Question 1

Which of the following applies to the measurement and recognition of an asset?

Accepted Answer

A)  A pervasive principle in accounting is that an asset is measured at the market value of the consideration exchanged or sacrificed to acquire it and place it in operating condition. 
B)  In some cases, an asset may be recorded at an amount greater than its cash equivalent purchase price. 
C)  When the consideration given for an asset is nonmonetary, the market value of that consideration generally provides the most reliable basis for measuring acquisition cost. 
D)  Assets are always measured and reported based on historical cost. 
A)  A pervasive principle in accounting is that an asset is measured at the market value of the consideration exchanged or sacrificed to acquire it and place it in operating condition. 
B)  In some cases, an asset may be recorded at an amount greater than its cash equivalent purchase price. 
C)  When the consideration given for an asset is nonmonetary, the market value of that consideration generally provides the most reliable basis for measuring acquisition cost. 
D)  Assets are always measured and reported based on historical cost. A

Question 2

APB Statement 4 and SFAC No. 5 indicate that liabilities are measured at amounts established in the transaction, usually amounts to be paid it the future, but never discounted.

Accepted Answer

A) True 
 B)False  False

Question 3

There is a movement in accounting policy toward fair or current values on the balance sheet.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is a true statement?

Accepted Answer

A)  There is more variety in liability groups than in asset groups. 
B)  Most liabilities are noncontractual in nature. 
C)  There are natural subclassifications of liabilities and assets that can be inferred from the balance sheet. 
D)  Liabilities are measured at amounts established in the transaction, usually amounts to be paid in the future, sometimes discounted. 
A)  There is more variety in liability groups than in asset groups. 
B)  Most liabilities are noncontractual in nature. 
C)  There are natural subclassifications of liabilities and assets that can be inferred from the balance sheet. 
D)  Liabilities are measured at amounts established in the transaction, usually amounts to be paid in the future, sometimes discounted.

Question 5

The only method allowed by GAAP in accounting for convertible bonds is to treat the debt as conventional debt until conversion.

Accepted Answer

A) True 
 B)False

Question 6

Manditorily redeemable financial instruments are classified as assets on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

The asset-liability approach complements the expense-liability approach because the former is applicable to the balance sheet and the latter is applicable to the income statement.

Accepted Answer

A) True 
 B)False

Question 8

Although not specifically mentioned in the most recent definition of liabilities, deferred credits continue to be part of the liability section in the balance sheet under present practices.

Accepted Answer

A) True 
 B)False

Question 9

The "future service potential" of an asset may be realized as a direct market exchange for another asset, or through conversion in a manufacturing operation for finished goods.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a true statement regarding assets as they appear on the balance sheet?

Accepted Answer

A)  Historical cost gives a good indication of the productive value of assets. 
B)  Assets held for sale and measured at net realizable value represent a high degree of certainty as to measurement reliability. 
C)  Certain types of deferred charges do not have any direct effect on future cash flows. 
D)  In terms of additivity, it is questionable if a balance sheet should be added. 
A)  Historical cost gives a good indication of the productive value of assets. 
B)  Assets held for sale and measured at net realizable value represent a high degree of certainty as to measurement reliability. 
C)  Certain types of deferred charges do not have any direct effect on future cash flows. 
D)  In terms of additivity, it is questionable if a balance sheet should be added.

Question 11

Which of the following is a true statement?

Accepted Answer

A)  Under the articulated concept, accounting elements are defined using the revenue-expense approach rather than the asset-liability approach. 
B)  The articulated approach severs the mathematical relationships between the balance sheet and income statement. 
C)  Under the articulated approach, contributed capital, retained earnings, and unrealized capital adjustments are subclassifications of owners' equity. 
D)  Recent SFASs have advocated the nonarticulated approach to financial statements. 
A)  Under the articulated concept, accounting elements are defined using the revenue-expense approach rather than the asset-liability approach. 
B)  The articulated approach severs the mathematical relationships between the balance sheet and income statement. 
C)  Under the articulated approach, contributed capital, retained earnings, and unrealized capital adjustments are subclassifications of owners' equity. 
D)  Recent SFASs have advocated the nonarticulated approach to financial statements.

Question 12

An asset should be initially recorded at either its historical acquisition cost or its cash equivalent purchase price, whichever is greater.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is a true statement?

Accepted Answer

A)  Under the articulation approach, all accounting transactions are reported on the income statement. 
B)  Because income is a subclassification of retained earnings, the income statement and balance sheet articulate. 
C)  Under articulation, adjustments to the income of prior years are reflected on the current year income statement. 
D)  All transactions can be easily categorized using the current accounting classification system. 
A)  Under the articulation approach, all accounting transactions are reported on the income statement. 
B)  Because income is a subclassification of retained earnings, the income statement and balance sheet articulate. 
C)  Under articulation, adjustments to the income of prior years are reflected on the current year income statement. 
D)  All transactions can be easily categorized using the current accounting classification system.

Question 14

Which of the following is not true regarding derivatives?

Accepted Answer

A)  A derivative is a financial instrument whose value is based upon another financial instrument, stock index or interest rate, or interest rate index. 
B)  Derivatives can be classified into two general types: forward-based and option-based derivatives. 
C)  Unrealized holding gains and losses on derivatives are not recognized. 
D)  SFAS No. 133 values derivatives at fair value. 
A)  A derivative is a financial instrument whose value is based upon another financial instrument, stock index or interest rate, or interest rate index. 
B)  Derivatives can be classified into two general types: forward-based and option-based derivatives. 
C)  Unrealized holding gains and losses on derivatives are not recognized. 
D)  SFAS No. 133 values derivatives at fair value.

Question 15

The definition of assets establishes what types of economic factors will appear in the balance sheet.

Accepted Answer

A) True 
 B)False

Question 16

Explain how assets and liabilities should be classified on the balance sheet. What are the problems with this classification method?

Accepted Answer

ARB 43 requires classification of assets

Question 17

A constructive obligation is one that is implied rather than expressly written.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a true statement regarding owners' equity?

Accepted Answer

A)  APB Statement 4 and SFAC No. 6 both reflect the entity view of the firm. 
B)  Owners' equity consists of only two components: contributed capital and retained earnings. 
C)  In a sole proprietorship, there is no legal distinction between contributed capital and earned capital. 
D)  Dividends are legally paid only out of retained earnings. 
A)  APB Statement 4 and SFAC No. 6 both reflect the entity view of the firm. 
B)  Owners' equity consists of only two components: contributed capital and retained earnings. 
C)  In a sole proprietorship, there is no legal distinction between contributed capital and earned capital. 
D)  Dividends are legally paid only out of retained earnings.

Question 19

Owners' equity is defined as the stockholders' residual interest in the net assets of the firm.

Accepted Answer

A) True 
 B)False

Question 20

How should stock dividends be measured and accounted for? Is this treatment justified?

Accepted Answer

ARB 3 discusses two separate accounting

Which of the following applies to the measurement and recognition of an asset?

APB Statement 4 and SFAC No. 5 indicate that liabilities are measured at amounts established in the transaction, usually amounts to be paid it the future, but never discounted.

There is a movement in accounting policy toward fair or current values on the balance sheet.

Which of the following is a true statement?

The only method allowed by GAAP in accounting for convertible bonds is to treat the debt as conventional debt until conversion.

Manditorily redeemable financial instruments are classified as assets on the balance sheet.

The asset-liability approach complements the expense-liability approach because the former is applicable to the balance sheet and the latter is applicable to the income statement.

Although not specifically mentioned in the most recent definition of liabilities, deferred credits continue to be part of the liability section in the balance sheet under present practices.

The "future service potential" of an asset may be realized as a direct market exchange for another asset, or through conversion in a manufacturing operation for finished goods.

Which of the following is not a true statement regarding assets as they appear on the balance sheet?

Which of the following is a true statement?

An asset should be initially recorded at either its historical acquisition cost or its cash equivalent purchase price, whichever is greater.

Which of the following is a true statement?

Which of the following is not true regarding derivatives?

The definition of assets establishes what types of economic factors will appear in the balance sheet.

Explain how assets and liabilities should be classified on the balance sheet. What are the problems with this classification method?

A constructive obligation is one that is implied rather than expressly written.

Which of the following is a true statement regarding owners' equity?

Owners' equity is defined as the stockholders' residual interest in the net assets of the firm.

How should stock dividends be measured and accounted for? Is this treatment justified?

An Introduction to Accounting Theory

Accounting Theory and Accounting Research

Development of Institutional Structure of Financial Accounting

The Economics of Financial Reporting Regulation

Postulates, Principles, and Concepts

The Search for Objectives

The Fasbs Conceptual Framework

Usefulness of Accounting Information to Investors and Creditors

Uniformity and Disclosure: Some Policy Making Directions

International Accounting

The Income Statement

Statements of Cash Flows

Accounting for Inflation and Changing Prices

Income Taxes and Financial Accounting

Pensions and Other Postretirement Benefits

Leases

Intercorporate Equity Investments

Filters

Exam 11: The Balance Sheet

Which of the following applies to the measurement and recognition of an asset?

APB Statement 4 and SFAC No. 5 indicate that liabilities are measured at amounts established in the transaction, usually amounts to be paid it the future, but never discounted.

There is a movement in accounting policy toward fair or current values on the balance sheet.

Which of the following is a true statement?

The only method allowed by GAAP in accounting for convertible bonds is to treat the debt as conventional debt until conversion.

Manditorily redeemable financial instruments are classified as assets on the balance sheet.

The asset-liability approach complements the expense-liability approach because the former is applicable to the balance sheet and the latter is applicable to the income statement.

Although not specifically mentioned in the most recent definition of liabilities, deferred credits continue to be part of the liability section in the balance sheet under present practices.

The "future service potential" of an asset may be realized as a direct market exchange for another asset, or through conversion in a manufacturing operation for finished goods.

Which of the following is not a true statement regarding assets as they appear on the balance sheet?

Which of the following is a true statement?

An asset should be initially recorded at either its historical acquisition cost or its cash equivalent purchase price, whichever is greater.

Which of the following is a true statement?

Which of the following is not true regarding derivatives?

The definition of assets establishes what types of economic factors will appear in the balance sheet.

Explain how assets and liabilities should be classified on the balance sheet. What are the problems with this classification method?

A constructive obligation is one that is implied rather than expressly written.

Which of the following is a true statement regarding owners' equity?

Owners' equity is defined as the stockholders' residual interest in the net assets of the firm.

How should stock dividends be measured and accounted for? Is this treatment justified?

An Introduction to Accounting Theory

Accounting Theory and Accounting Research

Development of Institutional Structure of Financial Accounting

The Economics of Financial Reporting Regulation

Postulates, Principles, and Concepts

The Search for Objectives

The Fasbs Conceptual Framework

Usefulness of Accounting Information to Investors and Creditors

Uniformity and Disclosure: Some Policy Making Directions

International Accounting

The Income Statement

Statements of Cash Flows

Accounting for Inflation and Changing Prices

Income Taxes and Financial Accounting

Pensions and Other Postretirement Benefits

Leases

Intercorporate Equity Investments

Filters