ACC 253 FINAL EXAM 36 QUESTIONS ANSWERED.doc
ACC 253 FINAL EXAM 36 QUESTIONS ANSWERED.doc PRG211
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Date Created: 11/16/15
ACC 253 FINAL EXAM36 QUESTIONS ANSWERED 1 An accrued expense can best be described as an amount Apaid and currently matched With earnings Bnot paid and not currently matched With earnings Cnot paid and currentlv matched with earnings Dpaid and not currently matched With earnings 2 When an item of revenue is collected and recorded in advance it is normally called an revenue Aunearned B prepaid C accrued Dcash 3 When an item of expense is paid and recorded in advance it is normally called an Aestimated expense Baccrued expense Cprepaid expense Dcash expense 4 A common set of accounting standards and procedures are called Aobjectives of financial reporting Bgenerally accented accountjng principles Cfinancial accounting standards Dstatements of financial accounting concepts 5 One objective of financial reporting is to provide Ainformation that is useful in assessing cash flow Drosnects Binformation about the liquidation values of the resources held by the enterprise Cinformation about the investors in the business entity Dinformation that will attract new investors 6 The information provided by financial reporting pertains to individual business enterprises industries and an economy as a whole r her 39than to members of societv as consumers business industries rather than to individual enterprises or an economy as a whole or to 39members of society as consumers individual business enterprises rather than to industries or an economy as a whole or to 39members of society as consumers an economy as a whole and to members of society as consumers rather than to 39individual enterprises or industries 7 The Financial Accounting Foundation Aprovides information to interested parties on financial reporting issues Boversees the operations of the AICPA Coversees the onerations of the FASB works with the Financial Accounting Standards Advisory Council to provide informa tion to interested parties on financial reporting issues 8 The major distinction between the Financial Accounting Standards Board FASB and its predecessor the Accounting Principles Board APB is Aall members of the FASB possess extensive experience in financial reporting all members of the FASB are fully remunerated serve full time and are 39independent of any companies or institutions Cthe FASB issues exposure drafts of proposed standards Da majority of the members of the FASB are CPAs drawn from public practice 9 The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the AFASB BSEC C APB DAICPA 10 Limitations of the income statement include all of the following except Aitems that cannot be measured reliably are not reported Bincome measurement involves judgment Cincome numbers are affected by the accountin2 methods emploved Donly actual amounts are reported in determining net income 11 The income statement reveals Aresources and equities of a firm at a point in time Bnet earnings net income of a firm at a point in time net earnin s net income of a rm for a period of Dresources and equities of a firm for a period of time 12 Which of the following would represent the least likely use of an income statement prepared for a business enterprise Use by customers to determine a company39s ability to provide needed goods and 39services BUse by government agencies to formulate tax and economic policy CUse bv investors interested in the nancial position of the entity DUse by labor unions to examine earnings closely as a basis for salary discussions 13 The process of formally recording or incorporating an item in the financial statements of an entity is Aallocation Brealization C recognition Darticulation 14 Which of the following is not a reason why revenue is recognized at time of sale ARealization has occurred BTitle legally passes from seller to buyer CAll of these are reasons to recognize revenue at time of sale DThe sale is the critical event 15 Which of the following is not an accurate representation concerning revenue recognition Revenue from selling products is recognized at the date of sale usually interpreted to 39mean the date of delivery to customers Revenue from permitting others to use enterprise assets is recognized as time passes or 39as the assets are used CRevenue from disposing of assets other than products is recognized at the date of sale Revenue from services rendered is recognized when cash is received or when 39services have been performed 16 One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is Aan extensive use of estimates Bthe extensive use of senagnte clgssi cations Cfailure to re ect current value information Dfailure to include items of financial value that cannot be recorded objectively 17 The basis for classifying assets as current or noncurrent is conversion to cash within Athe accounting cycle or one year Whichever is longer Bthe oneratin2 cvcle or one vear whichever is longer Cthe accounting cycle or one year Whichever is shorter Dthe operating cycle or one year Whichever is shorter 18 The correct order to present current assets is ACash inventories accounts receivable prepaid items B Qsh accounts receivable inventories prepaid items CCash accounts receivable prepaid items inventories DCash inventories prepaid items accounts receivable 19 If a business entity entered into certain related party transactions it would be required to disclose all of the following information except the dollar amount of the transactions for each of the periods for which an income state 39ment is presented nature of any future transactions planned between the parties and the terms 39involved Cnature of the relationship between the parties to the transactions Damounts due from or to related parties as of the date of each balance sheet presented 20 Events that occur after the December 31 2008 balance sheet date but before the balance sheet is issued and provide additional evidence about conditions that existed at the balance sheet date and affect the realizability of accounts receivable should be used to record anadiustment to Bad Debt Expense for the vear ending December 3931 2008 Bdisclosed only in the Notes to the Financial Statements discussed only in the MDampA Management39s Discussion and Analysis section of the 39annual report Dused to record an adjustment directly to the Retained Earnings account 21 The full disclosure principle as adopted by the accounting profession is best described by which of the following Enough information should be disclosed in the financial statements so a person 39Wishing to invest in the stock of the company can make a profitable decision Information about each account balance appearing in the financial statements is to be 39included in the notes to the financial statements All information related to an entity39s business and operating objectives is required to be 39disclosed in the financial statements Disclosure of any nancial facts signi cant enough to in uence the iudgment of 39gn informed reader 22 The MDampA section of an enterprise39s annual report is to cover the following three items Aliguidity capital resources and results of Operations Bincome statement balance sheet and statement of cash ows Cincome statement balance sheet and statement of owners39 equity Dchanges in the stock price mergers and acquisitions 23 If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole the opinion is said to be Aunqualified B adverse C gualified Dexceptional 24 Which of the following best characterizes the difference between a financial forecast and a financial projection Forecasts include a complete set of financial statements while projections include only 39summary financial data A forecast attempts to provide information on whiis expected to happen Bwhereas a proiection may provide information on whiis not necessarilv expected to happen A forecast is normally for a full year or more and a projection presents data for less 39than a year D A forecast includes data which can be verified about future expectations while the data 39in a projection is not susceptible to verification 25 Theoretically in computing the receivables turnover the numerator should include Anet sales B sales Cnet credit sales Dcredit sales 26 Which of the following ratios measures longterm solvency AAcidtest ratio BDebt to total assets CReceivables turnover DCurrent ratio 27 The rate of return on common stock equity is calculated by dividing Anet income by average common stockholders39 equity Bnet income by ending common stockholders39 equity Cnet income less preferred dividends bv average common stockholders39 equity Dnet income less preferred dividends by ending common stockholders39 equity 28 The primary purpose of the statement of cash ows is to provide information Aabout the operating investing and financing activities of an entity during a period B21bout the cash receipts and cash Davments of an entitv during a period Cthat is useful in assessing cash ow prospects about the entity39s ability to meet its obligations its ability to pay dividends and its 39needs for external financing 29 The first step in the preparation of the statement of cash ows requires the use of information included in Which comparative financial statements AStatements of cash ows BIncome statements CBalance sheets DStatements of retained earnings 30 To arrive at net cash provided by operating activities it is necessary to report revenues and expenses on a cash basis This is done by eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash estimating the percentage of income statement transactions that were originally Breported on a cash basis and projecting this amount to the entire array of income statement transactions eliminating all transactions that have no current or future effect on cash such as 39depreciation from the net income computation rerecording all income statement transactions that directly affect cash in a separate 39cash ow journal 31 The amortization of bond premium on longterm debt should be presented in a statement of cash ows using the indirect method for operating activities as an Ainvesting activity B deduction from net income Cfinancing activity Daddition to net income 32 In determining net cash ow from operating activities a decrease in accounts payable during a period Areauires an increwdiusgment to cost of goods sold under the direct methid Brequires an addition adjustment to net income under the indirect method Crequires a decrease adjustment to cost of goods sold under the direct method Dmeans that income on an accrual basis is less than income on a cash basis 33 In reporting extraordinary transactions on a statement of cash ows indirect method the Anet of tax amount of an extraordinary gain should be deducted from net income Bnet of tax amount of an extraordinary gain should be added to net income C gross amount of an extraordinary gain should be added to net income D2ross amount of an extraordinary gain should be deducted from net income 34 Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of the asset obtained or liability owed at the date of incurrence A tenyear 8 bond is issued on January 2 with interest payable semiannually on July 391 and January 1 yielding 7 A capital lease is entered into with the initial lease payment due one month subse quent to the signing of the lease agreement A tenyear 8 bond is issued on January 2 with interest payable semiannually on July 391 and January 1 yielding 9 A capital lease is entered into with the initial lease Davment due upon the signing 39of the lease agreement 35 Which of the following tables would show the smallest value for an interest rate of 5 for six periods AFuture value of an ordinary annuity of 1 BPresent value of 1 CPresent value of an ordinary annuity of 1 DFuture value of 1 36 Which table would show the largest factor for an interest rate of 8 for five periods AFuture value of all annuity due of 1 BPresent value of an ordinary annuity of 1 CPresent value of an annuity due of l DFuture value of an ordinary annuity of 1
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