acct test

C

Issuing new shares of common stock will A. increase retained earnings. B. decrease retained earnings. C. increase common stock. D. decrease common stock.

D

An item is ________ if it is likely to influence the decision of an investor or creditor. A. consistent B. faithful representation C. comparable D. material

Current Assets

Assets that companies expect to convert to cash or use up within one year or the operating cycle, whichever is longer

T

T/F The historical cost principle requires that if a company buys a building for $2,000,000 in 2012 that increases in value to $2,900,000 in 2014, the company will have to report the building at $2,000,000 in the balance sheet for 2014.

Securities and Exchange Commission

The agency of the US government that oversees US financial markets and accounting standard-setting bodies

Operation Cycle

The average time required to purchase inventory, sell it on account, and then collect cash from customer - that is, go from cash to cash

B

What is measured by current assets minus current liabilities? A. Solvency B. Working capital C. Profitability D. Cash flow

A

What is the primary accounting standard-setting body in the United States? A. Financial Accounting Standards Board B. IFRS C. Securities and Exchange Commission D. Public Company Accounting Oversight Board (PCAOB)

C

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

A

What organization issues International Financial Reporting Standards? A. International Accounting Standards Board B. Financial Accounting Standards Board C. International Auditing Standards Committee D. IFRS

B

Which is an indicator of profitability? A. Current ratio B. Earnings per share C. Debt to total assets ratio D. Free cash flow

D

Which of the following are constraints that allow a company to modify generally accepted accounting principles without jeopardizing the usefulness of the financial statements? A. Consistency and comparability B. Relevance and faithful representation C. Timeliness and neutrality D. Cost constraint

Cost Constraint

Constraint that weighs the cost that companies will incur to provide the information against the benefit that financial statement users will gain from having the information available

D

Which of the following ratios measures the ability of the company to survive over a long period of time? A. Current ratios B. Liquidity ratios C. Profitability ratios D. Solvency ratios

Statement of Stockholders' Equity

A financial statement that presents the factors that caused stockholders' equity to change during the period, including those that caused retained earnings to change.

Current Ratio

A measure of liquidy computed as current assets divided by current liabilities

Ratio

A technique that expresses the relationship among selected items of financial statement data

D

In a classified balance sheet, how are assets usually classified? 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 stock C. Current assets; long-term investments; tangible assets; and intangible assets D. Current assets; long-term investments; property, plant, and equipment; and intangible assets

Current Liabilities

Obligations that a company expects to pay within the next year or operating cycle, whichever is longer

A

What are generally accepted accounting principles? A. A set of accounting rules and practices that have authoritative support B. Usually established by the Internal Revenue Service C. The guidelines used to resolve ethical dilemmas D. Fundamental truths that can be derived from the laws of nature

D

What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U. S.? A. General accounting principles B. Generally accepted auditing principles C. Generally accepted accounting standards D. Generally accepted accounting principles

C

What will vary between countries when statements are prepared using IFRS? A. The number of shares outstanding B. Accounting time period C. The monetary unit D. Faithful representation

D

Which of the following does not properly reflect a financial ratio? A. 18.4% B. 7:1 C. $0.60 per dollar D. $7,200

B

Which of the following is an example of an intangible asset? A. Accounts receivable B. Trademarks C. Prepaid expenses D. Property, plant, and equipment

C

Which of the following is considered property, plant, and equipment on a classified balance sheet? A. Supplies B. Investment in Intel Corporation stock C. Land D. Copyright

A

Which of the following is not a characteristic of relevance? A. Verifiability B. Materiality C. Confirmatory value D. Predictive value

A

Which of the following is not a fundamental quality of useful accounting information? A. Verifiability B. Relevance C. Neutrality D. Faithful representation

C

Which of the following is not classified as a current asset? A. Prepaid expenses B. Accounts receivable C. Patents D. Inventory

D

Which of the following is the correct order for listing current assets on the balance sheet? A. Cash, accounts receivable, prepaid expenses, inventories, short-term investments B. Cash, short-term investments, inventories, prepaid expenses, accounts receivable C. Cash, accounts receivable, inventories, short-term investments, prepaid expenses D. Cash, short-term investments, accounts receivable, inventories, prepaid expenses

B

Which of these measures is an evaluation of a company's ability to pay current liabilities? A. Earnings per share B. Current ratio C. Both earnings per share and current ratio D. None of these answer choices are correct

C

Which one of the following does not affect retained earnings? A. Net income B. Net loss C. Issuance of common stock D. Dividends

D

Which one of the following is not an alternate means of expressing a ratio? A. Proportion B. Rate C. Percentage D. Dollar amount

C

Which statement is used by most corporations instead of the retained earnings statement? A. Statement of owners' equity B. Statement of cash flows C. Statement of stockholders' equity D. Balance sheet

International Accounting Standards Board

An accounting standard setting body that issues standards adopted by many countries outside of the United States (ISASB)

Economic Entity Assumption

An assumption that every economic entity can be separately identified and accounted for.

Monetary Unit Assumption

An assumption that requires that only those things that can be expressed in money are included in the accounting records.

Free Cash Flow

Net cash provided by operating activities after adjusting for capital expenditures and cash dividends paid

F

T/F Consistency means that a company uses the same accounting principles and methods as the other companies in the same industry.

C

Under IFRS, what is the label used for common stock? A. Share common stock B. Common shares C. Share capital D. Ordinary shares

Classified Balance Sheet

Groups together simialar assets and similar liabilities using a number of standard classifications and sections

A

A company can change to a new method of accounting if management can justify that the new method results in terms of A. more meaningful financial information. B. a higher net income. C. a lower net income for tax purposes. D. less likelihood of clerical errors.

C

A company purchased a tract of land on which it expects to build a production plant on in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported? A. Property, plant, and equipment B. Land expense C. A long-term investment D. An intangible asset

Debt to Asset Ratio

A measure of solvency calculated as total liabilities divided by total assets. It measures the percentage of total financing provided by creditors.

Earnings Per Share

A measure of the net income earned on each share of common stock; computed as net income minus preferred dividends divided by the average number of common shares outstanding during the year

Generally Accepted Accounting Principles

A set of accounting standards that have substantial authoritative support, the guide accounting professionals (GAAP)

Comparability

Ability to compare the accounting information of different companies because they use the same accounting principles

Full Disclosure Principle

Accounting principle that dictates that companies disclose circumstances and events that make a difference to financial statement users.

International Financial Reporting Standards

Accounting standards, issued by the IASB, that have been adopted by many countries outside of the United States (IFRS)

Historical Cost Principle

An accounting principle that states that companies should record assets at their cost

Periodicity Assumption

An assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business.

Intangible Assets

Assets that do not have physical substance

Property, plant, and equipment

Assets with relatively long useful lives that companies use in operating the business

C

Earnings per share is computed by dividing net income A. by the average common shares outstanding. B. by the ending common shares outstanding. C. less preferred stock dividends by the average common shares outstanding. D. less preferred stock dividends by the ending common shares outstanding.

Financial Accounting Standards Board

FASB - primary accounting standard setting body in the US

D

For what purpose might a company use free cash flow? A. Pay additional dividends B. Acquire property, plant, and equipment C. Pay off debts D. All of the answer choices are correct

Long-term Investments

Generally, (1) investments in stocks and bonds of other corporations that companies hold for more than one year, and (2) long-term assets, such as land and buildings, not currently being used in the company's operations.

D

If a company has the ability to pay obligations that are expected to become due within the next year or operating cycle whichever is longer, what is the term that describes this measure? A. Working capital B. Profitability C. Solvency D. Liquidity

A

In what order are current assets listed? A. By liquidity B. By importance C. By longevity D. Alphabetically

Understandability

Information presented in a clear and concise fashion so that users can interpret it and comprehend its meaning

Timely

Information that is available to decision makers before it loses its capacity to influence decisions

Liquidity Ratios

Measure of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash

Solvency Ratios

Measures of the ability of the company to survive over a long period of time.

Profitability Ratios

Measures of the operating success of a company for a given period of time.

F

T/F Current assets are economic resources that are expected to be converted to cash or used up by the business within one year or the normal operating cycle, whichever is shorter.

F

T/F Going concern is the qualitative characteristic of accounting information that allows a statement reader to compare a company's performance from one year to the next.

T

T/F The current ratio is a liquidity ratio that is computed as current assets divided by current liabilities.

F

T/F The monetary unit assumption assures that all important information needed by investors, creditors, and managers is contained in the financial statements.

Solvency

The ability of a company to pay interest as it comes due and to repay the face value of debt at maturity.

Liquidity

The ability of a company to pay obligations that are expected to become due within the next year or operating cycle

Going Concern Assumption

The assumption that a company will continue in operation for the foreseeable future

C

The correct order of presentation in a classified balance sheet for the following current assets is A. accounts receivable, cash, prepaid insurance, inventories. B. cash, inventories, accounts receivable, prepaid insurance. C. cash, accounts receivable, inventories, prepaid insurance. D. inventories, cash, accounts receivable, prepaid insurance.

Working Capital

The difference between the amounts of current assets and current liabilites

D

The following ratios are available for Leer Inc. and Stable Inc. Current Ratio Debt to Assets Ratio Earnings per Share Leer Inc. 2:1 75% $3.50 Stable Inc. 1.5:1 40% $2.75 Compared to Stable Inc., Leer Inc. has A. higher liquidity, higher solvency, but profitability cannot be compared based on information provided. B. lower liquidity, higher solvency, and higher profitablility. C. higher liquidity, lower solvency, and higher profitability. D. higher liquidity and lower solvency, but profitability cannot be compared based on information provided.

Public Company Accounting Oversight Board

The group charged with determining auditing standards and reviewing the performance of auditing firms. (PCAOB)

Relevance

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

Verifiable

The quality of information that occurs when independent observers, using the same methods, obtain similar results.

A

Under IFRS, which of the following current assets section would be presented correctly in accordance with IFRS standards? A. Short term notes receivable, Accounts receivable, Cash B. Marketable securities, Land, Cash C. Cash, Intangibles, Short term notes receivable D. Short term investments, Cash, Land

B

Under IFRS, which of the following selections properly refer to what GAAP signifies as a "balance sheet"? A. Statement of balance B. Statement of financial position C. Statement of financial resources D. Statement of financial wherewithal

Consistency

Use of the same accounting principles and methods from year to year within a company

B

Verifiability is an ingredient of Faithful Representation Relevance a)Yes Yes b)No No c)Yes No d)No Yes

Materiality

Whether an item is large enough to likely influence the decision of an investor or creditor

Fair Value Principle

assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability)

Faithful Representation

information that is complete, neutral, and free from error