accounting review - chapter 2

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Which of the following statements is true? A. Net income is not adjusted when computing earnings per share. B. By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance. C. Earnings per share is an internal measure and is not used by stockholders. D. The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period.

B. By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance.

Which of the following is generally not classified as a current liability? A. Salaries and Wages Payable B. Accounts Payable C. Taxes Payable D. Bonds Payable

D. Bonds Payable

consistency

a company's use of the same accounting principles and methods from year to year

Comparibility

ability to easily evaluate one company's results relative to another's

going concern

belief that a company will continue to operate for the foreseeable future

interest payable

current liability

salaries and wages payable

current liability

unearned service revenue

current liability

goodwill

intangible assets

investment in real estate

long term investment

mortgage payable (due in 3 years)

long term liability

depreciation expense

not on balance sheet

service revenue

not on balance sheet

accumulated depreciation

property, plant, and equipment

equipment

property, plant, and equipment

monetary unit

reporting only those things that can be measured in dollars

retained earings

stockholders equity

Cash, and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, are called: A. Current assets. B. Intangible assets. C. Long-term investments. D. Property, plant, and equipment.

A. Current Assets

In which balance sheet section would trademarks be reported? A. Intangible assets B. Investments C. Property, plant, and equipment D. Current assets

A. Intangible Assets

The two fundamental qualities of useful information are A. relevance and faithful representation. B. verifiability and timeliness. C. comparability and flexibility. D. understandability and consistency.

A. relevance and faithful representation.

The convention of consistency refers to consistent use of accounting principles A. among firms. B. from period to period. C. throughout the current accounting period. D. within industries.

B. from period to period.

The agency of the United States Government that oversees the U.S. financial markets is the A. International Auditing Standards Committee. B. Internal Revenue Service. C. Security Exchange Commission. D. Financial Accounting Standards Board.

C. Security Exchange Commission.

What is the primary criterion by which accounting information can be judged? A. Consistency B. Predictive value C. Usefulness for decision making D. Comparability

C. Usefulness for decision making

On a classified balance sheet, companies usually list current assets A. in alphabetical order. B. with the largest dollar amounts first. C. in the order in which they are expected to be converted into cash. D. in the order of acquisition.

C. in the order in which they are expected to be converted into cash.

The information needed to determine if companies can pay their current obligations is the A. net income for this year. B. projected net income for next year. C. relationship between current assets and current liabilities. D. relationship between short-term and long-term liabilities.

C. relationship between current assets and current liabilities.

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? A. Monetary unit assumption B. Economic entity assumption C. Periodicity assumption D. Going concern assumption

D. Going concern assumption

Free cash flow represents A. cash provided by operations less adjustments for capital expenditures and dividends. B. a measurement of a company's cash generating ability. C. a measure of solvency. D. all of these answer choices are correct.

D. all of these answer choices are correct.

In a classified balance sheet, assets are usually classified as A. current assets; long-term assets; property, plant, and equipment; and intangible assets. B. current assets; long-term investments; property, plant, and equipment; and common stocks. C. current assets; long-term investments; tangible assets; and intangible assets. D. current assets; long-term investments; property, plant, and equipment; and intangible assets.

D. current assets; long-term investments; property, plant, and equipment; and intangible assets.

Most companies that follow IFRS present balance sheet (statement of financial position) information in this order. A. current assets; investments; property; plant and equipment; intangible assets; current liabilities; long-term liabilities; owners' equity. B. intangible assets; property; plant and equipment; investments; current assets; current liabilities; owners' equity; long-term liabilities. C. current assets; noncurrent assets; current liabilities; noncurrent liabilities; equity. D. noncurrent assets; current assets; equity; noncurrent liabilities; current liabilities.

D. noncurrent assets; current assets; equity; noncurrent liabilities; current liabilities.

historical cost

belief that items should be reported on the balance sheet at the price that was paid to acquire them

debt investments (short term)

current asset

faithful representation

the desire to minimize errors and bias in financial statements

materiality

the judgement concerning whether an item is large enough to matter to decision-makers

periodicity

the practice of preparing financial statements at regular intervals

relavance

the quality of information that indicates the information makes a difference in a decision

full disclosure

the reporting of all information that would make a difference to financial statement users

economic entity

tracing accounting events to particular companies


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