Chapter 8 - Financial Accounting and Reporting

Examples of fixed assets include which of the following? I. Inventory II. Treasury bills III. Forklift IV. Goodwill a. III only b. I and III only c. I, II, and IV only d. I, III, and IV only

a. III only

When it comes to audit opinions, firms would like a. Unqualified b. Adverse c. Disclaimed d. Qualified with explanation

a. Unqualified

How are liabilities and debt different? a. Debt refers to an amount that is owed, regardless of the form b. Accounts payable is a liability but not a debt c. Liability refers only to obligations that require interest payments and is considered a subset of debts d. Notes payable is a liability but not a debt

b. Accounts payable is a liability but not a debt (a and c have labels reversed; notes payable is both a liability and a debt)

Which is NOT a source of cash for a company a. Depreciation expense b. An increase in accounts receivable c. A decrease in inventory d. Paying your bills later

b. An increase in accounts receivable

Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT: a. Debt b. Interest expense c. Shareholder's equity d. Inventory

d. Inventory

Identify whether change in each of the balance sheet accounts is a source or use of funds on the statement of cash flows Decrease in an asset

sources of funds

Identify whether change in each of the balance sheet accounts is a source or use of funds on the statement of cash flows Increase in a liability

sources of funds

Identify whether change in each of the balance sheet accounts is a source or use of funds on the statement of cash flows Increase in an asset

use of funds

Identify whether change in each of the balance sheet accounts is a source or use of funds on the statement of cash flows Decrease in a liability

uses of funds

Net income adjusted for the following gains and losses not reported on the income statement is called what? - Unrealized gains and losses on investments - Minimum pension liability adjustments - Foreign currency translation adjustments - Changes in market value of instruments qualifying as hedges a. Operating income b. Other income and expenses c. Comprehensive income d. Retained earnings

c. Comprehensive income

Which is a possible reason why the vast majority of participants in US capital markets do not support adopting IFRS over US GAAP? a. IFRS may not spell out the "correct" solution to specific accounting transactions, making it impossible to get reasonable guidance b. UFRS is a rules-based system c. IFRS might result in different interpretations of specific situations d. A single set of financial statements can be made that conform to both IFRS and US GAAP

c. IFRS might result in different interpretations of specific situations

The matching principle in regards to accrual accounting is a. Recognize revenues when they are paid b. Recognize revenues when they are earned c. Recognize the expenses incurred to generate earned revenues d. Recognize expenses paid to support revenues earned

c. Recognize the expenses incurred to generate earned revenues