Question 1

Certain costs of doing business are capitalized when incurred and then amortized over subsequent accounting periods to:

Accepted Answer

A) aid management in decision-making. 
B) match the costs incurred with revenues earned. 
C) conform to the conservatism constraint. 
D) conform to the comparability characteristic. 
E) reduce the income tax. 
A) aid management in decision-making. 
B) match the costs incurred with revenues earned. 
C) conform to the conservatism constraint. 
D) conform to the comparability characteristic. 
E) reduce the income tax.

Question 2

Accounting should provide information that is useful in assessing the "value" of an entity; however,accounting information does not necessarily report the actual "value" of the entity.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following accounting concepts best justifies the use of accruals and deferrals?

Accepted Answer

A) Cost/benefit constraint 
B) Unit-of-measure assumption 
C) Continuity assumption 
D) Materiality constraint 
A) Cost/benefit constraint 
B) Unit-of-measure assumption 
C) Continuity assumption 
D) Materiality constraint

Question 4

Which of the following distinguishes the personal transactions of business owners from business transactions?

Accepted Answer

A) Unit-of-measure assumption 
B) Full-disclosure principle 
C) Materiality constraint 
D) Separate entity assumption 
A) Unit-of-measure assumption 
B) Full-disclosure principle 
C) Materiality constraint 
D) Separate entity assumption

Question 5

Accounting information is considered to be relevant when it

Accepted Answer

A) can be depended on to represent the economic conditions and events that it is intended to represent. 
B) is capable of making a difference to a decision-maker. 
C) is understandable by reasonably informed users of accounting information. 
D) is verifiable and neutral. 
A) can be depended on to represent the economic conditions and events that it is intended to represent. 
B) is capable of making a difference to a decision-maker. 
C) is understandable by reasonably informed users of accounting information. 
D) is verifiable and neutral.

Question 6

The nominal dollar capital maintenance approach implicitly recognizes that inflation is under control,and thus ignores inflation in the preparation of financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following relates to both relevance and reliability?

Accepted Answer

A) Cost-benefit constraint. 
B) Predictive value. 
C) Verifiability. 
D) Representational faithfulness. 
E) None of these answers are correct. 
A) Cost-benefit constraint. 
B) Predictive value. 
C) Verifiability. 
D) Representational faithfulness. 
E) None of these answers are correct.

Question 8

Materiality is a component of representational faithfulness under IFRS.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following qualities does the cost principle primarily support?

Accepted Answer

A) Predictive value 
B) Conservatism 
C) Verifiability 
D) Timeliness 
A) Predictive value 
B) Conservatism 
C) Verifiability 
D) Timeliness

Question 10

When a corporation buys a portion of its own common shares,the recording must conform to the:

Accepted Answer

A) matching principle. 
B) cost principle. 
C) revenue recognition principle. 
D) accrual principle. 
A) matching principle. 
B) cost principle. 
C) revenue recognition principle. 
D) accrual principle.

Question 11

The list price of a new van was $30,000 at a local car dealership.However,a customer convinced the dealer to sell the van for $25,000 (the van had cost the dealer $20,000 one year earlier).The van would cost the dealer $24,000 today.Inflation is 5% per year.The amount of profit that would be recognized by the dealer as a result of the sale using the physical capital maintenance approach is:

Accepted Answer

A) $1,000 
B) $2,500 
C) $5,000 
D) $6,000 
A) $1,000 
B) $2,500 
C) $5,000 
D) $6,000

Question 12

A corporation made the following entries: $\begin{array}{lll}
\text {A) Prepaid insurance }&900\
\text { Cash}&&900\
\text {B) Depreciation expense  }&10,000\
\text {Accumulated depreciation }&&10,000\
\text {C)  Wages payable }&3,000\
\text {Cash }&&3,000\
\text { D) Inventory of Merchandise}&4,000\
\text { Accounts payable}&&4,000\
\end{array}$ Which entry must have been made as a direct result of the matching principle?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 13

Recognition requires the measurement of an item for inclusion in the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Under ASPE (Private Entity GAAP),which of the following is an ingredient of reliability?

Accepted Answer

A) Predictive value 
B) Materiality 
C) Understandability 
D) Verifiability 
A) Predictive value 
B) Materiality 
C) Understandability 
D) Verifiability

Question 15

Preparation of financial statements with adequate notes is primarily based on the:

Accepted Answer

A) separate entity assumption. 
B) full-disclosure principle. 
C) cost principle. 
D) cost/benefit constraint. 
E) reliability quality. 
A) separate entity assumption. 
B) full-disclosure principle. 
C) cost principle. 
D) cost/benefit constraint. 
E) reliability quality.

Question 16

The use of deferrals and accruals is a direct result of the:

Accepted Answer

A) unit-of-measure assumption. 
B) time period assumption. 
C) cost/benefit constraint. 
D) separate entity assumption. 
A) unit-of-measure assumption. 
B) time period assumption. 
C) cost/benefit constraint. 
D) separate entity assumption.

Question 17

The understandability concept states that the information contained in financial statements should be understandable to persons who have a reasonable understanding of business and economic conditions and are willing to study the information with reasonable diligence.

Accepted Answer

A) True 
 B)False

Question 18

Under the productive capacity capital maintenance approach,a profit is assumed to have been earned only if enough financial capital has been recovered by the end of the year to enable the business to operate at the same level as at the beginning of the year.

Accepted Answer

A) True 
 B)False

Question 19

The going concern or continuity assumption is critical to financial accounting.The assumption

Accepted Answer

A) Is always maintained for all firms for all years. 
B) Supports the use of historical cost valuation for assets rather than market values. 
C) Means that a corporation has a definite ending date. 
D) Requires that we immediately expense prepaid accounts because they do not represent a future cash inflow. 
A) Is always maintained for all firms for all years. 
B) Supports the use of historical cost valuation for assets rather than market values. 
C) Means that a corporation has a definite ending date. 
D) Requires that we immediately expense prepaid accounts because they do not represent a future cash inflow.

Question 20

The goal of maximizing shareholder wealth is consistent with the entity concept.

Accepted Answer

A) True 
 B)False

Certain costs of doing business are capitalized when incurred and then amortized over subsequent accounting periods to:

Accounting should provide information that is useful in assessing the "value" of an entity; however,accounting information does not necessarily report the actual "value" of the entity.

Which of the following accounting concepts best justifies the use of accruals and deferrals?

Which of the following distinguishes the personal transactions of business owners from business transactions?

Accounting information is considered to be relevant when it

The nominal dollar capital maintenance approach implicitly recognizes that inflation is under control,and thus ignores inflation in the preparation of financial statements.

Which of the following relates to both relevance and reliability?

Materiality is a component of representational faithfulness under IFRS.

Which of the following qualities does the cost principle primarily support?

When a corporation buys a portion of its own common shares,the recording must conform to the:

Recognition requires the measurement of an item for inclusion in the financial statements.

Under ASPE (Private Entity GAAP),which of the following is an ingredient of reliability?

Preparation of financial statements with adequate notes is primarily based on the:

The use of deferrals and accruals is a direct result of the:

The understandability concept states that the information contained in financial statements should be understandable to persons who have a reasonable understanding of business and economic conditions and are willing to study the information with reasonable diligence.

Under the productive capacity capital maintenance approach,a profit is assumed to have been earned only if enough financial capital has been recovered by the end of the year to enable the business to operate at the same level as at the beginning of the year.

The going concern or continuity assumption is critical to financial accounting.The assumption

The goal of maximizing shareholder wealth is consistent with the entity concept.

The Framework for Financial Reporting

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Financial Instruments: Investments in Debt and Equity Securities

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Exam 2: Accounting Judgements

Certain costs of doing business are capitalized when incurred and then amortized over subsequent accounting periods to:

Accounting should provide information that is useful in assessing the "value" of an entity; however,accounting information does not necessarily report the actual "value" of the entity.

Which of the following accounting concepts best justifies the use of accruals and deferrals?

Which of the following distinguishes the personal transactions of business owners from business transactions?

Accounting information is considered to be relevant when it

The nominal dollar capital maintenance approach implicitly recognizes that inflation is under control,and thus ignores inflation in the preparation of financial statements.

Which of the following relates to both relevance and reliability?

Materiality is a component of representational faithfulness under IFRS.

Which of the following qualities does the cost principle primarily support?

When a corporation buys a portion of its own common shares,the recording must conform to the:

Recognition requires the measurement of an item for inclusion in the financial statements.

Under ASPE (Private Entity GAAP),which of the following is an ingredient of reliability?

Preparation of financial statements with adequate notes is primarily based on the:

The use of deferrals and accruals is a direct result of the:

The understandability concept states that the information contained in financial statements should be understandable to persons who have a reasonable understanding of business and economic conditions and are willing to study the information with reasonable diligence.

Under the productive capacity capital maintenance approach,a profit is assumed to have been earned only if enough financial capital has been recovered by the end of the year to enable the business to operate at the same level as at the beginning of the year.

The going concern or continuity assumption is critical to financial accounting.The assumption

The goal of maximizing shareholder wealth is consistent with the entity concept.

The Framework for Financial Reporting

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Depreciation,Amortization,and Impairment

Financial Instruments: Investments in Debt and Equity Securities

Filters