Question 1

Which of the following assets is NEVER expensed on the Statement of Income?

Accepted Answer

A)  land 
B)  building 
C)  inventory 
D)  equipment

Question 2

The return on assets = net income ÷ average total assets.

Accepted Answer

A) True 
 B)False

Question 3

How is cash invested by shareholders in exchange for shares initially recorded in the accounting records?

Accepted Answer

A)  as an increase in retained earnings, and an increase in cash 
B)  as an increase in long-term investments, and a decrease in cash 
C)  as an increase in common shares, and a decrease in cash 
D)  as an increase in common shares, and an increase in cash

Question 4

The template method can only be used by large companies.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would be the effect of a transaction to expense prepaid rent for the period?

Accepted Answer

A)  increase Prepaid Rent, decrease Rent Expense 
B)  increase Rent Expense, decrease Cash 
C)  increase Prepaid Rent, decrease Cash 
D)  increase Rent Expense, decrease Prepaid Rent

Question 6

When $10,000 of inventory is purchased with a six-month note payable bearing 4% interest, the inventory has a total cost of

Accepted Answer

A)  $10,400. 
B)  $10,000. 
C)  $10,200. 
D)  $9,800.

Question 7

Which of the following enhancing characteristics is achieved if a third party, with sufficient understanding, would arrive at a similar result to that used by the company?

Accepted Answer

A)  comparability 
B)  understandability 
C)  timeliness 
D)  verifiability

Question 8

A declaration of dividends results in an increase in liabilities and a decrease in shareholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

Accumulated depreciation is deducted when calculating net income.

Accepted Answer

A) True 
 B)False

Question 10

Revenue recognition criteria are necessary to determine when to recognize revenue when using both accrual and cash accounting methods.

Accepted Answer

A) True 
 B)False

Question 11

The sales of merchandise on credit will cause the retained earnings and long term liabilities accounts to increase.

Accepted Answer

A) True 
 B)False

Question 12

The objective of both IFRS and ASPE is to allow financial reporting that is useful to the financial statement users.

Accepted Answer

A) True 
 B)False

Question 13

Public companies are prohibited from being cross listed.

Accepted Answer

A) True 
 B)False

Exam 2: Nalyzing Transaction and Their Effect on Financial Statement

Which of the following assets is NEVER expensed on the Statement of Income?

The return on assets = net income ÷ average total assets.

How is cash invested by shareholders in exchange for shares initially recorded in the accounting records?

The template method can only be used by large companies.

Which of the following would be the effect of a transaction to expense prepaid rent for the period?

When $10,000 of inventory is purchased with a six-month note payable bearing 4% interest, the inventory has a total cost of

Which of the following enhancing characteristics is achieved if a third party, with sufficient understanding, would arrive at a similar result to that used by the company?

A declaration of dividends results in an increase in liabilities and a decrease in shareholders' equity.

Accumulated depreciation is deducted when calculating net income.

Revenue recognition criteria are necessary to determine when to recognize revenue when using both accrual and cash accounting methods.

The sales of merchandise on credit will cause the retained earnings and long term liabilities accounts to increase.

The objective of both IFRS and ASPE is to allow financial reporting that is useful to the financial statement users.

Public companies are prohibited from being cross listed.