1. The SEC relies on the AICPA and FASB to regulate the accounting profession and develop and enforce accounting standards.
2. Currently, both U.S. GAAP and the International Financial Reporting Standards are acceptable for international use.
3. An effective capital allocation process
a. promotes productivity.
b. encourages innovation.
c. provides an efficient market for buying and selling securities.
d. all of these.
4. Members of the Financial Accounting Standards Board are
a. employed by the American Institute of Certified Public Accountants (AICPA).
b. part-time employees.
c. required to hold a CPA certificate.
d. independent of any other organization.
5. Financial accounting standard-setting in the United States
a. can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.
b. is based solely on research and empirical findings.
c. is a legalistic process based on rules promulgated by governmental agencies.
d. is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.
6. The idea of consistency does not mean that companies cannot switch from one accounting method to another.
7. Revenues are realizable when assets received or held are readily convertible into cash or claims to cash.
8. Companies consider only quantitative factors in determining whether an item is material.
9. In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting?
a. Measurement and recognition concepts such as assumptions, principles, and constraints
b. Qualitative characteristics of accounting information
c. Elements of financial statements
d. Objectives of financial reporting
10. Which of the following is an implication of the going concern assumption?
a. The historical cost principle is credible.
b. Depreciation and amortization policies are justifiable and appropriate.
c. The current-noncurrent classification of assets and liabilities is justifiable and signify-cant.
d. All of these.
11. Under current GAAP, inflation is ignored in accounting due to the
a. economic entity assumption.
b. going concern assumption.
c. monetary unit assumption.
d. periodicity assumption.
12. The allowance for doubtful accounts, which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts, is an application of the
a. consistency characteristic.
b. matching principle.
c. materiality constraint.
d. revenue recognition principle.
13. The book value of any depreciable asset is the difference between its cost and its salvage value.
14. Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles?
a. To reduce the federal income tax liability
b. To aid management in cash-flow analysis
c. To match the costs of production with revenues as earned
d. To adhere to the accounting constraint of conservatism
15. Pappy Corporation received cash of $13,500 on September 1, 2007 for one year's rent in advance and recorded the transaction with a credit to Unearned Rent. The December 31, 2007 adjusting entry is
a. debit Rent Revenue and credit Unearned Rent, $4,500.
b. debit Rent Revenue and credit Unearned Rent, $9,000.
c. debit Unearned Rent and credit Rent Revenue, $4,500.
d. debit Cash and credit Unearned Rent, $9,000.
16. Jim Yount, M.D., keeps his accounting records on the cash basis. During 2007, Dr. Yount collected $360,000 from his patients. At December 31, 2006, Dr. Yount had accounts receivable of $50,000. At December 31, 2007, Dr. Yount had accounts receivable of $70,000 and unearned revenue of $10,000. On the accrual basis, how much was Dr. Yount's patient service revenue for 2007?
a. $310,000.
b. $370,000.
c. $380,000.
d. $390,000.
17. On September 1, 2006, Lowe Co. issued a note payable to National Bank in the amount of $600,000, bearing interest at 12%, and payable in three equal annual principal payments of $200,000. On this date, the bank's prime rate was 11%. The first payment for interest and principal was made on September 1, 2007. At December 31, 2007, Lowe should record accrued interest payable of
a. $24,000.
b. $22,000.
c. $16,000.
d. $14,667.
18. Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2007 are as follows:
Last payroll was paid on 12/26/07, for the 2-week period ended 12/26/07.
Overtime pay earned in the 2-week period ended 12/26/07 was $10,000.
Remaining work days in 2007 were December 29, 30, 31, on which days there was no overtime.
The recurring biweekly salaries total $180,000.
Assuming a five-day work week, Colaw should record a liability at December 31, 2007 for accrued salaries of
a. $54,000.
b. $64,000.
c. $108,000.
d. $118,000.
Acct Pronouncements: Match the description to the pronouncement
1________Staff Positions
2________Interpretations (of the financial accounting standards Board)
3________ Statement of financial acct standards
4________EITE statments
5________Opinions
6________Statement of Financial Accounting Concepts
a. Offical Pronouncement of the APB
b. Sethforth fundamental objecftives and concepts that will be used in developing future standards.
c. Primary document of the FASB tht establishes GAAP
d. Provides aditional guidance on implementing or applying FASB standared or Interpretations
e. Provides guidance on how to account for new and unusual financial transactions tht have the potential for creating deversity in financial reporting practices.
f. Represent extensions of modifications of existing standards.
