ACNT 2336 Midterm 1 Ch. 1-6
Materiality
The comment that "items that are not material may be recorded in the financial statements is the most economical and expedient manner possible" is representative of: A. matching B. conservatism C. realization D. materiality E. none of the answers are correct.
Statements of Financial Accounting Standards (SFASs)
These statements are issued by the Financial Accounting Standards Board and establish GAAP for specific accounting issues.
Financial Accounting Standards Board (FASB)
This board issues four types of pronouncements: (1) Statements of Financial Accounting Standards, (2) Interpretations, (3) Technical bulletins, and (4) Statements of Financial Accounting Concepts
Reduction of stockholders' equity
Treasury stock is best classified as a A. Current Liability B. Current Asset C. Reduction of stockholders' equity D. Contra Asset E. Contra liability
Income Statement
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Cost of Goods Sold
Income Statement
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Cumulative effect of change in accounting principle
Reconciliation of Retained Earnings
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Dividends Paid
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Equity in net income of affiliates
Income Statement
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Extraordinary Loss
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Goodwill
Income Statement
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Income from Non-Controlling Interest
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Land
Income Statement
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Loss on disposal of equipment
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Notes Payable
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Redeemable preferred stock
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Supplies
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Treasury Stock
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Unrealized decline in market value of equity investment
Income Statement
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Unrealized exchange gains and losses
$40,000
Growth Company had total assets of $100,000 and total liabilities of $60,000. What is the balance of the stockholders' equity? A. $0 B. $40,000 C. $60,000 D. $100,000 E. None of the Above
Supplies
Inventories which are the balance of goods on hand. In a manufacturing firm, they include all but which of the following? A. Raw materials B. Work in Process C. Finished goods D. Supplies E. Construction in Process
Statements of Position (SOP)
Issued by the Accounting Standards Division of the AICPA to influence the development of accounting standards.
Financial Reporting Releases (FRRs)
Issued by the SEC and give the SEC's official position on matters relating to financial statements.
Accounting Principles Board (APB)
Issued official opinions on accounting standards between 1959 and 1973
Going Concern
Valuing assets at their liquidation values is not consistent with: A. Conservatism B. Materiality C. Going Concern D. Time Period E. None of the answers are correct
Accounts Receivable
Which is a permanent account? A. Revenue B. Advertising Expense C. Accounts Receivable D. Dividends E. Insurance Expense
Insurance Expense
Which is a temporary account? A. Cash B. Accounts Receivable C. Insurance Expense D. Accounts Payable E. Notes Payable
Gain from sale of land
Which of the following accounts would not appear on a conventional balance sheet? A. Accounts receivable B. Accounts payable C. Patents D. Gain from sale of land E. Common Stock
Accounts receivable
Which of the following accounts would not be classified as an intangible? A. Goodwill B. Patent C. Accounts receivable D. Trademarks E. Franchises
Bonds Payable
Which of the following accounts would not usually be classified as a current liability? A. Accounts payable B. Wages payable C. Unearned rent income D. Bonds payable E. Taxes payable
The PCAOB is to adopt accounting standards
Which of the following does not relate to The Public Company Accounting Oversight Board (PCAOB)? A. Two members of the board must be CPAs. B. In addition to appointing the five members of the PCAOB, the SEC is responsible for the oversight 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
Clean opinion
Which of the following is NOT a type of audit opinion? A. Unqualified opinion B. Qualified opinion C. Adverse opinion D. Clean opinion E. Disclaimer of opinion
Unearned rent income
Which of the following is a current liability? A. Unearned rent income B. Prepaid interest C. Land D. Common Stock E. None of the above.
Financial Accounting Standards Advisory Council (FASAC)
Responsible for advising the FASB
Materiality
Charging off equipment that cost less than $20 would be an example of the application of: A. Going Concern B. Cost C. Matching D. Materiality E. Realization
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Accrued Payrolls
$132,000
1. The following relate to Owens data in 2012. What is the ending inventory? Purchases $580,000 Beginning Inventory 80,000 Purchase returns 8,000 Sales 900,000 Cost of goods sold 520,000 a. $150,000 b. $132,000 c. $152,000 d. $170,000 e. $142,000
Reconciliation of Retained Earnings
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Adjustments of prior periods
$20,000
2. Changes in account balances of Gross Flowers during 2012 were as follows: Increase Assets $400,000 Liabilities 150,000 Capital Stock 120,000 Additional Paid-In Capital 110,000 Assuming there were no charges to retained earnings other than dividends of $20,000, the net income (loss) for 2012 was a. $(20,000) b. $(40,000) c. $20,000 d. $40,000 e. $60,000
$50,000
7. The stockholders' equity of Gaffney Company at November 30, 2012, is presented below. Common stock, par value $5, authorized 200,000 shares, 100,000 shares issued and outstanding $500,000 Paid-in capital in excess of par 100,000 Retained earnings 300,000 Total $900,000 On December 1, 2012, the board of directors of Gaffney Company declared a 5% stock dividend, to be distributed on December 20. The market price of the common stock was $10 on December 1 and $12 on December 20. What is the amount of the change to retained earnings as a result of the declaration and distribution of this stock dividend? A. $0 B. $40,000 C. $50,000 D. $60,000 E. None of the Above
Securities and Exchange Commission
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 Commission E. Financial Accounting Standards Board
American Institute of Certified Public Accountants (AICPA)
A professional accounting organization whose members are certified public accountants
Exposure Draft
A proposed Statement of Financial Accounting Standards
Emerging Issues Task Force (EITF)
A task force of representatives from the accounting profession created by the FASB to deal with emerging issues of financial reporting.
Point of order acceptance
Accountants face a problem of when to recognize revenue. Which of the following methods of recognizing revenue is not used in practice? A. Point of sale B. Point of order acceptance C. End of production D. Receipt of cash E. Revenue recognized during production
Generally Accepted Accounting Principles (GAAP)
Accounting Principles that have substantial authoritative support
Public Company Accounting Oversight Board (PCAOB)
Adopts auditing standards
Balance Sheet
Choose from: Income Statement, Balance Sheet, or Reconciliation of Retained Earnings. Common Stock
The FASB is the primary board for the development of generally accepted accounting principles
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. A. The FASB is independent of the AICPA. B. The size of the board is much smaller. C. The FASB has broader representation. D. The FASB is the primary board for the development of generally accepted accounting principles E. Members of the FASB serve on a full-time basis
Certified Public Accountants
An accountant who has received a certificate stating that he or she
The natural business year.
An accounting period that ends when operations are at a low ebb is: A. a calendar year B. a fiscal year C. the natural business year D. an operating year E. None of the answers are correct
Matching
At the end of the fiscal year, an adjusting entry is made that increases both interest expense and interest payable. This entry is an application for which accounting principle? A. Full disclosure B. Materiality C. Matching D. Going concern E. Realization
Matching
At the end of the fiscal year, an adjusting entry is made that increases salaries payable 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
All-Purpose
Audit opinions cannot be classified as which of the following? A. All-Purpose B. Disclaimer of Opinion C. Adverse Opinion D. Qualified Opinion E. Unqualified Opinion
$1 million
Bell Company has 2 million shares of common stock with par of $10. Additional paid in capital totals $15 million, and retained earnings is $15 million. The directors declare a 5% stock dividend when the market value is $10. The reduction of retained earnings as a result of the declaration will be a. $0. b. $1 million. c. $800,000. d. $600,000. e. None of the above.
None of these statements would be considered false.
Considering IFRSs, which of the following statements would be considered false? A. When using IFRSs, local laws or securities regulations may specify disclosures in addition to those required by IFRSs. B. IAS introduced a number of terminology changes. The new titles for the financial statements are not mandatory. C. The IFRS model consolidated balance sheet, as presented by Deloitte Touche, puts an emphasis on liquidity. D. Under IFRS, noncontrolling interests are usually presented as the last item in total equity. E. None of these statements would be considered false.
All of these items would be considered to be true
Considering IFRSs, which of the following statements would be considered false? A. IFRSs do not require a standard format for the balance sheet. B. With IFRSs, usually non-concurrent assets are presented first, followed by current assets. C. Under IFRS for liabilities and owners' equity, capital and listed reserves are usually listed first, then noncurrent liabilities, and then current liabilities last. D. The reserves section of capital and reserves would not be part of U.S. GAAP. E. All of these items would be considered to be true.
Securities and Exchange Commission (SEC)
Created by the Securities Exchange Act of 1934
Cash restricted for the retirement of bonds
Current assets typically include all but which of the following assets? A. Cash restricted for the retirement of bonds B. Unrestricted cash C. Marketable securities D. Receivables E. Inventories
Liabilities
For the issuing firms, redeemable preferred stock should be classified where for analysis purposes? A. Marketable security B. Long-term investment C. Intangible D. Liabilities E. Shareholder's Equity
Unqualified Opinion
From the point of view of analysis, which classification of an audit opinion indicates that the financial statements carry the highest degree of reliability? A. Unqualified opinion B. All-purpose C. Disclaimer of opinion D. Qualified opinion E. Adverse opinion
Financial Accounting Foundation (FAF)
Governs the Financial Accounting Standards Board
All of the Above
If an accountant performs a compilation and becomes aware of deficiencies in statements, the accountant's report characterizes the deficiencies by all but one of the following: A. Omission of substantially all disclosures B. Omission of statement of cash flows C. Accounting principles not generally accepted D. All of the above E. None of the above
$60,000
If assets are $100,000 and liabilities are $40,000, how much is stockholders' equity? A. $40,000 B. $50,000 C. $60,000 D. $30,000 E. $140,000
A. $30,000
If assets are $40,000 and stockholder's equity is $10,000, how much are liabilities? A. $30,000 B. $50,000 C. $20,000 D. $60,000 E. $10,000
Two years of audited balance sheets, three years of audited statement of income, and two years of statements of cash flows.
In addition to the company's principal financial statements, the Form 10-K and shareholder annual reports must include all but one of the following: A. Information on the market for holders of common stock and related securities, including high and low sales prices, frequency and amount of dividends, and number of shares. B. Five-year summary of selected financial data C. Management's discussion and analysis of financial condition and results of operations. D. Two years of audited balance sheets, three years of audited statements of income, and two years of statements of cash flows. E. Disclosure of the domestic and foreign components of pretax income.
Expenses, Assets, Dividends
In terms of debits and credits, which accounts have the same normal balances? A. Dividends, retained earnings, liabilities B. Capital stock, liabilities, expenses C. Revenues, capital stock, expenses D. Expenses, assets, dividends E. Dividends, assets, liabilities
Our company owns less than 100% of another company, and the statements are not consolidated.
Net income-non-controlling interest comes from which of the following situations? a. A company has been consolidated with our income statement, and our company owns less than 100% of the other company. b. A company has been consolidated with our income statement, and our company owns 100% of the other company. c. Our company owns less than 100% of another company, and the statements are not consolidated. d. Our company owns 100% of another company, and the statements are not consolidated. e. None of the above.
Discussion Memorandum
Presents all known facts and points of view on a topic; issued by the FASB
Accounting Principles Board Statements (APBSs)
Represent views of the Accounting Principles Board but not the official opinions
Accounting Principles Board Opinions (APBOs)
Represented official positions of the APB
A total of 400,000 shares of common stock will be outstanding.
Schroeder Company had 200,000 shares of common stock outstanding with a $2 par value and retained earnings of $90,000. In 2010, earnings per share were $0.50. In 2011, the company split the stock 2 for 1. Which of the following would result from the stock split? a. Retained earnings will decrease as a result of the stock split. b. A total of 400,000 shares of common stock will be outstanding. c. The par value would become $4 par. d. Retained earnings will increase as a result of the stock split. e. None of the above.
Accounting Standards Executive Committee (AcSEC)
Serves as the official voice of the AICPA
Statements of Financial Accounting Concepts (SFACs)
Statements issued by the Financial Accounting Standards Board to provide a theoretical foundation on which to base GAAP; they are not a part of GAAP
Inventory
The Current Assets section of the balance sheet should include A. Inventory B. Taxes payable C. Land D. Patents E. Bonds payable
Accounts Payable
The Current Liabilities section of the balance should include A. Land B. Cash surrender value of life insurance C. Accounts payable D. Bonds Payable E. Preferred Stock
1973-present
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
Securities and Exchange Commission
The Form 10-K is submitted to the: A. American Institute of Certified Public Accountants B. Securities and Exchange Commission C. Internal Revenue Service D. American Accounting Association E. Emerging Issues Task Force
Monetary Unit
The accounting principle that assumes that inflation will not 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
Time period
The assumption that allows accountants to accept some inaccuracy, because of incomplete information about the future, in exchange for more timely reporting is: A. conservatism B. time period C. business entity D. materiality E. realization
Matching
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. Materiality E. None of the answers are correct
Time Period
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: A. Time period B. Business entity C. Historical cost D. Transaction E. None of the answers are correct
D. Assets - Liabilities = Stockholder's Equity
The balance sheet equation can be defined as which of the following? A. Assets + Stockholders' Equity = Liabilities B. Assets + Liabilities = Stockholder's Equity C. Assets = Liabilities - Stockholders' Equity D. Assets - Liabilities = Stockholders' Equity E. None of the above
Business entity assumption
The business being separate and distinct from the owners is an integral part of the: A. time period assumption B. going concern assumption C. business entity assumption D. realization assumption E. None of the answers are correct
$190,000
The following data relate to Gorr Company for the year ended December 31, 2012. 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? A. $180,000 B. $185,000 C. $190,000 D. $200,000 E. None of the answers are correct.
$5,000 loss
The following data relate to Rocket Company for the year ended December 31, 2012. 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, 2012? A. $30,000 B. $5,000 loss C. $40,000 D. $45,000 E. $50,000
allows for the statements to be prepared under generally accepted accounting principles.
The going concern assumption: A. is applicable to all the financial statements B. primarily involves periodic income measurement C. allows for the statements to be prepared under generally accepted accounting principles D. requires that accounting procedures be the same from period to period E. None of these answers are correct
The point of sale
The realization principle leads accountants to usually recognize revenue at: A. the end of production B. during production C. the receipt of cash D. the point of sale E. none of the answers are correct
Extraordinary item.
Which of the following is not a category within accumulated other comprehensive income? a. Foreign currency translation adjustments. b. Unrealized holding gains and losses on available-for-sale marketable securities. c. Changes to stockholders' equity resulting from additional minimum pension liability. d. Unrealized gains and losses from derivative instruments. e. Extraordinary item.
Pension Liabilities
Which of the following is not a typical current liability? A. Accounts payable B. Wages payable C. Interest payable D. Pension liabilities E. Taxes payable
To lessen the impact of the FASB
Which of the following is not an objective of the SEC's integrated disclosure system? A. To coordinate the Form 10-K requirements with those of the annual report B. To lessen the impact of the FASB C. To expand the management discussion of liquidity, capital resources, and results of operations D. To improve the quality of disclosure E. To standardize information requirements
Research and development usually represents a significant intangible on the financial statements.
Which of the following is not true relating to intangibles? A. Research and development usually represents a significant intangible on the financial statements. B. Goodwill arises from the acquisition of a business for a sum greater than the physical asset value. C. Purchased goodwill is not amortized but is subject to annual impairment review. D. The global treatment of goodwill varies significantly. E. Intangibles are usually amortized over their useful lives or legal lives, whichever is shorter.
The typical unqualified opinion has one paragraph.
Which of the following statements is false? A. The reliance that can be placed on financial statements that have been reviewed is substantially less than for those that have been audited. B. An accountant's report described as a compilation presents only financial information as provided by management. C. A disclaimer of opinion indicates that you should not look to the auditor's report as an indication of the reliability of the statements. D. A review has substantially less scope than an examination in accordance with generally accepted auditing standards. E. The typical unqualified opinion has one paragraph
Adjustment for an error of the current period
Which of the following will not be disclosed in retained earnings? a. Declaration of a stock dividend b. Adjustment for an error of the current period c. Adjustment for an error of a prior period d. Net income e. Net loss
A loss from a flood in a location that would not be expected to flood.
Which of the following would be classified as an extraordinary item on the income statement? a. Loss on disposal of a segment of business b. Cumulative effect of a change in accounting principle c. A sale of fixed assets d. An error correction that relates to a prior year e. A loss from a flood in a location that would not be expected to flood.
Relevant cost
Which of these measurement attributes is not currently used in practice? A. Historical cost B. Relevant cost C. Current market value D. Current cost E. Present value
Management
Who is responsible for the preparation and integrity of financial statements? A. A cost accountant B. Management C. An auditor D. A bookkeeper E. The FASB