Ch1 Analysis

CHAPTER 1 entre TO FINANCIAL REPORTING MULTIPLE CHOICE 1. Charging off equipment that make up less(prenominal) than $20 would be an example of the screening of a. personnel casualty business b. cost c. matching d. physicalness e. identification autonomic nervous systemD 2. The going pertain given a. is applicable to all monetary statements b. primarily involves ut most(prenominal)ic income touchstone c. allows for the statements to be prepargond under slackly put oned story dogmas d. requires that explanation system procedures be the same from finish to boundary e. no(prenominal) of the answers be ameliorate autonomic nervous systemC 3.Understating assets and grosss is justified found on a. realization boldness b. matching c. consistency d. realization e. none of the answers ar squ are up autonomic nervous systemE 4. The sup function that enables us to prepare periodic statements mingled with the era that a business commences operations and the cartridg e holder it goes out of business is a. while period b. business entity c. historical cost d. execution e. none of the answers are correct autonomic nervous systemA 5. Valuing assets at their liquidation cheers is non consistent with a. conservatism b. corporality c. going concern d. sequence period . none of the answers are correct autonomic nervous systemC 6. The business being bust and distinct from the owners is an integral part of the a. time period precondition b. going concern assumption c. business entity assumption d. realization assumption e. none of the answers are correct autonomic nervous systemC 7. The principle that assumes the indorser of the fiscal statements is non interested in the liquidation fosters is a. conservatism b. matching c. time period d. realization e. none of the answers are correct autonomic nervous systemE 8. An accounting period that ends when operations are at a low ebb is a. a calendar form b. a fiscal year c. the natural business ye ar d. an operating year e. none of the answers are correct autonomic nervous systemC 9. The accounting principle that assumes that inflation depart non take place or will be immaterial is a. monetary unit b. historical cost c. realization d. going concern e. none of the answers are correct ANSA 10. Valuing inventory at the lower of cost or market is an application of the a. time period assumption b. realization principle c. going concern principle d. conservatism principle e. none of the answers are correct ANSD 11.The realization principle leads accountants to normally recognize revenue at a. the end of turnout b. during production c. the receipt of hard currency d. the point of barter e. none of the answers are correct ANSD 12. The comment that items that are not material may be preserve in the fiscal statements in the most economical and expedient manner likely is illustration of a. matching b. conservatism c. realization d. corporality 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 concern c. consistency d. corporeality e. none of the answers are correct ANSA 14. The most world-shaking current source of primarily current accounting principles is the a. New York comport Exchange b. news report Principles get on c. write up Research Studies d. AIcertified public accountant committee on Accounting mathematical operation e. monetary Accounting Standards display panel ANSE 15. exclusively but one of the spare-time activity statements indicates a difference between the financial Accounting Standards circuit board (FASB) and prior approaches. Select the one that is not a difference. a. The FASB is independent of the AICPA. b. The size of the jump on is much smaller. c. The FASB has broader re grantation. d. The FASB is the primary election board for the development of world(a)ly accepted accoun ting principles. e. Members of the FASB serve on a wide of the mark-time basis. ANSD 16. The Accounting Principles Board 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 financial Accounting Standards Board 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 causa a problem of when to recognize revenue. Which of the avocation methods of recognizing revenue is not apply in normal? a. point of sale b. point of order acceptation c. end of production d. receipt of cash e. revenue recognized during production ANSB 19. The constitution that has by national law the province to adopt auditing standards is the a. New York Stock Exchange b. exoteric Company Accounting Oversight Board c. Accounting Principles Board d. monetary Accounting Standards Board . AICPA Committee on Accounting Procedure ANSB 20. By law, the setting of accounting standards is the responsibility of the a. AICPA Committee on Accounting Procedure b. New York Stock Exchange c. Accounting Principles Board d. Securities and Exchange armorial bearing e. monetary Accounting Standards Board ANSD 21. The assumption that allows accountants to accept near inaccuracy, because of in staring(a) data about the future, in exchange for much punctual 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 national Company Accounting Oversight Board (PCAOB)? a. twain members of the board must be CPAs b. In addition to appointing the five members of the PCAOB, the secondment is responsible for the supervision and enforcement authority over the Board c. The PCAOB consists of five members appointed by the SEC d. The PCAOB is to adopt auditing standards e. The PCAOB is to adopt accounting standards ANSE 23. Understating expenses is justified b ased 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 entry is made that increases salaries collectible and increases salaries expense. This entry is an application of which accounting principle? a. full disclosure b. materiality c. matching d. realization e. historical cost ANSC 25. Accountants get out 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 currently used in practice? . historical cost b. relevant cost c. current market value d. current cost e. present value ANSB 27. The following data relate to quick Company for the year end celestial latitude 31, 2008. Swift Company uses the accrual basis. Sales on credit$250,000 live of inventory interchange on credit170,00 0 Collections from customers220,000 Purchase of inventory on credit150,000 Payment for purchases140,000 exchange expenses (accrual basis)40,000 Payment for selling expenses45,000 Which of the following amounts represents income for Swift Company for the year ended celestial latitude 31, 2008? a. $60,000 b. $50,000 c. $40,000 d. $35,000 e. $30,000 ANSC 28. The following data relate to roquette Company for the year ended declination 31, 2008. Rocket Company uses the cash basis. Sales on credit$180,000 price of inventory sold on credit130,000 Collections from customers170,000 Purchase of inventory on credit140,000 Payment for purchases150,000 sell expenses (accrual basis)20,000 Payment for selling expenses25,000 Which of the following amounts represents income for Rocket Company for the year ended celestial latitude 31, 2008? a. $30,000 b. $5,000 loss 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 Compa ny uses the accrual basis. Sales for cash$200,000 Sales for credit 220,000 address 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 Company for the year ended December 31, 2008. Falcon Company uses the cash basis. Sales for cash$180,000 Sales for credit 190,000 toll of inventory sold 210,000 Collections from customers 350,000 Purchases of inventory 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. $70,00 0 d. $60,000 e. none of the answers are correct ANSD 31. opposite than December, the most popular month for fiscal year-end is a. January b. March c. June d. phratry e. October ANSD TRUE/FALSE 1. In order to mould the economic success of a grocery store, we should view it as separate from the an new(prenominal)(prenominal) resources that are owned by this individual. ANST 2. some 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 influence the classification of assets and liabilities. ANSF 4.The most accurate focal point to account for the success or failure of an entity is to accumulate all proceedings from the opening of business until the business eventually liquidates. ANST 5. An entity normally keepnot reasonably account for the profits related to inventory until that inventory is sold in the normal course of business. ANST 6. To the extent that bills does not re main stable, it loses its reusableness as the standard for measuring financial legal proceeding. ANST 7. A loss in value of gold is called inflation. ANST 8. At the time of originally learning a transaction, historical cost also represents the fair market value.ANST 9. It would forever be conservative to value inventory at market. ANSF 10. Accountants normally recognize revenue when cash is received. ANSF 11. 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. ANST 12. The arguments of financial Accounting Concepts are intended to provide the Financial Accounting Standards Board with a park foundation and the basic underlying reasoning on which to consider the merits of several(prenominal)(a) alternative accounting principles. ANST 13.Eventually, the Financial Accounting Standards Board intends to evaluate current principles i n terms of the concepts established in the Financial Accounting Concepts. ANST 14. Financial Accounting Concepts establish generally accepted accounting principles. ANSF 15. According to the second Financial Accounting Concept, those characteristics of nurture that make it a desirable commodity can be viewed as a hierarchy of qualities, with understandability and avail for decision making of most importance. ANST 16. Performance indicators for nonbusiness organizations are usually formal budgets and donor restrictions.ANST 17. Reasonable inaccuracies of accounting for an entity, short of its complete life span, are accepted. ANST 18. Using the business entity assumption, the financial statements are prepared separate and distinct from the owners of the entity. ANST 19. The time period assumption indicates that the entity will remain in business for an enigmatical period time. ANSF 20. Timeliness is a permeant modesty imposed upon financial accounting information. ANSF 21. rel evance and dependableness are two primary qualities that make accounting information useful for decision making. ANST 22.Predictive value, feedback value, and timeliness are ingredients needed to guarantee that the information is reliable. ANSF 23. Decision usefulness is a pervasive constraint imposed upon financial accounting information. ANSF 24. Relevance is a quality requiring that the information be timely and that it also put up predictive value or feedback value or both. ANST 25. The SEC has the authority to determine generally accepted accounting principles and to consecrate the accounting profession. ANST 26. whatsoever industry practices lead to accounting reports that do not conform to the general theory 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 realized (realization concept) and expenses when incurred (matching concept). ANST 29. The cash basis recognizes revenue when cash is received and expenses when cash is paid. ANST 30. The accountant records only the events that preserve the financial position of the entity and that can be reasonably determined in monetary terms. ANST 31.The Sarbanes-Oxley Act has far-reaching consequences for financial reporting and the CPA profession. ANST 32. Among the many an(prenominal) responsibilities of the PCAOB is to adopt accounting standards. ANSF 33. For a public company, the SEC requires that a report be filed annually on its internal control systems. ANST 34. The Sarbanes-Oxley Act has had an unimportant effect on the relationship between the company and the internal auditor. ANSF 35. insurance coverage under Sarbanes-Oxley revealed that very few 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 tell 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 &038 Techniques is a compilation of data obtained by a survey of 600 annual reports to stockholders undertaken for the purpose of analyzing the accounting information divulge in such reports. ANST 40.Many companies are on a 51-52 week fiscal year. ANSF 41. The Sarbanes-Oxley Act has materiality implications. ANST 42. Web sites are not very useful when acting analysis. ANSF 43. Accounting standards codification TM reorganizes the accounting pronouncements into nearly 90 accounting issuings. ANST 44. Accounting standards codification TM addresses U. S. generally accepted accounting principles for nongovernmental entities. ANST PROBLEMS 1. undeniable Listed below are several accounting principles and assumptions. extend to the garner of each with the appropriate statement. a. Business entitye. historical costi.Full disclosure b. Going concernf. Conservatismj. Verifiability c. Time periodg. Realizationk. Materiality d. Monetary unith. Consistencyl. Industry practices 1. Some industry 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 give the same treatment to comparable proceedings. 4. Directs that the measurement that has the least(prenominal) favorable effect on net income and financial position in the current period be selected. 5. The decision 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. Dea ls 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 indefinite period of time. 12. Assumption that a businesss financial statements are separate and distinct from the ad hominem 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. Required 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 recorded 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 let down is $25,000. g. The accountants determine that the company is in danger of going bankrupt and therefore refuse to certify the statements as prepared according 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 interrelated elements that are nowadays related to measuring performance and status of an endeavour according to SFAC no. 6, Elements of Financial Statements. a. Assetsf. Comprehensive income b. Liabilitiesg. Revenues c. Equityh. Expenses d. Investments by ownersi. Gains e. Distribution to ownersj. Losses Required Match the letter with the appropriate definition. 1. Probable future sacrifices of economic benefits arising from present obligations of a cross entity to transfer assets or provide services to another(prenominal) entities in the future as a result of past transactions or events. 2. Increases in the uprightness of a particular business enterprise resulting from transfers to the enterprise from other entities of something of value to obtain or increase will power interests (or integrity) in it. Assets are most commonly received as investments by owners, but that which is received may also include services or satisfaction or conversion of liabilities of the enterprise. 3. A decrease in the integrity of a particular business enterprise resulting from transferring assets, rendering services, or subject liabilities by the enterprise to owners.Decreases ownership interest (or fair play) 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 consumptio n 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 central 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. Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. 8. The residuum interest in the assets of an entity after 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 constitute the entitys ongoing major or central opera tions. 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. dependability e. predictive f. feedback value g. timely h. verifiable i. naturalistic faithfulness 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 included in the hierarchy. 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 no. 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 no. 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 pass judgment Accounting Principles (GAAP) b. Securities and Exchange Commission (SEC) c. American Institute of Certified Public Accountants (AICPA) d. Accounting Principles Board (APB) e. Financial Accounting Standards Board (FASB) f. Statements of Financial Standards (SFAS) g. discourse Memorandum (DM) h. Statements of Position (SOP) i. Emerging 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 authoritative 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 family of the AICPA to influence the development of accounting standards. 6. A professional accounting organization whose members are certified public accountants (CPAs). 7. Issued official opinion on accounting standards between 1959-1973. 8. This board issues four 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 zero(prenominal) 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 with 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 Bu siness Enterprises 6. Recognition and mensuration in Financial Statements of Business Enterprise 7. Using Cash full point Information in Accounting Measurements ANS 1. d 2. c 3. b 4. f 5. a 6. e 7. g