multiple choice questions chapter 2

Information has the quality of ______________ if it is presented in a clear and concise fashion. a) Consistency. (b) Understandability (c) Verifiable (d) Comparability.

(b) Understandability

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.

Information is __________if independent observers, using the same methods, obtain similar results. a) Consistency. (b) Understandability (c) Verifiable (d) Comparability.

(c) Verifiable

For 2017, Spanos Corporation reported net income $26,000, net sales $400,000, and weighted- average shares outstanding 4,000. There were preferred dividends of $2,000. What was the 2017 earnings per share? (a) $6.00. (b) $6.50.

(a) $6.00.

What organization issues U.S. accounting standards? (a) Financial Accounting Standards Board. (b) International Accounting Standards Committee. (c) International Auditing Standards Committee. (d) None of the above.

(a) Financial Accounting Standards Board.

Generally accepted accounting principles are: (a) a set of standards and rules that are recognized as a general guide for financial reporting. (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.

(a) a set of standards and rules that are recognized as a general guide for financial reporting.

Current assets are listed: (a) by order of expected conversion to cash. (b) by importance. (c) by longevity. (d) alphabetically.

(a) by order of expected conversion to cash.

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 (a) and (b). (d) None of the above.

(b) Current ratio.

Which is an indicator of profitability? (a) Current ratio. (b) Earnings per share. (c) Debt to assets ratio. (d) Free cash flow.

(b) Earnings per share.

The characteristic of information that evaluates whether it is large enough to impact a decision. (a) Comparability. (b) Materiality. (c) Cost. (d) Consistency.

(b) Materiality.

When faced with different alternatives a company should always choose the lower asset value or lower net income A. by importance B. conservatism (c) Verifiable (d) Timely

B. conservatism

Neutrality is an ingredient of Faithful Representation Relevance A. Yes Yes B. No No C. Yes No D. No Yes

C. Yes No

The balance in retained earnings is not affected by: A. net income B. net loss C. issuance of common stock D. dividends

C. issuance of common stock

The correct order of presentation in a classified balance sheet for the following current assets is: (a) accounts receivable, cash, prepaid insurance, inventory. (b) cash, inventory, accounts receivable, prepaid insurance. (c) cash, accounts receivable, inventory, prepaid insurance. (d) inventory, cash, accounts receivable, prepaid insurance.

(c) cash, accounts receivable, inventory, prepaid insurance.

Companies can use free cash ow to: (a) pay additional dividends. (b) acquire more property, plant, and equipment. (c) pay off debts. (d) All of the above.

(d) All of the above.

Results when different companies use the same accounting principles. a) Consistency. (b) Understandability (c) Verifiable (d) Comparability.

(d) Comparability.

For accounting information to have relevance, it must be __________. a) Consistent. (b) Understandable (c) Verifiable (d) Timely

(d) Timely

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 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.

(d) current assets; long-term investments; property, plant, and equipment; and intangible assets.

For 2014 Stoneland Corporation reported net income $26,000; net sales $400,000; and average shares outstanding 6,000. There were preferred stock dividends of $2,000. What was the 2014 earnings per share? A. $4.00 B. $0.06 C. $16.67 D. $66.67

A. $4.00

When a company uses the same accounting principles and methods from year to year. a) Consistency. (b) Understandability (c) Verifiable (d) Comparability.

a) Consistency.