Exam 1: Introduction to Financial Reporting

Some firms question the costs/benefits of implementing Sarbanes-Oxley.

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.

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

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

The Sarbanes-Oxley Act has materiality implications.

Accountants face a problem of when to recognize revenue.Which of the following methods of recognizing revenue is not used in practice?

To the extent that money does not remain stable, it loses its usefulness as the standard for measuring financial transactions.

For a public company, the SEC requires that a report be filed annually on its internal control systems.

The assumption that enables us to prepare periodic statements between the time that a business commences operations and the time it goes out of business is:

Accounting standards codification ^TM reorganizes the accounting pronouncements into approximately 90 accounting topics.

The accounting principle that assumes that inflation will not take place or will be immaterial is:

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

The 1933 and 1934 U.S.federal securities laws virtually gave the Securities and Exchange Commission (SEC) authority and responsibility for the development of generally accepted accounting principles.

Using the business entity assumption, the financial statements are prepared separate and distinct from the owners of the entity.

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?

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?

The realization principle leads accountants to usually recognize revenue at:

The time period assumption indicates that the entity will remain in business for an indefinite period time.

Eventually, the Financial Accounting Standards Board intends to evaluate current principles in terms of the concepts established in the Financial Accounting Concepts.

Reasonable inaccuracies of accounting for an entity, short of its complete life span, are accepted.