Question 1

The conservatism convention should not be used when the accountant is certain of a particular measure.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not an enhancing qualitative characteristic?

Accepted Answer

A) Verifiability 
B) Timeliness 
C) Understandability 
D) Neutrality 
A) Verifiability 
B) Timeliness 
C) Understandability 
D) Neutrality

Question 3

Working capital is the amount by which current liabilities exceed current assets and measures how efficiently liabilities are used to produce sales.

Accepted Answer

A) True 
 B)False

Question 4

The asset turnover ratio equals

Accepted Answer

A) revenues divided by average total assets. 
B) average total assets divided by net income. 
C) average total assets divided by total liabilities. 
D) net income divided by average total assets. 
A) revenues divided by average total assets. 
B) average total assets divided by net income. 
C) average total assets divided by total liabilities. 
D) net income divided by average total assets.

Question 5

Use this information to answer the following question.   
-The debt to equity ratio is

Accepted Answer

A) 0.48. 
B) 0.34. 
C) 0.52. 
D) 1.92. 
A) 0.48. 
B) 0.34. 
C) 0.52. 
D) 1.92.

Question 6

The objective of financial reporting established by the FASB is to provide information that is useful to potential customers.

Accepted Answer

A) True 
 B)False

Question 7

The conventions of consistency and conservatism require that financial statements present all the information relevant to users' understanding of the statements.

Accepted Answer

A) True 
 B)False

Question 8

The cost-benefit convention holds that the benefits to be gained from providing accounting information should be greater than the costs of providing it.

Accepted Answer

A) True 
 B)False

Question 9

Goodwill would appear in which balance sheet section?

Accepted Answer

A) Investments 
B) Property,plant,and equipment 
C) Current assets 
D) Intangible assets 
A) Investments 
B) Property,plant,and equipment 
C) Current assets 
D) Intangible assets

Question 10

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios.  
 
-The return on equity for National Textile is

Accepted Answer

A) 40 percent. 
B) 67 percent. 
C) 47 percent. 
D) 32 percent. 
A) 40 percent. 
B) 67 percent. 
C) 47 percent. 
D) 32 percent.

Question 11

A company with a low asset turnover uses its assets more productively than one with a high asset turnover.

Accepted Answer

A) True 
 B)False

Question 12

A company with a low debt to equity ratio is in a more vulnerable position during poor economic times than a company with a high debt to equity ratio.

Accepted Answer

A) True 
 B)False

Question 13

An investment is classified as short term or long term based on

Accepted Answer

A) whether the investment can be sold immediately. 
B) the length of time the investor expects to hold it. 
C) the purpose for which it is held. 
D) the dollar amount of the investment. 
A) whether the investment can be sold immediately. 
B) the length of time the investor expects to hold it. 
C) the purpose for which it is held. 
D) the dollar amount of the investment.

Question 14

According to the FASB,the usefulness of accounting is judged by which of the following two qualitative characteristics of accounting information?

Accepted Answer

A) Comparability and neutrality 
B) Understandability and comparability 
C) Verifiability and timeliness 
D) Relevance and faithful representation 
A) Comparability and neutrality 
B) Understandability and comparability 
C) Verifiability and timeliness 
D) Relevance and faithful representation

Question 15

Use this information to answer the following question.   
-The total dollar amount of assets to be classified as property,plant,and equipment is

Accepted Answer

A) $135,000. 
B) $125,000. 
C) $95,000. 
D) $85,000. 
A) $135,000. 
B) $125,000. 
C) $95,000. 
D) $85,000.

Question 16

___________ is related to both the nature of an item and its size.

Accepted Answer

A) Neutrality 
B) Materiality 
C) Verifiability 
D) Timeliness 
A) Neutrality 
B) Materiality 
C) Verifiability 
D) Timeliness

Question 17

Stephanie Cape purchased a franchise for dry cleaning services.Stephanie is running the dry cleaning business as her primary occupation.Where on the balance sheet is the franchise reported?

Accepted Answer

A) Property,plant,and equipment 
B) Investments 
C) Current assets 
D) Intangible assets 
A) Property,plant,and equipment 
B) Investments 
C) Current assets 
D) Intangible assets

Question 18

The use of the lower-of-cost-or-market method for inventory is an application of the convention of conservatism.

Accepted Answer

A) True 
 B)False

Question 19

Only the chief financial officer and the company's CPAs must certify that,to their knowledge,the statements are accurate and complete.

Accepted Answer

A) True 
 B)False

Question 20

A different set of financial statements usually is prepared for each user.

Accepted Answer

A) True 
 B)False

Exam 5: Foundations of Financial Reporting and the Classified Balance Sheet

The conservatism convention should not be used when the accountant is certain of a particular measure.

Which of the following is not an enhancing qualitative characteristic?

Working capital is the amount by which current liabilities exceed current assets and measures how efficiently liabilities are used to produce sales.

The asset turnover ratio equals

Use this information to answer the following question. -The debt to equity ratio is

The objective of financial reporting established by the FASB is to provide information that is useful to potential customers.

The conventions of consistency and conservatism require that financial statements present all the information relevant to users' understanding of the statements.

The cost-benefit convention holds that the benefits to be gained from providing accounting information should be greater than the costs of providing it.

Goodwill would appear in which balance sheet section?

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios. -The return on equity for National Textile is

A company with a low asset turnover uses its assets more productively than one with a high asset turnover.

A company with a low debt to equity ratio is in a more vulnerable position during poor economic times than a company with a high debt to equity ratio.

An investment is classified as short term or long term based on

According to the FASB,the usefulness of accounting is judged by which of the following two qualitative characteristics of accounting information?

Use this information to answer the following question. -The total dollar amount of assets to be classified as property,plant,and equipment is

___________ is related to both the nature of an item and its size.

Stephanie Cape purchased a franchise for dry cleaning services.Stephanie is running the dry cleaning business as her primary occupation.Where on the balance sheet is the franchise reported?

The use of the lower-of-cost-or-market method for inventory is an application of the convention of conservatism.

Only the chief financial officer and the company's CPAs must certify that,to their knowledge,the statements are accurate and complete.

A different set of financial statements usually is prepared for each user.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis and Capital Budgeting

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