Multiple Choice Questions- ACT311

Which of the following is not considered part of comprehensive income?

gains and losses associated with the sale of a business component

Information related to the Berkley Company for the calendar year 2019 follows. Assuming no capital stock was issued during 2019, the net income earned by the Berkley Company during 2019 was

$290

The Salty Chip Company includes one coupon having no expiration date with its deluxe snack pack. Upon return of 10 coupons, Salty Chip will send a silver chip clip, which costs Salty Chip $1.50 each. Past experience indicates that 30% of coupons issued will be redeemed. Salty Chip began this promotion in 2019 and sold 1,000,000 deluxe snack packs. During 2019, 90,000 coupons were received, and 9,000 chip clips were distributed to customers. The December 31, 2019 balance sheet should include a liability for coupons outstanding of

$31,500

The Park Company is affected by the following contingencies at the end of 2020. What total amount should Parks accrue for loss contingencies in 2020?

$750,000

Which of the following rules is incorrect?

Common stock accounts are increased by debit entries and decreased by credit entries

Under IFRS, liabilities and shareholders' equity on the balance sheet usually appear in which order?

Equity, noncurrent liabilities, and current liabilities

U.S. companies that have subsidiaries in foreign countries can file their financial statements with the SEC by using?

GAAP

Which principle of the AICPA Code of Professional Conduct is: Members should broaden and maintain public confidence by performing all of their professional responsibilities with the highest sense of honesty possible?

Integrity

The agreement in 2002 by the FASB and IASB to develop high quality, compatible accounting standards that could be used by both domestic and cross-border financial reporting was called the

Norwalk agreement

What additional supplementary information should be included as part of the financial statements under GAAP?

Notes to financial statements

Which of the following is not one of the stages used by the FASB process before issuing an Accounting Standards Update?

Obtaining approval from the SEC for the new standard

The stated principles of the AICPA Code of Professional Conduct do not include

Optimism

Which of the following statements regarding a post-closing trial balance is false?

Post-closing trial balances only contain temporary accounts

Which Principle of the AICPA Code of Professional Conduct is: A member, as a professional, should exercise sensitive and moral judgments in all their activities?

Responsibilities

Which of the following organizations has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets?

Securities and Exchange Commission

Certain U.S. accounting standards have been, and will be, amended to aid in the international convergence process. The process of changing these standards usually involves

Selecting the best standard between existing U.S. and international standards

Which of the following statements regarding Standards contained in the FASB Accounting Standards Codification (ASC) is true?

They apply to financial reporting by all U.S. companies

Which of the following statements regarding the requirement to follow U.S. GAAP in financial reporting is true?

U.S. GAAP represents a set of professional standards, and the requirement to follow U.S. GAAP is enforced through the AICPA Code of Professional Conduct

Reversing entries should not be made for

adjusting entries related to estimated items such as depreciation

The accountant failed to make the adjusting entry to record the unpaid wages of its employees as of December 31. This error will cause

an understatement of liabilities and an overstatement of shareholders' equity

Dividends that are paid to owners would affect both the

balance sheet and statement of cash flows

Compensating balance agreements are held against short-term borrowings should

be separately reported in the current assets portion of the balance sheet

Comprehensive income is an important concept in accounting because it represents

changes in equity from non-owner sources

Which of the following are considered enhancing characteristics of accounting information?

comparability and consistency

The joint IASB and FASB boards identified several "enhancing" decision useful characteristics of financial information including

comparability, verifiability, timeliness, and understandability

The sales returns and allowances accounts is reported as a

contra-revenue account on the income statement

Notes to financial statements provide

discussions that further explain items shows in the financial statements

The accounting projects portion of the FASB's conceptual framework project deals with all of the following except

how financial reports should be displayed

Which one of the following is an advantage of LIFO?

in periods of rising prices, less income tax is paid

Which statement measures and reports the financial results of a company's performance for a period of time?

income statement

A perpetual inventory system

keeps a continuous record of the physical quantities of inventory on hand

When an uncollectible account is written off under the allowance method, the effect of the write-off is to

leave total assets unchanged

Which qualitative characteristic is an ingredient of relevance?

materiality

Long Corporation has adopted the policy of charging to expense at the time of purchase all assets having a cost of less than $200, regardless of the life expectancy of the asset. This policy is most closely related to the

materiality principle

Which fundamental characteristic is an ingredient of faithful representation?

neutrality

The use of the historical cost principle is justified because the resulting information has the qualitative characteristics of

neutrality and verifiability

A company that uses accounting methods in preparing its tax returns that differ from the accounting methods used to prepare its financial statements is

not necessarily violating either the income tax law or generally accepted accounting principles

Which of the following is a specific objective of financial reporting

provide information about a company's resources and the claims against the company

The FASB and IASB concluded that the most general objective of financial reporting is to

provide information useful in the decisions made by external users

Which of the following adjusting entries involves the recognition of an accrued expense?

recognition of salaries owed to employees for work done during the current period that will be paid during the next accounting period

Nontrade receivables, such as deposits with utility companies or advances to subsidiary companies, should be

recorded in separate accounts and separately reported on the balance sheet

The purpose of closing entries is to

reduce all temporary accounts to zero

Activities between affiliated entities such as subsidiaries must be disclosed in the financial statements of a corporation as

related party transactions

How should the gain or loss that is considered infrequent be disclosed?

separately in the income statement as a component of income from continuing operations

All of the following are examples of subsequent events that would be disclosed in the footnotes to the financial statements except

the write off of a significant uncollectible account

Accrual accounting relates the financial effects of a company's transactions

to the period in which they occur rather than to when the cash receipts or payment occurs

Which of the following fundamental qualitative characteristics may have to be sacrificed in order to achieve timeliness?

verifiability

The accounting projects portion of the FASB's conceptual framework project deals with

which accounting elements should be reported and how they should be measured