash

5 e.revenue recognized during production

Other than December, the most popular month for fiscal year-end is:

The going concern assumption:

1 a.is applicable to all financial statements

2 b.primarily involves periodic income measurement

3 c.allows for the statements to be prepared under generally accepted accounting principles

4 d.requires that accounting procedures be the same from period to period

5 e.none of the answers are correct

By law, the setting of accounting standards is the responsibility of the:

1 a.AICPA Committee on Accounting Procedure

2 b.New York Stock Exchange

3 c.Accounting Principles Board

4 d.Securities and Exchange Commission

5 e.Financial Accounting Standards Board

The Financial Accounting Standards Board has issued statements between:

1 a.1960-1973

2 b.1939-1959

3 c.1973-present

4 d.1966-1976

5 e.none of the answers are correct

Valuing assets at their liquidation values is not consistent with:

1 a.conservatism

2 b.materiality

3 c.going concern

4 d.time period

5 e.none of the answers are correct

The realization principle leads accountants to usually recognize revenue at:

1 a.the end of production

2 b.during production

3 c.the receipt of cash

4 d.the point of sale

5 e.none of the answers are correct

The following data relate to Falcon Company for the year ended December 31,

2010 Falcon Company uses the cash basis Sales for cash: $180,000; Sales for credit: 190,000; Cost of inventory sold: 210,000; Collections from

customers: 350,000; Purchases of inventory on credit: 200,000; Payment for purchases: 220,000; Selling expenses (accrual basis): 60,000; Payment for selling expenses: 70,000 Which of the following amounts represents income for Falcon Company for the year ended December 31, 2010?

1 a.$90,000

2 b.$80,000

3 c.$70,000

4 d.$60,000

5 e.none of the answers are correct

Which of the following does not relate to The Public Company Accounting Oversight Board (PCAOB)?

1 a.Two members of the board must be CPAs

2 b.In addition to appointing the five members of the PCAOB, the SEC is responsible for the oversight and enforcement authority over the Board

3 c.The PCAOB consists of five members appointed by the SEC

4 d.The PCAOB is to adopt auditing standards

5 e.The PCAOB is to adopt accounting standards

Understating expenses is justified based on:

1 a.time period assumption

2 b.conservatism assumption

3 c.materiality assumption

4 d.matching assumption

5 e.none of the answers are correct

The Accounting Principles Board issued Opinions between:

1 a.1959-1973

2 b.1939-1959

3 c.1973-present

4 d.1966-1976

5 e.none of the answers are correct

The accounting principle that assumes that inflation will not take place or will

5 e.none of the answers are correct

The business being separate and distinct from the owners is an integral part

of the:

1 a.time period assumption

2 b.going concern assumption

3 c.business entity assumption

4 d.realization assumption

5 e.none of the answers are correct

The following data relate to Rocket Company for the year ended December 31,

2010 Rocket Company uses the cash basis Sales on credit: $180,000; Cost of inventory sold on credit: 130,000; Collections from customers: 170,000;

Purchase of inventory on credit: 140,000; Payment for purchases: 150,000; Selling expenses (accrual basis:)20,000; Payment for selling expenses:

25,000 Which of the following amounts represents income for Rocket

Company for the year ended December 31, 2010?

5 e.none of the answers are correct

The comment that “items that are not material may be recorded in the

financial statements in the most economical and expedient manner possible”

5 e.none of the answers are correct

The assumption that allows accountants to accept some inaccuracy, because

of incomplete information about the future, in exchange for more timely

3 c.matching

4 d.materiality

5 e.realization

The following data relate to Gorr Company for the year ended December 31,

2010 Gorr Company uses the accrual basis Sales for cash: $200,000; Sales for credit: 220,000; Cost of inventory sold: 180,000; Collections from

customers: 300,000; Purchases of inventory on credit: 190,000; Payment for purchases: 180,000; Selling expenses (accrual basis): 50,000; Payment for selling expenses: 60,000 Which of the following represents income for Gorr Company for the year ended December 31, 2010?

1 a.$180,000

2 b.$185,000

3 c.$190,000

4 d.$200,000

5 e.none of the answers are correct

The following data relate to Swift Company for the year ended December 31,

2010 Swift Company uses the accrual basis Sales on credit: $250,000; Cost

of inventory sold on credit: 170,000; Collections from customers: 220,000; Purchase of inventory on credit: 150,000; Payment for purchases: 140,000; Selling expenses (accrual basis):40,000; Payment for selling expenses:45,000 Which of the following amounts represents income for Swift Company for the year ended December 31, 2010?

1 a.$60,000

2 b.$50,000

3 c.$40,000

4 d.$35,000

5 e.$30,000

alternative accounting principles

1 True

2 False

The Sarbanes-Oxley Act has far-reaching consequences for financial

reporting and the CPA profession

1 True

2 False

Some industry practices lead to accounting reports that do not conform to the general theory that underlies accounting

1 True

2 False

According to the second Financial Accounting Concept, those characteristics

of information that make it a desirable commodity can be viewed as a

hierarchy of qualities, with understandability and usefulness for decision making of most importance

The most accurate way to account for the success or failure of an entity is to accumulate all transactions from the opening of business until the business eventually liquidates

Financial Accounting Concepts establish generally accepted accounting principles

Relevance is a quality requiring that the information be timely and that it also have predictive value or feedback value or both

Accounting Trends & Techniques is a compilation of data obtained by a

survey of 600 annual reports to stockholders undertaken for the purpose of analyzing the accounting information disclosed in such reports

The Sarbanes-Oxley Act has materiality implications

At the time of originally recording a transaction, historical cost also

represents the fair market value

Accounting standards codification TM reorganizes the accounting

pronouncements into approximately 90 accounting topics

The SEC has the authority to determine generally accepted accounting

principles and to regulate the accounting profession

Private companies are required to report under Sarbanes-Oxley

1 True

2 False

An entity usually cannot reasonably account for the profits related to

inventory until that inventory is sold in the normal course of business

Among the many responsibilities of the PCAOB is to adopt accounting standards