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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

On May 31, the Cash account of Bottle's R US had a normal balance of $6,100.
During May, the account was debited for a total of $13,300 and credited for a total of $12,600.
What was the balance in the Cash account at the beginning of May?
 
A $5,400 debit balance.
A $0 balance.
A $5,400 credit balance
A $6,800 debit balance.
A $6,800 credit balance.
   
Paul’s Landscaping purchased $660 of office supplies on credit.
The company’s policy is to initially record prepaid and unearned items in balance sheet accounts.
Which of the following general journal entries will Paul’s Landscaping make to record this transaction?
 
Debit Office supplies expense, $660; credit Cash, $660.
Debit Office supplies, $660; credit Cash, $660
Debit Office supplies, $660; credit Accounts payable, $660.
Debit Cash, $660; credit Office supplies, $660.
Debit Accounts payable, $660; credit Office supplies, $660.
   
Paul’s Landscaping paid $700 on account for supplies purchased in the prior month.
Which of the following general journal entries will Paul’s Landscaping make to record this transaction?
 
Debit Accounts payable, $700; credit Cash, $700.
Debit Office supplies, $700; credit Cash, $700
Debit Cash, $700; credit Office supplies, $700.
Debit Office supplies expense, $700; credit Cash, $700.
Debit Office supplies, $700; credit Accounts payable, $700.
   
On January 1 of the current year, Jimmy's Sandwich Company reported stockholders’ equity totaling $132,000.
During the current year, total revenues were $114,000 while total expenses were $103,500.
Also, during the current year paid $38,000 in cash dividends. No other changes in equity occurred during the year.
If, on December 31 of the current year, total assets are $214,000, the change in total stockholders’ equity during the year was:
 
An increase of $48,500.
An increase of $82,000
A decrease of $27,500
A decrease of $48,500.
An increase of $27,500.
   
A $310 credit to Supplies was credited to Fees Earned by mistake.
By what amounts are the accounts under- or overstated as a result of this error?
 
Supplies, overstated $620; Fees Earned, understated $310.
Supplies, overstated $310; Fees Earned, understated $310.
Supplies, understated $310; Fees Earned, overstated $310.
Supplies, understated $620; Fees Earned, overstated $310.
Supplies, overstated $310; Fees Earned, overstated $310
   
On April 30, Victor Services had an Accounts Receivable balance of $25,700. During the month of May,
total credits to Accounts Receivable were $60,400 from customer payments.
The May 31 Accounts Receivable balance was $20,000. What was the amount of credit sales during May?
 
$37,600.
$66,100
$5,700.
$60,400.
$54,700.
   
Given the following errors, identify the one by itself that will cause the trial balance to be out of balance.
 
A $130 cash receipt from a customer in payment of her account posted as a $130 debit to Cash and a $130 credit to Cash.
An $1,350 prepayment from a customer for services to be rendered in the future was posted as an $1,350 debit to
Unearned Revenue and an $1,350 credit to Cash.
A $310 cash salary payment posted as a $310 debit to Cash and a $310 credit to Salaries Expense.
A $83 cash purchase of office supplies posted as a $83 debit to Office Equipment and a $83 credit to Cash.
A $210 cash receipt from a customer in payment of her account posted as a $210 debit to Cash and a $21 credit to Accounts Receivable
   
The credit purchase of a new oven for $5,700 was posted to Kitchen Equipment as a $5,700 debit and to Accounts Payable
as a $5,700 debit. What effect would this error have on the trial balance?
 
The total of the Debit column of the trial balance will exceed the total of the Credit column by $5,700.
The total of the Debit column of the trial balance will equal the total of the Credit column.
The total of the Credit column of the trial balance will exceed the total of the Debit column by $11,400.
The total of the Debit column of the trial balance will exceed the total of the Credit column by $11,400
The total of the Credit column of the trial balance will exceed the total of the Debit column by $5,700.
   
Andrea Apple opened Apple Photography on January 1 of the current year. During January,
the following transactions occurred and were recorded in the company's books:
 
Andrea invested $14,200 cash in the business in exchange for common stock.
Andrea contributed $27,000 of photography equipment to the business in exchange for common stock.
The company paid $2,800 cash for an insurance policy covering the next 24 months.
The company received $6,400 cash for services provided during January.
The company purchased $6,900 of office equipment on credit.
The company provided $3,450 of services to customers on account.
The company paid cash of $2,200 for monthly rent.
The company paid $3,800 on the office equipment purchased in transaction #5 above.
Paid $345 cash for January utilities.
 
Based on this information, the amount of total stockholders’ equity-reported on the Balance Sheet at the end of the month would be:
 
$37,805.
$47,600.
$41,200.
$39,550.
$48,505
   
At the beginning of January of the current year, Little Mikey's Catering ledger reflected a normal balance of $53,000 for accounts receivable.
During January, the company collected $15,000 from customers on account and provided additional services to customers on account
totaling $12,600. Additionally, during January one customer paid Mikey $5,100 for services to be provided in the future.
At the end of January, the balance in the accounts receivable account should be:
 
$50,300.
$50,600
$55,700.
$2,400.
$55,400.
 
Ralph Pine Consulting received its telephone bill in the amount of $490, and immediately paid it.
Pine's general journal entry to record this transaction will include a
 
Credit to Accounts payable for $490.
Credit to Telephone Expenses for $490.
Debit to Cash for $490.
Debit to Telephone Expenses for $490
Debit to Accounts payable for $490.
   
Golddigger Services, Inc. provides services to clients. On May 1,
a client prepaid Golddigger Services $68,000 for 6-months services in advance.
Golddigger Services' general journal entry to record this transaction will include a:
 
Credit to Management Fees Earned for $68,000.
Credit to Unearned Management Fees for $68,000
Debit to Management Fees Earned for $68,000.
Credit to Cash for $68,000.
Debit to Unearned Management Fees for $68,000.
   
A $19 credit to Sales was posted as a $190 credit. By what amount is the Sales account in error?
 
$19 understated.
$190 understated.
$190 overstated.
$171 understated.
$171 overstated
   
J. Brown Consulting immediately paid $660 cash for utilities for the current month.
Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.
 
Multiple Choice
 
Cash      660         
Utilities Expense                               660
 
Utilities Expense              660         
Cash                      660
 
Cash      660         
Accounts Payable                             660
 
Prepaid Utilities                660         
Accounts Payable                             660
 
Utilities Expense               660         
Accounts Payable                             660
   
At the end of the current year, Leer Company reported total liabilities of $314,000 and total equity of $114,000.
The company's debt ratio on the last year-end was:
 
73.4
$428,000
275%.
36.3%.
3.75%.
   
Able Graphics received a $680 utility bill for the current month's electricity.
It is not due until the end of the next month which is when they intend to pay it.
Which of the following general journal entries will Able Graphics make to record this transaction?
 
Multiple Choice
 
Cash      680         
Utilities Expense                               680
 
No journal entry is required                          
                                 
Accounts Payable             680         
Utilities Expense                               680
 
Utilities Expense              680         
Accounts Payable                            680
 
Utilities Expense               680         
Cash                      680
   
ABC Catering received $960 cash from a customer for catering services to be provided next month.
Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt.
Assume the company’s policy is to initially record prepaid and unearned items in balance sheet accounts.
 
Multiple Choice
 
Unearned Catering Revenue       960         
Catering Revenue                             960
 
Accounts Receivable       960         
Catering Revenue                            960
 
Cash      960         
Unearned Catering Revenue                       960
 
Cash      960         
Catering Revenue                            960
 
Cash      960         
Accounts Receivable                       960
   
During the month of March, Harley's Computer Services made purchases on account totaling $45,100.
Also during the month of March, Harley was paid $10,400 by a customer for services to be provided in the future and paid $37,700
of cash on its accounts payable balance. If the balance in the accounts payable account at the beginning of March was $78,100,
what is the balance in accounts payable at the end of March?
 
$5,700.
$85,500
$75,100.
$7,400.
$95,900.
   
A law firm collected $2,500 for work to be performed in the following month.
Which of the following general journal entries will the firm make to record this transaction?
 
Debit Cash, $2,500; credit Unearned Legal Fees Revenue, $2,500
Debit Cash, $2,500; credit Accounts Receivable, $2,500.
Debit Accounts Receivable, $2,500; credit Unearned Legal Fees Revenue, $2,500.
Debit Accounts Receivable, $2,500; credit Legal Fees Revenue, $2,500.
Debit Legal Fees Revenue, $2,500; credit Accounts Receivable, $2,500.
   
Trimble Graphic Design receives $2,350 from a client billed in a previous month for services provided.
Which of the following general journal entries will Trimble Graphic Design make to record this transaction?
 
Cash      2,350      
Design Revenue                                2,350
 
Accounts Receivable       2,350      
Unearned Design Revenue                          2,350
 
Cash      2,350      
Unearned Design Revenue                          2,350
 
Cash      2,350      
Accounts Receivable                      2,350
 
Accounts Receivable       2,350      
Cash                      2,350
  If equity is $338,000 and liabilities are $188,000, then assets equal:
 
$188,000.
$338,000.
$864,000.
$150,000.
$526,000 Flitter reported net income of $20,500 for the past year. At the beginning of the year the company had $206,000 in assets and $56,000 in liabilities.
By the end of the year, assets had increased to $306,000 and liabilities were $81,000. Calculate its return on assets:
 
8.0%.
10.0%.
35.4%.
6.7%.
24.7%. A company's balance sheet shows: cash $31,000, accounts receivable $37,000, equipment $64,000, and equity $79,000.
What is the amount of liabilities?
 
$111,000.
$75,000.
$53,000.
$132,000.
$211,000. If assets are $299,000 and liabilities are $191,000, then equity equals:
 
$490,000.
$108,000.
$789,000.
$299,000.
$191,000. Cage Company had income of $384 million and average invested assets of $2,090 million. Its return on assets (ROA) is:
 
3.7%.
1.8%.
37%.
18.4%.
5.4% If assets are $106,000 and liabilities are $36,000, then equity equals:
 
$36,000.
$142,000.
$106,000.
$248,000.
$70,000. Saddleback Company paid off $39,000 of its accounts payable in cash. What would be the effects of this transaction
on the accounting equation?
 
Assets, $39,000 increase; equity, $39,000 increase.
Assets, $39,000 decrease; liabilities, $39,000 increase.
Assets, $39,000 decrease; equity $39,000 decrease.
Liabilities, $39,000 decrease; equity, $39,000 increase.
Assets, $39,000 decrease; liabilities, $39,000 decrease. Charlie's Chocolates' stockholders made investments of $70,000 and received dividends of $30,000.
The company has revenues of $103,000 and expenses of $74,000. Calculate its net income.
 
$40,000.
$103,000.
$69,000.
$29,000.
$74,000. Savvy Sightseeing had beginning equity of $80,000; revenues of $114,000, expenses of $73,000,
and dividends to stockholders of $9,800. There were no stockholder investments during the year.
Calculate ending equity.
 
$111,200.
$29,200.
$41,000.
$121,000.
$39,000. Speedy has net income of $27,955, and assets at the beginning of the year of $209,000.
Assets at the end of the year total $255,000. Compute its return on assets.
 
12.0%.
13.4%.
11.0%.
15.8%.
10.8%. If a company purchases equipment costing $6,000 on credit, the effect on the accounting equation would be:
 
Assets increase $6,000 and liabilities decrease $6,000.
Assets increase $6,000 and liabilities increase $6,000.
Equity increases $6,000 and liabilities decrease $6,000.
Liabilities decrease $6,000 and assets increase $6,000.
Equity decreases $6,000 and liabilities increase $6,000. If the assets of a business increased $101,000 during a period of time and its liabilities increased $73,000 during the same period,
equity in the business must have:
 
Increased $28,000.
Increased $174,000.
Decreased $174,000.
Decreased $28,000.
Increased $101,000. Rushing had income of $177 million and average invested assets of $1,900 million. Its return on assets is:
 
93.2%.
11%.
107%.
9.3%.
18.6%. The assets of a company total $728,000; the liabilities, $214,000. What are the net assets?
 
$214,000.
$514,000.
$942,000.
It is impossible to determine unless the amount of stockholder investments is known.
$728,000. A company reported total equity of $171,000 at the beginning of the year.
The company reported $236,000 in revenues and $178,000 in expenses for the year.
There were no stockholder investments or dividends during the year. Liabilities at the end of the year totaled $105,000.
What are the total assets of the company at the end of the year?
 
$236,000.
$334,000.
$105,000.
$124,000.
$58,000. Dawson Electronic Services had revenues of $108,000 and expenses of $64,000 for the year.
Its assets at the beginning of the year were $414,000. At the end of the year assets were worth $464,000.
Calculate its return on assets.
 
10.0%.
9.5%.
24.6%.
10.6%.
26.1%. If Houston Company billed a client for $25,000 of consulting work completed, the accounts receivable asset increases by $25,000 and:
 
Revenue increases $25,000.
Revenue decreases $25,000.
Accounts payable decreases $25,000.
Accounts payable increases $25,000.
Cash increases $25,000. If the liabilities of a business increased $105,000 during a period of time and the equity in the business decreased
$45,000 during the same period, the assets of the business must have:
 
Decreased $150,000.
Decreased $60,000.
Increased $45,000.
Increased $150,000.
Increased $60,000. If a company is considering the purchase of a parcel of land that was acquired by the seller for $98,000,
is offered for sale at $176,000, is assessed for tax purposes at $108,000, is recognized by the purchaser as easily being worth $166,000,
and is purchased for $163,000, the land should be recorded in the purchaser's books at:
 
$166,000.
$176,000.
$163,000.
$108,000.
$164,500. Chou Co. has a net income of $61,000, assets at the beginning of the year are $268,000 and assets at the end of the year are $318,000.
Compute its return on assets.
 
11.6%.
22.8%.
20.8%.
2.0%.
19.2%. Profit is the difference between
 
a. assets and liabilities
b. the incoming cash and outgoing cash
c. the assets purchased with cash contributed by the owner and the cash spent to operate the business.
d. the assets received for goods and services and the amounts used to provide the goods and services.
   
Financial reports are used by:
a. management
b. creditors
c. investors
d. all are correct
   
The initials GAAP stand for
a. General Accounting Procedures
b. Generally Accepted Plans
c. Generally Accepted Accounting Principles
d. Generally Accepted Accounting Practices
   
For accounting purposes, the business entity should be considered separate from its owners if the entity is
a. a corporation
b, a proprietorship
c. a partnership
d. all of the above
   
Equipment with an estimated market value of $55,000 is offered for sale at $75,000. The equipment is acquired for $20,000
in cash and a note payable of $40,000 due in 30 days.
The amount used in the buyer's accounting records to record this acquisition is?
a. 555.000
b. $60.000
c. $20,000
d. $75,000
   
Owned resources of a business are referred to as
a. assets
b. liabilities
c. equities
d. revenue
   
7. Debts owed by a business are referred to as
a. accounts receivables
b. equities
c. owner's equity
d. liabilities
   
The accounting equation may be expressed as
a. Assets = Equities - Liabilities
b. Assets + Liabilities = Owner's Equity
c. Assets = Revenues less Liabilities
d. Assets - Liabilities: Owner's Equity
   
Accounts:
 
a. do not reflect money amounts.
b. are not used by entities that manufacture products.
c. are records of increases and decreases in individual financial statement items.
d. are only used by large entities with many transactions.
   
Which of the following accounts is an owner's equity account?
 
a. Cash
b. Accounts Payable
c. Prepaid Insurance
d. Ross Morris, Capital
   
The gross increases it's owner's equity attributable to business activities are called
 
a. assets
b. liabilities
c. revenues
d. net income
   
An account is said to have a debit balance if
 
a. the amount of the debits exceeds the amount of the credits
b. there are more entries on the debit side than on the credit side
c. its normal balance is debit without regard to the amounts or number of entries on the debit side
d. the first entry of the accounting period was posted on the debit side
   
A debit may signify a(n)
 
a. decrease in asset accounts
b. decrease in liability accounts
c. increase in the capital account
d. decrease in the drawings account
   
Which of the following groups of accounts have a normal debit balance?
 
a. revenues, liabilities, capital
b. capital, assets
c. liabilities, expenses
d. assets, expenses
   
A credit may signify a
 
a. decrease in assets
b. decrease in liabilities
c. decrease in capital
d. decrease in revenue
   
Which of the following entries records the payment of an account payable?
a. debit Cash; credit Accounts Payable
b. debit Accounts Receivable; credit Cash
c, debit Cash; credit Supplies Expense
d. debit Accounts Payable; credit Cash
   
The balance of the account is determined by
a. adding all of the debits to all of the credits.
b. always subtracting the debits from the credits.
c. always subtracting all of the credits from the debit.
d. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum.
   
Prarie Clinic purchased X-ray equipment for $4,000, paid $1,275 down, with the remainder to be paid later.
The correct entry would be?
 
a. Equipment                                     1,27 5
Cash                                                      1,275
 
b. Cash                                  1,215
Accounts Payable                             2,725
Equipment                                          4,000
 
c. Equipment Expense    4,000
Accounts Payable                             1,275
Cash                                                      2,725
 
d. Equipment                                     4,000
Accounts Payable                            2,725
Cash                                                      1,275
 
e. Cash                                  1,275
Equipment                                          1,275
   
Which of the following statements is not true about liabilities?
 
a. Liabilities are debts owed to outsiders.
b. Account titles of liabilities often include the term “payable”
c. Cash received before services are performed are considered to be liabilities.
d. Liabilities do not include wages owed to employees of the company.
   
All except one of the following accounts will be increased with a debit:
 
a. Unearned Revenues
b. Land
c. Accounts Receivable
d. Cash
   
Using accrual accounting, expenses are recorded and reported only
 
a. when they are incurred, whether or not cash is paid
b. when they are incurred and paid at the same time
c. if they are paid before they are incurred
d. if they are paid after they are incurred
   
Adjusting entries are
 
a. the same as correcting entries
b. needed to bring accounts up to date and match revenue and expense
c. optional under generally accepted accounting principles
d. rarely needed in large companies
   
Generally accepted accounting principles requires that companies use the _ of accounting.
 
a. cash basis
b. deferral basis
c. accrual basis
d. account basis
   
Which account would normally not require an adjusting entry?
 
a. Wages Expense
b. Accounts Receivable
c. Accumulated Depreciation
d. Smith, Capital
   
The balance in the office supplies account on June 1 was $6,300, supplies purchased during June were $3,100, and the supplies
on hand at June 30 were $2,500.
The amount to be used for the appropriate adjusting entry is
 
a. $3,700
b. $ 11,900
c. $5,700
d. $6,900
   
A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day.
The adjusting entry necessary at the end of the fiscal period ending on Tuesday is
 
a. debit Salaries Payable, $8,000; credit Cash, $8,000
b. debit Salary Expense, $8,000; credit Drawing, $8,000
c. debit Salary Expense, $8,000; credit Salaries Payable, $8,000
d. debit Drawing, $8,000; credit Cash, $8,000
   
The adjusting entry to record the depreciation of equipment for the fiscal period is
 
a. debit Depreciation Expense; credit Equipment
b. debit Depreciation Expense; credit Accumulated Depreciation
c. debit Accumulated Depreciation; credit Depreciation Expense
d. debit Equipment; credit Depreciation Expense
   
The income statement is prepared from:
 
a. the adjusted trial balance.
b. the income statement columns of the work sheet.
c. either the adjusted trial balance or the income statement columns of the work sheet.
d. both the adjusted trial balance and the income statement columns of the work sheet.
   
The Statement of Owner's Equity should be prepared.
a. before the income statement and after the balance sheet
b. before the income statement and balance sheet
c. after the income statement and balance sheet
d. after the income statement and before the balance sheet
   
Financial accounting is the process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control a company’s operations.
 False
   
Financial statements are the principal means through which a company communicates its financial information to those outside it.
 True
   
Users of financial reports of a company use the information provided by these reports to make their capital allocation decisions.
 True
   
An effective process of capital allocation promotes productivity and provides an efficient market for buying and
selling securities and obtaining and granting credit.
 True
   
The objective of financial reporting is to report the plans made by a company to improve the productivity of its employees.
 False
   
Investors are interested in financial reporting because it provides information that is useful for making decisions.
 True
   
Users of financial accounting statements have both coinciding and conflicting needs for information of various types.
 True
   
The Securities and Exchange Commission appointed the Committee on Accounting Procedure.
 False
   
The passage of a new FASB Accounting Standards Update requires the support of five of the seven board members.
 False
   
Statements of Financial Accounting Concepts set forth fundamental objectives and concepts that are used by the FASB in developing
future standards of financial accounting and reporting.
 True
   
The AICPA created the Accounting Principles Board in 1959.
 True
   
The FASB’s Codification creates a new set of GAAP.
 False
   
The AICPA’s Code of Professional Conduct requires that members prepare financial statements in accordance with
generally accepted accounting principles.
 True
   
GAAP is a product of careful logic or empirical findings and is not influenced by political action.
 False
   
The Public Company Accounting Oversight Board has oversight and enforcement authority and establishes
auditing and independence standards and rules.
 True
   
The expectations gap is due to the difference between what the public thinks accountants should do
and what accountants think they can do.
 True
 
Financial reports in the early 21st century did not provide any information about a company’s soft assets (intangibles).
 False
   
Accounting standards are now less likely to require the recording or disclosure of fair value information.
 False
   
U.S. companies that list overseas are required to use International Financial Reporting Standards, issued by the International Accounting Standards Board.
 False
   
Ethical issues in financial accounting are governed by the AICPA.
 False
   
General-purpose financial statements are the product of
a.  financial accounting.
b.  managerial accounting.
c.  both financial and managerial accounting.
d.  neither financial nor managerial accounting.
   
Which of the following is not a user of financial reports?
a.  Creditors.
b.  Government agencies.
c.  Unions.
d.  All of these are users.
   
The financial statements most frequently provided include all of the following except the
a.  balance sheet.
b.  income statement.
c.  statement of cash flows.
d.  statement of retained earnings.
   
The information provided by financial reporting pertains to
a.  individual business enterprises, rather than to industries or an economy as a whole or 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, industries, and an economy as a whole, rather than 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.
   
All the following are differences between financial and managerial accounting in how accounting information is used except to
a. plan and control company's operations.
b.  decide whether to invest in the company.
c.  evaluate borrowing capacity to determine the extent of a loan to grant.
d.  All the answer choices are correct.
   
Which of the following represents a form of communication through financial reporting but not through financial statements?
a. Balance sheet.
b.  President's letter.
c.  Income statement.
d.  Notes to financial statements.
   
The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate,
and control an organization’s operations is called?
a. financial accounting.
b.  managerial accounting.
c.  tax accounting.
d.  auditing.
   
How does accounting help the capital allocation process attract investment capital?
a.  By providing timely, relevant information.
b.  By encouraging innovation.
c.  By promoting productivity.
d.  By providing timely, relevant information and by encouraging innovation.
   
Which of the following helps in determining whether a business thrives? a. Markets.
b.  Free enterprise.
c.  Competition.
d.  All of these answer choices are correct.
  Which of the following is related to an effective capital allocation?
a.  Promoting productivity.
b.  Encouraging innovation.
c.  Providing an efficient market for buying and selling securities.
d.  All of these answer choices are correct.
   
Financial statements in the early 2000s provide information related to
a.  nonfinancial measurements.
b.  forward-looking data.
c.  hard assets (inventory and plant assets).
d.  None of these answer choices are correct.
   
Which of the following is not a major challenge facing the accounting profession?
a.  Nonfinancial measurements.
b.  Timeliness.
c.  Accounting for hard assets.
d.  Forward-looking information.
   
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.
   
Primary users for general-purpose financial statements include
a.  creditors.
b.  employees.
c.  investors.
d.  both creditors and investors.
   
Which of the following will be 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.
   
Accrual accounting is used because
a.  cash flows are considered less important.
b.  it provides a better indication of a company’s ability to generate cash flows than the cash basis.
c.  it recognizes revenues when cash is received and expenses when cash is paid.
d.  None of the answer choices are correct.
   
Which perspective is adopted as a part of the objective of general-purpose financial reporting?
a.  A decision-usefulness perspective.
b.  A proprietary perspective.
c.  An entity perspective.
d.  A financial reporting perspective.
   
Which of the following is a requirement for an accounting principle to be called "generally accepted"?
a.  An authoritative accounting rule-making body has established it in an official pronouncement.
b.  The principle has been accepted as appropriate because of its universal application.
c.  An authoritative accounting rule-making body has established it and it has been accepted because of its universal application.
d.  None of the answer choices are correct.
   
A common set of accounting standards and procedures are called
a.  financial accounting standards.
b.  generally accepted accounting principles.
c.  objectives of financial reporting.
d.  statements of financial accounting concepts.
   
Which of the following is a general limitation of "general purpose financial statements"?
a.  General purpose financial statements may not be the most informative for a specific enterprise.
b.  General purpose financial statements are not comparable.
c.  General purpose financial statements do not fairly present a company's financial operations.
d.  None of the answer choices are correct.
   
What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?
a.  The SEC requires all companies listed on an exchange to submit their financial statements to the SEC.
b.  The SEC coordinates with the AICPA in establishing accounting standards.
c.  The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.
d.  The SEC reviews financial statements for compliance.
   
What is due process in the context of standard setting at the FASB?
a.  The FASB operates in full view of the public.
b.  Public hearings are held on proposed accounting standards.
c.  Interested parties can make their views known.
d.  All of the answer choices are correct.
   
Which of the following organizations has been responsible for setting U.S. accounting standards?
a.  The Accounting Principles Board.
b.  The Committee on Accounting Procedure.
c.  The Financial Accounting Standards Board.
d.  All of the answer choices are correct.
   
Why did the AICPA create the Accounting Principles Board?
a.  The SEC disbanded the previous standard setting organization.
b.  The previous standard setting organization did not provide a structured set of accounting principles.
c.  No such organization existed in the past.
d.  None of the answer choices are correct.
   
Which organization was responsible for issuing Accounting Research Bulletins?
a.  The Accounting Principles Board.
b.  The Committee on Accounting Procedure.
c.  The SEC.
d.  The FASB.
   
A characteristic of generally accepted accounting principles include:
a.  a common set of standards and principles.
b.  standards and principles are based a federal statutes.
c.  acceptance requires an affirmative vote of Certified Public Accountants.
d.  practices that become accepted for at least a year by all industry members.
   
Characteristics of generally accepted accounting principles include all of the following except 
a.  authoritative accounting that the rule-making body has established as a principle of reporting.
b.  standards are considered useful by the profession.
c.  each principle is approved by the SEC.
d.  practice has become universally accepted over time.
   
Why was it believed that accounting standards that were issued by the Financial Accounting Standards Board would carry more weight? a. Smaller membership.
b.  The FASB board members were well-paid.
c.  The FASB board members were CPAs.
d.  Due process.
   
The passage of a new FASB Accounting Standards Update requires the support of
a.  seven Board members.
b.  three Board members.
c.  four Board members.
d.  five Board members.
   
What is the purpose of Emerging Issues Task Force?
a.  Provide interpretation of existing standards.
b.  Provide a consensus on how to account for new and unusual financial transactions.
c.  Provide interpretive guidance.
d.  Provide timely guidance on select issues.
   
Which organization is responsible for issuing Emerging Issues Task Force Statements?
a.  The FASB
b.  The CAP
c.  The APB
d.  The SEC
   
The role of the Securities and Exchange Commission in the formulation of accounting principles can be best described as
a. consistently primary.
b.  consistently secondary.
c.  sometimes primary and sometimes secondary.
d.  non-existent.
   
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.
   
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.
   
The Financial Accounting Standards Board (FASB) was proposed by the
a.  American Institute of Certified Public Accountants.
b.  Accounting Principles Board.
c.  Study Group on the Objectives of Financial Statements.
d.  Study Group on establishment of Accounting Principles (Wheat Committee).
   
Which of the following is true of the Financial Accounting Standards Board
a.  It has issued a series of pronouncements entitled Auditing Standards Updates.
b.  It was the forerunner of the current Accounting Principles Board.
c.  It is the arm of the Securities and Exchange Commission responsible for setting financial accounting standards.
d.  The members of the FASB are appointed by the Financial Accounting Foundation.
   
The Financial Accounting Foundation
a.  oversees the operations of the FASB.
b.  oversees the operations of the AICPA.
c.  provides information to interested parties on financial reporting issues.
d.  works with the Financial Accounting Standards Advisory Council to provide informa-tion to interested parties on financial reporting issues.
   
The major distinction between the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB),
is a. the FASB issues exposure drafts of proposed standards.
b.  all members of the FASB are fully remunerated, serve full time, and are independent of any companies or institutions.
c.  all members of the FASB possess extensive experience in financial reporting.
d.  a majority of the members of the FASB are CPAs drawn from public practice.
   
The Financial Accounting Standards Board employs a "due process" system which
a.  is an efficient system for collecting dues from members.
b.  enables interested parties to express their views on issues under consideration.
c.  identifies the accounting issues that are the most important.
d.  requires that all accountants must receive a copy of financial standards.
   
Which of the following is not a publication of the FASB?
a. Statements of Financial Accounting Concepts
b. Accounting Research Bulletins.
c. Interpretations
d. Technical Bulletins
   
FASB Technical Bulletins
a.  are similar to FASB Interpretations in that they establish enforceable standards under the AICPA's Code of Professional Ethics.
b.  are issued monthly by the FASB to deal with current topics.
c.  are not expected to have a significant impact on financial reporting in general and provide guidance when it does not conflict
  with any broad fundamental accounting principle.
d.  were recently discontinued by the FASB because they dealt with specialized topics having little impact on financial reporting in general.
   
The purpose of the Emerging Issues Task Force is to
a.  develop a conceptual framework as a frame of reference for the solution of future problems.
b.  lobby the FASB on issues that affect a particular industry.
c.  do research on issues that relate to long-term accounting problems.
d.  issue statements which reflect a consensus on how to account for new and unusual financial transactions that need to be resolved quickly.
   
The American Institute of Certified Public Accountants (AICPA) continues to be involved in all of the following except
a.  developing and enforcing professional ethics.
b.  developing auditing standards for public companies.
c.  providing professional education programs.
d.  All of the answer choices are correct.
   
Which of the following pronouncements were issued by the Accounting Principles Board?
a.  Accounting Research Bulletins
b.  APB Opinions.
c.  APB Statements of Position
d.  Statements of Financial Accounting Concepts
   
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
   
Which of the following organizations has not published accounting standards?
a.  American Institute of Certified Public Accountants.
b.  Securities and Exchange Commission.
c.  Financial Accounting Standards Board.
d.  All of these have published accounting standards.
   
The purpose of Statements of Financial Accounting Concepts is to
a. Modify or extend an existing FASB Accounting Standards Update
b. Determine the need for FASB involvement in an emerging issue.
c. Establish GAAP
d. Form a conceptual framework for solving existing and emerging problems.
   
Members of the Financial Accounting Standards Board are
a.  employed by the American Institute of Certified Public Accountants (AICPA).
b.  part-time employees.
c.  required to hold a CPA certificate.
d.  independent of any other organization.
   
The following are part of the "due process" system used by the FASB in the evolution of a typical FASB Accounting Standards Update:
Exposure Draft
FASB Accounting Standards Update
Preliminary Views
The chronological order in which these items are released is as follows:
a. 1, 2, 3.
b.  1, 3, 2.
c.  2, 3, 1.
d.  3, 1, 2.
   
Which of the following is true of generally accepted accounting principles?
a.  GAAP includes detailed practices and procedures as well as broad guidelines of general application.
b.  GAAP is influenced by pronouncements of the SEC and IRS.
c.  GAAP changes over time as the nature of the business environment changes.
d.  All of these answer choices are correct.
   
The most significant current source of generally accepted accounting principles is the
a.  AICPA.
b.  SEC.
c.  APB.
d.  FASB.
   
Which of the following is not a part of generally accepted accounting principles?
a.  The FASB Interpretations
b.  The CAP Accounting Research Bulletins
c.  The APB Opinions
d.  All of these are part of generally accepted accounting principles.
   
Which of the following publications does not qualify as a statement of generally accepted accounting principles?
a.  Statements of financial standards issued by the FASB
b.  Accounting interpretations issued by the FASB
c.  APB Opinions
d.  Accounting research studies issued by the AICPA.
   
Rule 203 of the Code of Professional Conduct addresses:
a.  ethical requirements.
b.  financial statements being based on generally accepted accounting principles.
c.  advertising to obtain clients.
d. auditing financial statements.
   
 What is the purpose of a FASB Staff Position?
a.  Provide interpretation of existing standards.
b.  Provide a consensus on how to account for new and unusual financial transactions.
c.  Provide interpretive guidance.
d.  Provide timely guidance on select issues.
   
Which of the following is not considered a component of generally accepted accounting principles?
a.  FASB Implementation Guides.
b.  Widely recognized industry practices.
c.  Articles published in CPA journals.
d.  AICPA Accounting Interpretations.
   
Financial accounting standard-setting in the United States
a.  can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.
b.  is based solely on research and empirical findings.
c.  is a legalistic process based on rules promulgated by governmental agencies.
d.  is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.
   
The purpose of the International Accounting Standards Board is to
a.  issue enforceable standards which regulate the financial accounting and reporting of multinational corporations.
b.  develop a uniform currency in which the financial transactions of companies through-out the world would be measured.
c.  promote uniform accounting standards among countries of the world.
d.  arbitrate   accounting   disputes   between   auditors   and   international companies.
   
Which of the following is a source of pressure that may influence the accounting standard setting process?
a. Congress.
b.  Lobbyist.
c.  CPA firms.
d.  All of these answers are correct. 
   
What is a possible danger if politics plays too big a role in accounting standard setting?
a.  Accounting standards that are not truly generally accepted.
b.  Individuals may influence the standards.
c.  User groups become active.
d.  The FASB delegates its authority to elected officials.
   
What is the "expectations gap"?
a.  The difference between what the public thinks the accountant should not do and what the accountant knows they should do.
b.  The difference between what the public thinks the accountant is doing and what Congress says the accountant is doing.
c.  The difference between what the public thinks the accountant should do and what the accountant thinks they can do.
d.  The difference between what the accountant is doing and what the Courts say the accountant should be doing.
   
What is not a reason that accounting standards may differ across countries?
a.  Governments.
b.  Language.
c.  Culture.
d.  Past practice.
   
What would be an advantage of having all countries adopt and follow the same accounting standards?
a. Consistency.
b. Comparability.
c. Lower preparation costs.
d. b and c
   
Which of the following is an ethical concern of accountants?
a) Earnings manipulation.
b) Conservative accounting.
c) Industry practices.
d) None of these answers are correct.

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2