Ch1 Analysis

CHAPTER 1INTRODUCTION TO pecuniary REPORTING MULTIPLE CHOICE 1. Charging absent equipment that follow less than $20 would be an example of the practise of a. going adjoin b. equal c. matching d. materiality e. actualization autonomic nervous systemD 2. The going anguish speculation a. is applicable to all mo finalary statements b. primarily involves oscillating income bannerment c. allows for the statements to be prep argond under(a) primarily reliable news report teachings d. requires that account statement procedures be the similar from occlusion to plosive speech sound e. no(prenominal) of the answers be ripe autonomic nervous systemC 3.Understating assets and grosss is justify based on a. actualization arrogance b. matching c. union d. actualisation e. no(prenominal) of the answers ar moderate autonomic nervous systemE 4. The arrogance that enables us to prep ar checkic statements amidst the conviction that a job commences operations and the condemnation it goes out of traffic is a. clip period b. commercial green light entity c. historical toll d. transaction e. none of the answers argon slide down autonomic nervous systemA 5. Valuing assets at their liquidation set is non consonant with a. conservatism b. materiality c. going head ache d. time period . none of the answers are repair autonomic nervous systemC 6. The ad hominem opinion line macrocosm separate and distinct from the owners is an constitutional part of the a. time period precondition b. going de none assertion c. business entity premise d. credence assumption e. none of the answers are correct autonomic nervous systemC 7. The rule that assumes the reader of the fiscal statements is non interested in the liquidation respects is a. conservatism b. matching c. time period d. realisation e. none of the answers are correct autonomic nervous systemE 8. An method of account statement period that ends when operations are at a low e bb is a. a calendar course of study b. a monetary stratum c. the inseparable business division d. an operational family e. none of the answers are correct autonomic nervous systemC 9. The score principle that assumes that inflation leave behind not take for place or leave behind be immaterial is a. monetary building block b. historical cost c. realization d. going fretfulness e. none of the answers are correct autonomic nervous systemA 10. Valuing neckcloth at the dismount of cost or trade is an application of the a. time period assumption b. realization principle c. going tinge principle d. conservatism principle e. none of the answers are correct autonomic nervous systemD 11.The realization principle leads restrainers to ordinarily descry tax at a. the end of employment b. during exertion c. the reception of immediate payment d. the point of sales event e. none of the answers are correct ANSD 12. The comment that items that are not material may be put d own in the pecuniary statements in the al nearly economical and expedient manner realizable is re affordative of a. matching b. conservatism c. realization d. materiality e. none of the answers are correct ANSD 13. The assumption that deals with when to recognize the costs that are associated with the revenue that is being recognized is a. matching b. going tutelage c. consis 10cy d. materiality e. none of the answers are correct ANSA 14. The some signifi rottert genuine source of for the most part accepted accounting principles is the a. unfermented York investment firm Exchange b. business relationship Principles gore c. report Research Studies d. AICPA committee on accountancy Procedure e. monetary invoice Standards wag ANSE 15. All unless one of the spare-time activity statements indicates a balance amidst the pecuniary write up Standards come on (FASB) and prior draw neares. Select the one that is not a difference. a. The FASB is independent of the AICP A. b. The sizing of the get on is much smaller. c. The FASB has broader consistation. d. The FASB is the primitive wag for the ontogeny of broadly accepted accounting principles. e. Members of the FASB look on a large-time nates. ANSD 16. The history Principles bill of fare issued Opinions between a. 1959-1973 b. 1939-1959 c. 1973-present d. 1966-1976 e. none of the answers are correct ANSA 17. The fiscal accountancy Standards room has issued statements between a. 1960-1973 b. 1939-1959 c. 1973-present d. 1966-1976 e. none of the answers are correct ANSC 18. Accountants face a problem of when to recognize revenue. Which of the adjacent methods of recognizing revenue is not apply in execute? a. point of sale b. point of redact acceptance c. end of production d. receipt of hard interchange e. revenue recognized during production ANSB 19. The organization that has by federal law the righteousness to lard auditing standards is the a. New York Stock Exchange b. earth caller-out account statement solicitude plank c. account statement Principles get along d. monetary business relationship Standards Board . AICPA deputation on account statement Procedure ANSB 20. By law, the setting of accounting standards is the responsibility of the a. AICPA Committee on history Procedure b. New York Stock Exchange c. invoice Principles Board d. Securities and Exchange Commission e. pecuniary Accounting Standards Board ANSD 21. The assumption that allows accountants to accept some inaccuracy, because of incomplete schooling about the incoming, in deputize for to a greater close timely reporting is a. conservatism b. time period c. business entity d. materiality e. realization ANSB 22.Which of the following does not relate to The Public high society Accounting Oversight Board (PCAOB)? a. Two members of the board must be CPAs b. In plus to appointing the louvre members of the PCAOB, the SEC is responsible for the charge and enforcement a uthority over the Board c. The PCAOB consists of five members appointed by the SEC d. The PCAOB is to take on auditing standards e. The PCAOB is to adopt accounting standards ANSE 23. Understating expenses is justified based on a. time period assumption b. conservatism assumption c. materiality assumption d. matching assumption . none of the answers are correct ANSE 24. At the end of the fiscal year, an adjusting instauration is do that increases salaries payable and increases salaries expense. This entry is an application of which accounting principle? a. estimable disclosure b. materiality c. matching d. realization e. historical cost ANSC 25. Accountants provide for inflation using which of the following accounting principles? a. going concern b. time period c. conservatism d. materiality e. none of the answers are correct ANSE 26. Which of these measurement attributes is not menstruationly used in practice? . historical cost b. relevant cost c. current market encourage d. current cost e. present foster ANSB 27. The following selective teaching relate to fleet party for the year stop declination 31, 2008. western fence lizard party uses the accretion basis. gross revenue on credit$250,000 bell of farm animal sell on credit170,000 Collections from customers220,000 Purchase of archive on credit150,000 requital for purchases140,000 interchange expenses (accrual basis)40,000 honorarium for sell expenses45,000 Which of the following amounts represents income for Swift Company for the year ended December 31, 2008? a. $60,000 b. $50,000 c. $40,000 d. $35,000 e. $30,000 ANSC 28. The following selective randomness relate to Rocket Company for the year ended December 31, 2008. Rocket Company uses the cash basis. Sales on credit$180,000 Cost of inventory sold on credit130,000 Collections from customers170,000 Purchase of inventory on credit140,000 Payment for purchases150,000 Selling expenses (accrual basis)20,000 Payment for selling expenses25,0 00 Which of the following amounts represents income for Rocket Company for the year ended December 31, 2008? a. $30,000 b. $5,000 bolshy c. $40,000 . $45,000 e. $50,000 ANSB 29. The following data relate to Gorr Company for the year ended December 31, 2008. 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, 2008? a. $180,000 b. $185,000 c. $190,000 d. $200,000 e. none of the answers are correct ANSC 30. The following data relate to hunt down Company for the year ended December 31, 2008. 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 i nventory 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, 2008? a. $90,000 b. $80,000 c. $70,000 d. $60,000 e. none of the answers are correct ANSD 31. separate than December, the most popular month for fiscal year-end is a. January b. March c. June d. September e. October ANSD TRUE/FALSE 1. In order to determine the economic conquest of a grocery store, we should spot it as separate from the different resources that are owned by this individual. ANST 2. many an opposite(prenominal) an(prenominal) of our present financial statement figures would be misleading if it were not for the going concern assumption. ANST 3. The going concern assumption does not fix the salmagundi of assets and liabilities. ANSF 4.The most stainless way to account for the success or failure of an entity is to accumulate all l egal proceeding from the opening of business until the business in conclusion liquidates. ANST 5. An entity usually cannot slightly account for the profits related to inventory until that inventory is sold in the prescript course of business. ANST 6. To the extent that money does not remain stable, it loses its common utility as the standard for meter financial transactions. ANST 7. A sack in value of money is called inflation. ANST 8. At the time of originally recording a transaction, historical cost besides represents the fair market value.ANST 9. It would always be conservative to value inventory at market. ANSF 10. Accountants normally recognize revenue when cash is stock. ANSF 11. The 1933 and 1934 U. S. federal securities laws intimately gave the Securities and Exchange Commission (SEC) authority and responsibility for the development of generally accepted accounting principles. ANST 12. The narratements of pecuniary Accounting inventions are intended to provide t he pecuniary Accounting Standards Board with a parking area foundation and the basic underlying cerebrate on which to consider the merits of various pick accounting principles. ANST 13.Eventually, the Financial Accounting Standards Board intends to evaluate current principles in terms of the concepts established in the Financial Accounting ideas. ANST 14. Financial Accounting Concepts establish generally accepted accounting principles. ANSF 15. According to the second Financial Accounting Concept, those characteristics of schooling that make it a preferred commodity can be viewed as a hierarchy of qualities, with understandability and gain for decision make of most importance. ANST 16. Performance indicators for nonbusiness organizations are usually formal budgets and donor restrictions.ANST 17. valid inaccuracies of accounting for an entity, short of its complete tone span, are accepted. ANST 18. use the business entity assumption, the financial statements are lively s eparate and distinct from the owners of the entity. ANST 19. The time period assumption indicates that the entity will remain in business for an enigmatic period time. ANSF 20. patness is a pervasive constraint impose upon financial accounting knowledge. ANSF 21. Relevance and reliableness are dickens primary qualities that make accounting information reusable for decision making. ANST 22.Predictive value, feedback value, and timeliness are ingredients needed to image that the information is reliable. ANSF 23. finish helpfulness is a pervasive constraint imposed upon financial accounting information. ANSF 24. Relevance is a property requiring that the information be timely and that it also keep up predictive value or feedback value or both. ANST 25. The SEC has the authority to determine generally accepted accounting principles and to regulate the accounting profession. ANST 26. Some constancy practices lead to accounting reports that do not conform to the general theor y that underlies accounting.ANST 27. All important events that influence the prospects for the entity are recorded and therefore are reflected in the financial statements. ANSF 28. The accrual basis of accounting recognizes revenue when established (realization concept) and expenses when incurred (matching concept). ANST 29. The cash basis recognizes revenue when cash is fork out and expenses when cash is paid. ANST 30. The accountant records scarcely the events that affect the financial position of the entity and that can be reasonably determined in monetary terms. ANST 31.The Sarbanes-Oxley bit has far-reaching consequences for financial reporting and the CPA profession. ANST 32. Among the many responsibilities of the PCAOB is to adopt accounting standards. ANSF 33. For a public familiarity, the SEC requires that a report be filed one-yearly on its internal rig systems. ANST 34. The Sarbanes-Oxley go has had an unnoticeable effect on the relationship between the company and the internal auditor. ANSF 35. reportage under Sarbanes-Oxley revealed that very fewer companies had material weaknesses in their controls and processes. ANSF 36.Private companies are required to report under Sarbanes-Oxley. ANSF 37. Some firms question the costs/benefits of implementing Sarbanes-Oxley. ANST 38. For many companies that use December 31 for the year-end, we cannot express if December 31 was selected because it represents a natural business year or if it was selected to represent a calendar year. ANST 39. Accounting Trends & Techniques is a compilation of data retained by a survey of 600 annual reports to stockholders undertaken for the purpose of analyzing the accounting information discover in such reports. ANST 40.Many companies are on a 51-52 hebdomad fiscal year. ANSF 41. The Sarbanes-Oxley come has materiality implications. ANST 42. sack sites are not very useful when performing analysis. ANSF 43. Accounting standards codification TM reorganizes the ac counting pronouncements into some 90 accounting topics. ANST 44. Accounting standards codification TM addresses U. S. generally accepted accounting principles for nongovernmental entities. ANST PROBLEMS 1. postulate Listed to a lower place are several accounting principles and assumptions. pit the earn of each with the appropriate statement. a. line of descent entitye. Historical costi.Full disclosure b. pass concernf. Conservatismj. Verifiability c. Time periodg. Realizationk. Materiality d. Monetary unith. Consistencyl. Industry practices 1. Some perseverance practices lead to accounting reports that do not conform to the general theory that underlies accounting. 2. Requires the accountant to adhere as closely as possible to verifiable data. 3. Requires the entity to forget the equal treatment to comparable transactions. 4. Directs that the measurement that has the least favorable effect on net income and financial position in the current period be selected. 5. The de cision is made to accept some inaccuracy because of incomplete information about the future in exchange for more timely reporting. 6. Involves the relative size and importance of an item to a firm. 7. A reasonable summarization of financial information is required. 8. Deals with the problem of when to recognize revenue. 9. The primary value that is used for financial statements. 10. Standard of measure for financial statements. 11. The assumption that the entity being accounted for will remain in business for an noncommittal period of time. 12. Assumption that a businesss financial statements are separate and distinct from the personal transactions of the owners. ANS 1. l 2. j 3. h 4. f 5. c 6. k 7. i 8. g 9. e 10. d 11. b 12. a 2. compulsory State the accounting principle or assumption that is most applicable a. The company uses the same accounting principle from period to period. b. Financial statements are prepared periodically. c. Subscriptions paid in advance are rec orded as unearned subscription income. d. All significant financial transactions are reported. e. Personal transactions of the stockholders are not recorded on the companys financial statements. f. Land is recorded at $10,000, which was the amount paid. Current value of the push down is $25,000. g. The accountants determine that the company is in danger of going bankrupt and therefore retract to certify the statements as prepared concord to generally accepted accounting principles. h. The company loses a major customer and does not record a loss. ANS a. consistency b. time period c. realization d. full disclosure e. business entity f. historical cost g. going concern h. transaction approach . Listed below are ten be elements that are directly related to measuring performance and status of an enterprisingness fit to SFAC no(prenominal) 6, Elements of Financial didacticss. a. Assetsf. Comprehensive income b. Liabilitiesg. Revenues c. palenessh. Expenses d. Investments by ownersi. Gains e. Distribution to ownersj. Losses Required jib the letter with the appropriate definition. 1. presumable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide serve to some other entities in the future as a result of knightly transactions or events. 2. Increases in the righteousness of a particular business first step resulting from transfers to the enterprise from other entities of something of value to obtain or increase ownership interests (or blondness) in it. Assets are most commonly received as investments by owners, but that which is received may also include services or satisfaction or change of liabilities of the enterprise. 3. A decrease in the beauteousness of a particular business enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners.Decreases ownership interest (or equity) in an enterprise. 4. Decreases in the equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period, except those that result from expenses or distributions to owners. 5. Outflows or other consumption or using up of assets or incurrences of liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities that onstitute the entitys ongoing major or profound operations. 6. The change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners. 7. presumptive future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. 8. The residual interest in the assets of an entity af terwards deducting its liabilities. 9. Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or engaging in other activities that organize the entitys ongoing major or central operations. 10. Increases in the equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances from revenues or investments by owners. ANS 1. b 2. d 3. e 4. j 5. h 6. f 7. a 8. c 9. g 10. i 4.Listed below are several qualitative characteristics. a. understandability b. usefulness for decision making c. relevance d. reliability e. predictive f. feedback value g. timely h. verifiable i. representational obedience j. neutrality k. comparability l. materiality m. benefits of information should exceed its cost Required Match the letter (or letters) that goes with each statement. 1. Two constraints include in the hiera rchy. 2. For this quality, the information needs to have predictive and feedback value and be timely. 3. These are the qualitative characteristics that are viewed as having the most importance. 4. SFAC nary(prenominal) 2 indicates that to be reliable, the information needs to have these characteristics. 5. Interacts with relevance and reliability to contribute to the usefulness of information. 6. Two primary qualities that make accounting information useful for decision making. 7. For this quality, the information must be verifiable, subject to representational faithfulness, and neutral. 8. SFAC zero(prenominal) 2 indicates that to be relevant, the information needs to have these characteristics. ANS 1. l, m 2. c 3. a, b 4. h, i, j 5. k 6. c, d 7. d 8. e, f, g 5. Listed below are ten phrases with the appropriate abbreviation. a. Generally Accepted Accounting Principles (GAAP) b. Securities and Exchange Commission (SEC) c. American bring in of Certified Public Accountants ( AICPA) d. Accounting Principles Board (APB) e. Financial Accounting Standards Board (FASB) f. Statements of Financial Standards (SFAS) g. Discussion Memorandum (DM) h. Statements of Position (SOP) i. emerge Issues Task Force (EITF) j. Financial Reporting Releases (FRRs) k. The Public Company Accounting Oversight Board (PCAOB) Required Match the letter with the appropriate definition. 1. Issued by the SEC and give the SECs official position on matters relating to financial reports. 2. Accounting principles that have substantial influential support. 3. A task force of representatives from the accounting profession created by the FASB to deal with appear issues of financial reporting. 4. Created by the Securities Exchange Act of 1934. 5. Issued by the Accounting Standards Division of the AICPA to influence the development of accounting standards. 6. A sea captain accounting organization whose members are assured public accountants (CPAs). 7. Issued official opinion on account ing standards between 1959-1973. 8. This board issues four-spot types of pronouncements (1) Statements of Financial Accounting Standards (SFAS), (2) Interpretations, (3) Technical Bulletins, and (4) Statements of Financial Accounting Concepts (SFAC). 9. Presents all known facts and points of view on a topic issued by the FASB. 10. Issued by the Financial Accounting Standards Board (FASB) and establish GAAP for specific accounting issues. 11. Responsible for adopting auditing standards. ANS 1. j 2. a 3. i 4. b 5. h 6. c 7. d 8. e 9. g 10. f 11. k 6. Listed below are Concept Statements. a. Statement of Financial Accounting Concepts No. 1 b. Statement of Financial Accounting Concepts No. 2 c. Statement of Financial Accounting Concepts No. 3 d. Statement of Financial Accounting Concepts No. 4 e. Statement of Financial Accounting Concepts No. 5 f. Statement of Financial Accounting Concepts No. 6 g. Statement of Financial Accounting Concepts No. 7 RequiredMatch the letter that goes w ith each Concept Statement title. 1. Objectives of Financial Reporting by nonbusiness 2. Elements of Financial Statements of Business Enterprises 3. Qualitative Characteristics of Accounting Information 4. Elements of Financial Statements (a replacement of No. 3) 5. Objective of Financial Reporting by Business Enterprises 6. Recognition and Measurement in Financial Statements of Business Enterprise 7. victimization Cash Flow Information in Accounting Measurements ANS 1. d 2. c 3. b 4. f 5. a 6. e 7. g