Question 1

Accounting traditionally has been influenced by conservatism because of the:

Accepted Answer

A)  probability of undetected errors in the financial statements. 
B)  difficulty in measuring net income on the accrual basis. 
C)  inherent uncertainties of many accounting measurements. 
D)  difficulty in making certain calculations. 
E)  large number of transactions recorded in any one period. 
A)  probability of undetected errors in the financial statements. 
B)  difficulty in measuring net income on the accrual basis. 
C)  inherent uncertainties of many accounting measurements. 
D)  difficulty in making certain calculations. 
E)  large number of transactions recorded in any one period.

Question 2

The nominal dollar capital maintenance approach is the mostly widely used application of the stable currency assumption in North American practice.

Accepted Answer

A) True 
 B)False

Question 3

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 4

A corporation reports the sale of some of its shares to a shareholder in its financial statements, and the shareholder reports the same transaction as an investment. Therefore,

Accepted Answer

A)  the revenue recognition principle has been violated. 
B)  the separate entity assumption has been violated. 
C)  the double entry accounting concept has been violated. 
D)  no accounting concept has been violated. 
A)  the revenue recognition principle has been violated. 
B)  the separate entity assumption has been violated. 
C)  the double entry accounting concept has been violated. 
D)  no accounting concept has been violated.

Question 5

Adjusting entries are needed because an entity:

Accepted Answer

A)  has earned revenue during the period by selling products from its central operations. 
B)  has expenses. 
C)  uses the accrual basis of accounting. 
D)  uses the cash basis of accounting rather than the accrual basis. 
A)  has earned revenue during the period by selling products from its central operations. 
B)  has expenses. 
C)  uses the accrual basis of accounting. 
D)  uses the cash basis of accounting rather than the accrual basis.

Question 6

Information is reliable when it is in agreement with the actual underlying transactions and events, the agreement is capable of independent verification and the information is reasonably free from error and bias.

Accepted Answer

A) True 
 B)False

Question 7

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 8

A firm's accounting policy is to immediately expense the cost of metal wastebaskets it purchases for use by its employees at their desks. The total cost of wastebaskets in any year is $1,000 and the firm has $6 billion in total assets. The firm expects the wastebaskets to last indefinitely. The firm

Accepted Answer

A)  Is violating GAAP 
B)  Is invoking the materiality constraint 
C)  Is invoking the conservatism constraint 
D)  Is violating the relevance principle 
E)  None of these answers are correct. 
A)  Is violating GAAP 
B)  Is invoking the materiality constraint 
C)  Is invoking the conservatism constraint 
D)  Is violating the relevance principle 
E)  None of these answers are correct.

Question 9

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 constant dollar financial capital maintenance approach is:

Accepted Answer

A)  $10,000 
B)  $4,000 
C)  $5,000 
D)  $9,000 
A)  $10,000 
B)  $4,000 
C)  $5,000 
D)  $9,000

Question 10

Neutrality is an ingredient of the qualitative criteria of $\begin{array}{|l|l|l|}
\hline &\text { Relevance}&\text{reliabiliy } \
\hline 1&\text { Yes } & \text { Yes } \
\hline 2&\text { No } & \text { Yes } \
\hline 3&\text { Yes } & \text { No } \
\hline 4&\text { No } & \text { No } \
\hline
\end{array}$

Accepted Answer

A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4 
A)  Choice 1 
B)  Choice 2 
C)  Choice 3 
D)  Choice 4

Question 11

The use of deferrals and accruals in accounting relates to the Time Period Assumption.

Accepted Answer

A) True 
 B)False

Question 12

The organization created to develop accounting standards in Canada, the AcSB, is LEAST concerned with:

Accepted Answer

A)  reported cash flows. 
B)  reported earnings. 
C)  reported comparability of results. 
D)  reporting financial position. 
E)  all of these answers are correct. 
A)  reported cash flows. 
B)  reported earnings. 
C)  reported comparability of results. 
D)  reporting financial position. 
E)  all of these answers are correct.

Question 13

The information provided by financial reporting pertains to:

Accepted Answer

A)  individual business enterprises and the economy as a whole, rather than to industries or to members of society as consumers. 
B)  individual business enterprises, industries and the economy as a whole, rather than to members of society as consumers. 
C)  individual business enterprises, rather than to industries of the economy as a whole or to members of society as consumers. 
D)  individual business enterprises and industries rather than to the economy as a whole or to members of society as consumers. 
A)  individual business enterprises and the economy as a whole, rather than to industries or to members of society as consumers. 
B)  individual business enterprises, industries and the economy as a whole, rather than to members of society as consumers. 
C)  individual business enterprises, rather than to industries of the economy as a whole or to members of society as consumers. 
D)  individual business enterprises and industries rather than to the economy as a whole or to members of society as consumers.

Question 14

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 15

Which of the following accounting concepts states that before a transaction is recorded, sufficient evidence must exist to allow two or more knowledgeable individuals to reach essentially the same conclusion about the transaction?

Accepted Answer

A)  Continuity assumption 
B)  Separate entity assumption 
C)  Cost principle 
D)  Reliability quality 
E)  Materiality constraint 
A)  Continuity assumption 
B)  Separate entity assumption 
C)  Cost principle 
D)  Reliability quality 
E)  Materiality constraint

Question 16

Predictive value is a component of representational faithfulness.

Accepted Answer

A) True 
 B)False

Question 17

The matching concept is the name applied to the process of associating expenses with revenues.

Accepted Answer

A) True 
 B)False

Question 18

Recording periodic depreciation on assets such as buildings or machinery is an application of the:

Accepted Answer

A)  cost principle. 
B)  materiality constraint. 
C)  unit-of-measure assumption. 
D)  matching principle. 
E)  conservatism constraint. 
A)  cost principle. 
B)  materiality constraint. 
C)  unit-of-measure assumption. 
D)  matching principle. 
E)  conservatism constraint.

Question 19

Which of the following is NOT a time when revenue may be recognized?

Accepted Answer

A)  At time of sale of goods. 
B)  At receipt of cash from sale of goods. 
C)  During production of goods. 
D)  Sale of Property of a manufacturing company. 
A)  At time of sale of goods. 
B)  At receipt of cash from sale of goods. 
C)  During production of goods. 
D)  Sale of Property of a manufacturing company.

Question 20

Comparability is sometimes sacrificed for consistency.

Accepted Answer

A) True 
 B)False

Accounting traditionally has been influenced by conservatism because of the:

The nominal dollar capital maintenance approach is the mostly widely used application of the stable currency assumption in North American practice.

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

A corporation reports the sale of some of its shares to a shareholder in its financial statements, and the shareholder reports the same transaction as an investment. Therefore,

Adjusting entries are needed because an entity:

Information is reliable when it is in agreement with the actual underlying transactions and events, the agreement is capable of independent verification and the information is reasonably free from error and bias.

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

A firm's accounting policy is to immediately expense the cost of metal wastebaskets it purchases for use by its employees at their desks. The total cost of wastebaskets in any year is $1,000 and the firm has $6 billion in total assets. The firm expects the wastebaskets to last indefinitely. The firm

Neutrality is an ingredient of the qualitative criteria of Relevance reliabiliy 1 Yes Yes 2 No Yes 3 Yes No 4 No No

The use of deferrals and accruals in accounting relates to the Time Period Assumption.

The organization created to develop accounting standards in Canada, the AcSB, is LEAST concerned with:

The information provided by financial reporting pertains to:

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 accounting concepts states that before a transaction is recorded, sufficient evidence must exist to allow two or more knowledgeable individuals to reach essentially the same conclusion about the transaction?

Predictive value is a component of representational faithfulness.

The matching concept is the name applied to the process of associating expenses with revenues.

Recording periodic depreciation on assets such as buildings or machinery is an application of the:

Which of the following is NOT a time when revenue may be recognized?

Comparability is sometimes sacrificed for consistency.

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

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 2: Accounting Judgements

Accounting traditionally has been influenced by conservatism because of the:

The nominal dollar capital maintenance approach is the mostly widely used application of the stable currency assumption in North American practice.

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

A corporation reports the sale of some of its shares to a shareholder in its financial statements, and the shareholder reports the same transaction as an investment. Therefore,

Adjusting entries are needed because an entity:

Information is reliable when it is in agreement with the actual underlying transactions and events, the agreement is capable of independent verification and the information is reasonably free from error and bias.

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

Neutrality is an ingredient of the qualitative criteria of Relevance reliabiliy 1 Yes Yes 2 No Yes 3 Yes No 4 No No

The use of deferrals and accruals in accounting relates to the Time Period Assumption.

The organization created to develop accounting standards in Canada, the AcSB, is LEAST concerned with:

The information provided by financial reporting pertains to:

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 accounting concepts states that before a transaction is recorded, sufficient evidence must exist to allow two or more knowledgeable individuals to reach essentially the same conclusion about the transaction?

Predictive value is a component of representational faithfulness.

The matching concept is the name applied to the process of associating expenses with revenues.

Recording periodic depreciation on assets such as buildings or machinery is an application of the:

Which of the following is NOT a time when revenue may be recognized?

Comparability is sometimes sacrificed for consistency.

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

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters