Question 1

IFRS differs from GAAP in that IFRS tends to be:

Accepted Answer

A)  more rules-based 
B)  more principles-based 
C)  focused on historical cost 
D)  focused more on hypothetical future values 
A)  more rules-based 
B)  more principles-based 
C)  focused on historical cost 
D)  focused more on hypothetical future values

Question 2

Explain the 'markets' in which a business entity operates.

Accepted Answer

business entity operates in an input mar

Question 3

A company prepares financial statements once every year. What practice does this assumption illustrate?

Accepted Answer

A)  Going concern assumption 
B)  Fiscal period assumption 
C)  The five-year moving theory 
D)  Stable dollar assumption 
A)  Going concern assumption 
B)  Fiscal period assumption 
C)  The five-year moving theory 
D)  Stable dollar assumption

Question 4

Three years ago, Astro Masters, Inc. purchased the three assets listed in the following table. The chief financial officer, Bill Moss, is presently trying to decide what to do with each asset. He has three options for each asset: (1) sell it; (2) keep it; and (3) sell it and replace it with an equivalent asset. The following information is provided to aid his decision.
   Based on your calculations of total cash flows, which of the following options is the best for Bill to pursue with respect to Asset A? 
a. Option 1
b. Option 2
c. Option 3
d. Both Options 2 & 3 provide the same total cash flows.

Accepted Answer

@#IMG-DLM& Therefore, Bill sho

Question 5

The principle of consistency states that:

Accepted Answer

A)  companies should choose a set of accounting methods and use them from one period to the next. 
B)  once a company selects an accounting method, it must use that method throughout the company's entire existence. 
C)  a company may change any accounting method, provided the SEC approves the change. 
D)  companies should elect to use methods that consistently inflate profits. 
A)  companies should choose a set of accounting methods and use them from one period to the next. 
B)  once a company selects an accounting method, it must use that method throughout the company's entire existence. 
C)  a company may change any accounting method, provided the SEC approves the change. 
D)  companies should elect to use methods that consistently inflate profits.

Question 6

For each financial statement item listed in 1 through 5 below, identify at which financial statement valuation (listed in a through g) the item should be reported. You may use each letter more than once or not at all.
   ____ 1. Inventory
____ 2. Plant and equipment (book value)
____ 3. Land used for plant site
____ 4. Current liabilities
____ 5. Long-term notes receivable

Accepted Answer

1. g 2. f

Question 7

Which one of the following statements best describes the concept of conservatism?

Accepted Answer

A)  Profits should be accelerated in all cases. 
B)  The measurement of an event is verifiable and reliable. 
C)  The value of goods and services provided is recognized when earned. 
D)  When uncertainty exists, understating assets, overstating liabilities, accelerating recognition of losses, and delaying recognition of gains is preferred. 
A)  Profits should be accelerated in all cases. 
B)  The measurement of an event is verifiable and reliable. 
C)  The value of goods and services provided is recognized when earned. 
D)  When uncertainty exists, understating assets, overstating liabilities, accelerating recognition of losses, and delaying recognition of gains is preferred.

Question 8

Which one of the following is considered an unrealistic assumption in accounting?

Accepted Answer

A)  Economic entity 
B)  Stable dollar 
C)  Going concern 
D)  Fiscal period concept 
A)  Economic entity 
B)  Stable dollar 
C)  Going concern 
D)  Fiscal period concept

Question 9

During 2009 and 2010, Orange Company recognized $100,000 and $120,000 of sales, respectively. The inflation rate between 2009 and 2010 was 10 percent. Did sales increase 20 percent from 2009 to 2010? Explain.

Accepted Answer

No. A 10% increase because of

Question 10

Jeter Company ordered 400 toy wagons from Lamar, Inc. on May 1, 2010. Jeter Company paid for them on May 20 at a cost of $2 each. Jeter sold 50 of them on June 2, 2010, for $4 each to Gilloz Company. Gilloz Company paid Jeter on June 10. On which date should Jeter Company recognize revenue?

Accepted Answer

A)  May 1 
B)  May 20 
C)  June 10 
D)  June 2 
A)  May 1 
B)  May 20 
C)  June 10 
D)  June 2

Question 11

Equipment with an original cost of $39,000 has a fair market value of $34,000, current replacement cost of $41,000, and a depreciated value of $36,000 on December 31, 2010. At what amount would net equipment be measured on the December 31, 2010 balance sheet?

Accepted Answer

A)  $38,000 
B)  $36,000 
C)  $41,000 
D)  $34,000 
A)  $38,000 
B)  $36,000 
C)  $41,000 
D)  $34,000

Question 12

For each financial concept listed in 1 through 5 below, identify in which category (listed in a through f) it should be matched. You may use each letter more than once or not at all.
   ____ 1. Comparability
____ 2. Objectivity
____ 3. Revenue recognition criteria
____ 4. Matching concept
____ 5. Consistency

Accepted Answer

1. c 2. f

Question 13

What is the most critical question in the matching process? Why is it critical?

Accepted Answer

The most critical question is: 'In what

Question 14

On October 1, 2010, $24,000 of annual magazine subscriptions were sold by Kitchen Design Magazines. The subscribed magazines are delivered on the first day of each month beginning on October 1, 2010. The total cost of the subscribed magazines is $6,000, equal to $500 per month. Determine the amount of revenue and the cost of the magazines to be recognized during 2010.

Accepted Answer

Revenue for 2010 is the amount

Question 15

Morgan Shipping held cash of $1 million throughout 2010 when the general price level decreased by over 30 percent. Morgan Shipping:

Accepted Answer

A)  has more than $1 million of purchasing power at the end of the period. 
B)  has less than $1 million purchasing power at the end of the period. 
C)  must recognize the gain due to general price level increases in its income statement. 
D)  has the same $1 million purchasing power at the end of the period as at the beginning of the period. 
A)  has more than $1 million of purchasing power at the end of the period. 
B)  has less than $1 million purchasing power at the end of the period. 
C)  must recognize the gain due to general price level increases in its income statement. 
D)  has the same $1 million purchasing power at the end of the period as at the beginning of the period.

Question 16

Which one of the following statements best describes objectivity?

Accepted Answer

A)  When uncertainty exists, understating assets, overstating liabilities, accelerating recognition of losses, and delaying recognition of gains is preferred. 
B)  The measurement of an event is verifiable and reliable. 
C)  Different firms use identical accounting measurement methods for similar events. 
D)  Objectives are laid out that are conservative or too aggressive by management. 
A)  When uncertainty exists, understating assets, overstating liabilities, accelerating recognition of losses, and delaying recognition of gains is preferred. 
B)  The measurement of an event is verifiable and reliable. 
C)  Different firms use identical accounting measurement methods for similar events. 
D)  Objectives are laid out that are conservative or too aggressive by management.

Question 17

Net realizable value is:

Accepted Answer

A)  the input price of liabilities. 
B)  a form of market value. 
C)  a present value concept. 
D)  the current input cost. 
A)  the input price of liabilities. 
B)  a form of market value. 
C)  a present value concept. 
D)  the current input cost.

Question 18

Which one of the following is violated when a firm has a policy of accelerating the recognition of depreciation expense during good years and decreasing depreciation expense during lean years?

Accepted Answer

A)  Relevance 
B)  Matching 
C)  Consistency 
D)  Conservatism 
A)  Relevance 
B)  Matching 
C)  Consistency 
D)  Conservatism

Question 19

During 1995, Jeter Company purchased property for its plant for $100,000. During December of 2010, a similar neighboring plot of land was sold for $120,000. At what amount would land be measured on Jeter Company's December 31, 2010 balance sheet?

Accepted Answer

The answer of During 1995, Jeter Company purchased property for...

Question 20

The most common point of revenue recognition is:

Accepted Answer

A)  when the cash is collected from the customer. 
B)  when the customer elects to issue the check to pay for goods shipped. 
C)  when the goods are delivered to the customer. 
D)  as the goods are being produced. 
A)  when the cash is collected from the customer. 
B)  when the customer elects to issue the check to pay for goods shipped. 
C)  when the goods are delivered to the customer. 
D)  as the goods are being produced.

IFRS differs from GAAP in that IFRS tends to be:

Explain the 'markets' in which a business entity operates.

A company prepares financial statements once every year. What practice does this assumption illustrate?

The principle of consistency states that:

Which one of the following statements best describes the concept of conservatism?

Which one of the following is considered an unrealistic assumption in accounting?

During 2009 and 2010, Orange Company recognized $100,000 and $120,000 of sales, respectively. The inflation rate between 2009 and 2010 was 10 percent. Did sales increase 20 percent from 2009 to 2010? Explain.

Jeter Company ordered 400 toy wagons from Lamar, Inc. on May 1, 2010. Jeter Company paid for them on May 20 at a cost of $2 each. Jeter sold 50 of them on June 2, 2010, for $4 each to Gilloz Company. Gilloz Company paid Jeter on June 10. On which date should Jeter Company recognize revenue?

Equipment with an original cost of $39,000 has a fair market value of $34,000, current replacement cost of $41,000, and a depreciated value of $36,000 on December 31, 2010. At what amount would net equipment be measured on the December 31, 2010 balance sheet?

For each financial concept listed in 1 through 5 below, identify in which category (listed in a through f) it should be matched. You may use each letter more than once or not at all. 1. Comparability 2. Objectivity 3. Revenue recognition criteria 4. Matching concept 5. Consistency

What is the most critical question in the matching process? Why is it critical?

Morgan Shipping held cash of $1 million throughout 2010 when the general price level decreased by over 30 percent. Morgan Shipping:

Which one of the following statements best describes objectivity?

Net realizable value is:

Which one of the following is violated when a firm has a policy of accelerating the recognition of depreciation expense during good years and decreasing depreciation expense during lean years?

During 1995, Jeter Company purchased property for its plant for $100,000. During December of 2010, a similar neighboring plot of land was sold for $120,000. At what amount would land be measured on Jeter Company's December 31, 2010 balance sheet?

The most common point of revenue recognition is:

Financial Accounting and Its Economic Context

The Financial Statements

The Mechanics of Financial Accounting

Using Financial Statement Information

The Current Asset Classification, Cash, and Accounts Receivable

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Long-Term Liabilities: Notes, Bonds, and Leases

Shareholders Equity

The Complete Income Statement

The Statement of Cash Flows

The Time Value of Money

Quality of Earnings Cases: A Comprehensive Review

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Exam 3: The Measurement Fundamentals of Financial Accounting

IFRS differs from GAAP in that IFRS tends to be:

Explain the 'markets' in which a business entity operates.

A company prepares financial statements once every year. What practice does this assumption illustrate?

The principle of consistency states that:

Which one of the following statements best describes the concept of conservatism?

Which one of the following is considered an unrealistic assumption in accounting?

During 2009 and 2010, Orange Company recognized $100,000 and $120,000 of sales, respectively. The inflation rate between 2009 and 2010 was 10 percent. Did sales increase 20 percent from 2009 to 2010? Explain.

Jeter Company ordered 400 toy wagons from Lamar, Inc. on May 1, 2010. Jeter Company paid for them on May 20 at a cost of $2 each. Jeter sold 50 of them on June 2, 2010, for $4 each to Gilloz Company. Gilloz Company paid Jeter on June 10. On which date should Jeter Company recognize revenue?

Equipment with an original cost of $39,000 has a fair market value of $34,000, current replacement cost of $41,000, and a depreciated value of $36,000 on December 31, 2010. At what amount would net equipment be measured on the December 31, 2010 balance sheet?

What is the most critical question in the matching process? Why is it critical?

Morgan Shipping held cash of $1 million throughout 2010 when the general price level decreased by over 30 percent. Morgan Shipping:

Which one of the following statements best describes objectivity?

Net realizable value is:

Which one of the following is violated when a firm has a policy of accelerating the recognition of depreciation expense during good years and decreasing depreciation expense during lean years?

During 1995, Jeter Company purchased property for its plant for $100,000. During December of 2010, a similar neighboring plot of land was sold for $120,000. At what amount would land be measured on Jeter Company's December 31, 2010 balance sheet?

The most common point of revenue recognition is:

Financial Accounting and Its Economic Context

The Financial Statements

The Mechanics of Financial Accounting

Using Financial Statement Information

The Current Asset Classification, Cash, and Accounts Receivable

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Long-Term Liabilities: Notes, Bonds, and Leases

Shareholders Equity

The Complete Income Statement

The Statement of Cash Flows

The Time Value of Money

Quality of Earnings Cases: A Comprehensive Review

Filters