Question 1

If a company is facing a bankruptcy from which it is quite doubtful that the firm may ever recover, which underlying assumption would not be valid?

Accepted Answer

A)  periodicity assumption 
B)  economic entity concept 
C)  monetary unit assumption 
D)  going concern concept 
A)  periodicity assumption 
B)  economic entity concept 
C)  monetary unit assumption 
D)  going concern concept

Question 2

A Fortune-500 company purchases a new clock for $35. The clock is expected to last for five years. According to the materiality threshold, this would be treated as an ________ in the accounting records.

Accepted Answer

A)  asset 
B)  expense 
C)  equipment 
D)  none of the above 
A)  asset 
B)  expense 
C)  equipment 
D)  none of the above

Question 3

On May 2, Johnson's Landscaping LLC paid $4,700 for repairs made to equipment during April. During May fuel costs for its machinery were $5,800 to be paid in June. Johnson's lawn mowers were depreciated for May by an amount of $1,000 using the straight-line method. What would be the company's equipment-related expenses for May under cash accounting and what would the expenses be under the accrual basis for May?

Accepted Answer

A)  $10,500 under both cash and accrual basis 
B)  $4,700 under cash basis; $5,800 under accrual basis 
C)  $4,700 under the cash basis; $6,800 under the accrual basis 
D)  $4,700 under the cash basis; $10,500 under accrual basis 
A)  $10,500 under both cash and accrual basis 
B)  $4,700 under cash basis; $5,800 under accrual basis 
C)  $4,700 under the cash basis; $6,800 under the accrual basis 
D)  $4,700 under the cash basis; $10,500 under accrual basis

Question 4

Do you agree or disagree with the following statement: "Financial statements that are free from error are accurate." Explain your answer.

Accepted Answer

A financial statement that is free from

Question 5

According to IFRS, there are two types of capital maintenance adjustments: financial and physical.

Accepted Answer

A) True 
 B)False

Question 6

Purrfect Pets, Inc. provides animal daycare for $31 per day. Customers buy three month packages, which provide 15 days of care per month. In January, they received cash payments from 13 customers. For the month of February, they will recognize ________ of revenue under the cash basis, and ________ of revenue under the accrual basis.

Accepted Answer

A)  $0; $403 
B)  $6,045; $6,045 
C)  $403; $403 
D)  $0; $6,045 
A)  $0; $403 
B)  $6,045; $6,045 
C)  $403; $403 
D)  $0; $6,045

Question 7

Materiality cannot always be expressed quantitatively and sometimes requires judgment.

Accepted Answer

A) True 
 B)False

Question 8

The ________ stipulates that an entity measure and report its economic activities in dollars (or some other monetary unit).

Accepted Answer

A)  monetary unit assumption 
B)  business entity concept 
C)  U.S. banking assumption 
D)  going concern concept 
A)  monetary unit assumption 
B)  business entity concept 
C)  U.S. banking assumption 
D)  going concern concept

Question 9

According to U.S. GAAP, changes in equity that result from the company's central business operations are ________.

Accepted Answer

A)  revenues and gains 
B)  gains and losses 
C)  revenues and expenses 
D)  losses and expenses 
A)  revenues and gains 
B)  gains and losses 
C)  revenues and expenses 
D)  losses and expenses

Question 10

The two types of qualitative characteristics are fundamental characteristics and elective characteristics.

Accepted Answer

A) True 
 B)False

Question 11

The IASB and FASB share the goal that standards will be based on an agreed set of fundamental ________.

Accepted Answer

A)  practices 
B)  constraints 
C)  standards 
D)  concepts 
A)  practices 
B)  constraints 
C)  standards 
D)  concepts

Question 12

The conceptual framework indicates that the primary users of financial information are investors, lenders, and other creditors who cannot demand information from the entity.

Accepted Answer

A) True 
 B)False

Question 13

Shadow's Cleaning Service provides weekly cleaning services for $48 per week. In January, they collected payments from 57 customers for 3 months (12 weeks) of service each. For the month of February, they will recognize ________ of revenue under the cash basis, and ________ under the accrual basis.

Accepted Answer

A)  $0; $10,944 
B)  $10,944; $10,944 
C)  $10,944; $32,832 
D)  $32,832; $10,944 
A)  $0; $10,944 
B)  $10,944; $10,944 
C)  $10,944; $32,832 
D)  $32,832; $10,944

Question 14

Under U.S. GAAP, what is a condition for revenue to be realized or realizable?

Accepted Answer

A)  Cash or fixed claims to cash are received. 
B)  Contracts are written as per negotiations. 
C)  The company exchanges a good or service. 
D)  Both A & C 
A)  Cash or fixed claims to cash are received. 
B)  Contracts are written as per negotiations. 
C)  The company exchanges a good or service. 
D)  Both A & C

Question 15

What are the attributes of relevant information?

Accepted Answer

A)  predictive value, timeliness, free from error 
B)  materiality, predictive value, and confirmatory value 
C)  comparability, verifiability, and predictive value 
D)  complete, neutral, free from error 
A)  predictive value, timeliness, free from error 
B)  materiality, predictive value, and confirmatory value 
C)  comparability, verifiability, and predictive value 
D)  complete, neutral, free from error

Question 16

Which of the following is a point-in-time element?

Accepted Answer

A)  Fees Earned 
B)  Notes Payable 
C)  Cost of Goods Sold 
D)  Dividends 
A)  Fees Earned 
B)  Notes Payable 
C)  Cost of Goods Sold 
D)  Dividends

Question 17

The role of qualitative characteristics in the conceptual framework is to increase the decision usefulness of financial information.

Accepted Answer

A) True 
 B)False

Question 18

Information that is not material is never relevant.

Accepted Answer

A) True 
 B)False

Question 19

________ elements appear on the balance sheet.

Accepted Answer

A)  Period-of-time 
B)  Point-in-time 
C)  Piece-of-time 
D)  Phase-in-time 
A)  Period-of-time 
B)  Point-in-time 
C)  Piece-of-time 
D)  Phase-in-time

Question 20

Discuss how standard setters use the conceptual framework in developing new standards.

Accepted Answer

Standard setters will:
- Determine if th

Exam 2: Financial Reporting Theory

If a company is facing a bankruptcy from which it is quite doubtful that the firm may ever recover, which underlying assumption would not be valid?

A Fortune-500 company purchases a new clock for $35. The clock is expected to last for five years. According to the materiality threshold, this would be treated as an ________ in the accounting records.

Do you agree or disagree with the following statement: "Financial statements that are free from error are accurate." Explain your answer.

According to IFRS, there are two types of capital maintenance adjustments: financial and physical.

Materiality cannot always be expressed quantitatively and sometimes requires judgment.

The ________ stipulates that an entity measure and report its economic activities in dollars (or some other monetary unit).

According to U.S. GAAP, changes in equity that result from the company's central business operations are ________.

The two types of qualitative characteristics are fundamental characteristics and elective characteristics.

The IASB and FASB share the goal that standards will be based on an agreed set of fundamental ________.

The conceptual framework indicates that the primary users of financial information are investors, lenders, and other creditors who cannot demand information from the entity.

Shadow's Cleaning Service provides weekly cleaning services for $48 per week. In January, they collected payments from 57 customers for 3 months (12 weeks) of service each. For the month of February, they will recognize ________ of revenue under the cash basis, and ________ under the accrual basis.

Under U.S. GAAP, what is a condition for revenue to be realized or realizable?

What are the attributes of relevant information?

Which of the following is a point-in-time element?

The role of qualitative characteristics in the conceptual framework is to increase the decision usefulness of financial information.

Information that is not material is never relevant.

________ elements appear on the balance sheet.

Discuss how standard setters use the conceptual framework in developing new standards.

The Financial Reporting Environment

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Shadow's Cleaning Service provides weekly cleaning services for $48 per week. In January, they collected payments from 57 customers for 3 months (12 weeks) of service each. For the month of February, they will recognize of revenue under the cash basis, and under the accrual basis.