ACC 253 FINAL EXAM 50 QUESTIONS ANSWERED.doc
ACC 253 FINAL EXAM 50 QUESTIONS ANSWERED.doc PRG211
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Date Created: 11/16/15
ACC 253 FINAL EXAM….50 QUESTIONS ANSWERED 1. Three major organizations in the private and public sector develop U.S. and international GAAP. They include all of the following except the (Points: 4) EU (European Union) SEC (Securities and Exchange Commission) FASB (Financial Accounting Standards Board) IASB (International; Accounting Standards Board) 2. The purposes of the joint longterm project of the FASB and IASB to converge revenue recognition principles include all of the following except (Points: 4) eliminate inconsistencies in conceptual guidance on revenues replace principlebased accounting with rulebased accounting for revenues establish a single comprehensive standard on revenue recognition fill voids in revenue recognition guidance 3. Certain U.S. accounting standards have been, and will be, amended to aid in the international convergence process. The process of changing these standards usually involves (Points: 4) a short deliberation followed by a vote of the U.S. Congress acceptance of the change by the Internal Revenue Service rejecting all existing standards and developing an entirely new concept selecting the best standard between existing U.S. and international standards 4. Conversion to IFRS reporting by all U.S. companies would be best accomplished with a transition plan for all of the following reasons except (Points: 4) it would have to be a multiyear process it needs to be an orderly process with a minimum of cost and disruption to the participants certain IFRS need further improvement through continued convergence efforts careful planning would enable maximum manipulation of the IFRS for the financial benefit of the United States. 5. Representational faithfulness is a relationship between the reported accounting measurements or descriptions and the economic resources, obligations, and the transactions and events causing changes in these items. This is important because the (Points: 4) bias associated with financial measurements can be reduced validity of accounting data is an important economic resource accounting information is relevant for all decisions financial information is faithfully reported in the accounting records 6. The IASB and FASB boards have agreed that the objective of general purpose financial reporting is to provide (Points: 4) financial information about a company that is useful to external users in making decisions in their capacity as capital providers mainly cash flow information about a company that is useful to external users in making decisions in their capacity as capital providers financial information about a company that is useful to internal users in making decisions in their capacity as capital custodians financial information about a company that is useful to government regulators in making decisions in their capacity as capital markets monitors 7. The IASB and FASB joint boards feel that financial reporting should (Points: 4) be general purpose be useful in assessing a company’s future cash flows provide information on an accrual basis all of these are true 8. The joint IASB and FASB boards identified several “enhancing” characteristic of financial information including (Points: 4) comparability, verifiability, timeliness, and understandability materiality, verifiability, timeliness, and understandability comparability, verifiability, timeliness, and materiality comparability , relevance, timeliness, and understandability 9. Similar to the constraints in the FASB’s qualitative characteristics, the joint IASB/FASB boards have identified two constraints including (Points: 4) benefits that justify the costs and consistency benefits that justify the costs and materiality consistency and materiality objectivity and materiality 10. The joint IASB/FASB qualitative characteristics Exposure Draft identifies a logical order in which to evaluate the qualities. That order (first, second, third) is (Points: 4) faithful representation, relevance, enhancing characteristics relevance, enhancing characteristics, faithful representation relevance, faithful representation, enhancing characteristics enhancing characteristics, relevance, faithful representation 11. An organization will typically utilize a subsidiary ledger to (Points: 4) make sure all debits equal credits make it easier to handle cash received from customers keep customer accounts up to date record customer credit sales outside of the normal double entry system 12. The total of the individual customer account balances should equal the balance in accounts receivable, which is the (Points: 4) control account master account nominal account contra account 13. Which of the following transactions would be recorded in a sales journal of the type illustrated in the text? (Points: 4) customer return of merchandise originally bought on credit customer purchase of merchandise for cash sale by a used car dealer of part of the property surrounding his display lot customer purchase of merchandise on credit terms 14. Marge Company has all of the special journals that were described in your text (other than the voucher register) as a part of its accounting system. Which of the following journal entries would therefore be recorded in Marge's general journal? (Points: 4) an entry to record the sale of merchandise on credit an entry to record the sale of inventory on credit an entry to record the return of defective purchased merchandise for credit an entry to record a cash purchase of inventory 15. Which statement is true? (Points: 4) All purchases should be recorded in a purchases journal. Closing and reversing entries will be found in the sales journal. Returned merchandise from a customer should be entered in the sales journal. All cash sales should be recorded in the cash receipts journal. 16. Which statement is not true? (Points: 4) The general journal is still a necessity, even when special journals are used. If a cash payments journal is in use, postings are usually made only at the end of the month. All transactions involving the receipt of cash are recorded in the cash receipts journal. A purchase of a desk calculator for the office should not be recorded in the purchases journal. 17. The Clipper, Inc., uses the accrual basis of accounting. Clipper's rent expense account had a $14,000 balance at the end of the year. The prepaid rent account had a $5,000 balance at the beginning of the year and a $7,000 balance at the end of the year. How much cash was paid for rent during the year? (Points: 4) $7,000 $9,000 $12,000 $16,000 18. The Waller Company uses the accrual basis of accounting. Waller Company's wages expense account had a $510,000 balance at the end of the year. The wages payable account had a $23,000 balance at the beginning of the year and a $45,000 balance at the end of the year. How much cash was paid for wages during the year? (Points: 4) $488,000 $510,000 $532,000 $555,000 19. The Slaughter Company uses the cash basis of accounting. Slaughter Company collected $850,000 from its customers during 2010. Customers owed Slaughter $50,000 of accounts receivable at the beginning of 2010, and $90,000 of accounts receivable at the end of 2010. What is Slaughter’s sales revenue for 2010 under the accrual basis of accounting? (Points: 4) $810,000 $850,000 $890,000 $940,000 20. All of the following are examples of subsequent events that would be disclosed in the footnotes to the financial statements except (Points: 4) fire or flood loss a litigation settlement a bond issuance after the balance sheet date the inability to collect a major customer's accounts receivable 21. According to APB Opinion No. 22, the initial note to the financial statements should describe (Points: 4) the calculation of comprehensive income the significant concentrations of credit risk the significant accounting policies the objectives of holding derivatives and the strategies for achieving them 22. A reader might find information about gain contingencies in an annual report by examining (Points: 4) a contingent account receivable an accrued revenue a deferred revenue footnote disclosures 23. GAAP requires that all derivative financial instruments be reported at their (Points: 4) historical cost fair value present value par value 24. Activities between affiliated entities such as subsidiaries must be disclosed in the financial statements of a corporation as (Points: 4) segment analysis significant relationships relatedparty transactions contingent activities 25. The SEC established integrated disclosures to (Points: 4) establish full disclosure demonstrate its legal authority to establish GAAP satisfy the form 10K disclosure requirements control Management’s Discussion and Analysis 26. When is a company not required to report comprehensive income? (Points: 4) when it has a net operating loss when it has no other comprehensive income items when it has no extraordinary items when it has no priorperiod adjustments 27. A company is required to report earnings per share on Net Income Comprehensive Income (Points: 4) Yes Yes No No Yes No No Yes 28. The statement of cash flows is least likely to help external users to assess (Points: 4) a company's ability to generate positive future cash flows the amount of a company's future accrualbased sales revenue a company's ability to meet its obligations and pay dividends a company's need for external financing 29. Which of the following sections will not appear in the statement of cash flows? (Points: 4) operating activities investing activities financing activities selling activities 30. Which of the following statements regarding a statement of cash flows is not true? (Points: 4) The most common method for reporting operating activities is the direct method. Operating activities include all transactions and other events related to the earnings process. It requires a reconciliation of beginning and ending cash balances. It helps users to assess a company's need for external financing. 31. Garcia Company began 2010 with net assets of $80,000. Net income calculated by using the capital maintenance concept was $21,000. During 2010 owners contributed $26,000 of new capital. By yearend, the net assets totaled $78,000. Dividends to the owners during 2010 were (Points: 4) $49,000 $28,000 $23,000 $2,000 32. Comprehensive income includes the following changes in equity in a company during a period except (Points: 4) transactions with nonowners events relating to nonowner sources circumstances relating to nonowner sources distributions to owners 33. Characteristics of risk as they relate to the uncertainty or unpredictability of the future results of a company include (Points: 4) the greater the risk, the higher the rate of return expected by investors risk increases as the range and timeframe within which future results are likely to fall increases risk increases as the range and timeframe within which future results are likely to fall decreases the greater the risk, the higher the rate of return expected by creditors 34. The following information relates to the Smith Company: What is the unadjusted January 1, 2010, balance in retained earnings? (Points: 4) $1,170 $1,320 $1,470 $1,630 35. IFRS content in the income statement is similar to U.S. GAAP in all of the following areas except the disclosure of (Points: 4) revenues finance costs extraordinary items tax expense 36. IFRS reporting requires all of the following items except (Points: 4) earnings per share disclosure comprehensive income disclosure in a statement of stockholders’ equity disclosure of the results of discontinued operations operating expenses disclosure 37. Differences that currently exist between IFRS and U.S. GAAP with regard to the presentation of information on the income statement include all of the following except (Points: 4) different acceptable terminology relating to revenue items depreciation measures differ when equipment has been revalued different performance measures such as EBITDA are permitted under IFRS differences resulting because IFRS does not require the use of accrual accounting under the historical cost framework 38. The Philip Company had the following information available for the fiscal year ended December 31, 2010: Philip's inventory turnover for 2010 was (Points: 4) 3 times 4 times 5.33 times 6 times 39. The following information was obtained from the records of Trophy Company for 2010: How many times was interest earned in 2010? (Points: 4) 1.25 times 1.75 times 2.75 times 32.5 times 40. Monroe Company reported the following information for the year ended December 31, 2010: Monroe's earnings per share for 2010 was (Points: 4) $6.67 $6.00 $5.11 $0.15 41. Full disclosure is desirable for all of the following reasons except (Points: 4) it helps to prevent the inappropriate use of insider information it helps financial markets to operate more efficiently it helps financial markets to operate more cost effectively it eliminates the need for financial analysis 42. Extensible Business Reporting Language (XBRL) (Points: 4) is limited to the manual comparison of data reported in the SEC 10K report. is expected to complete the development of its system of “tags” for all U.S. GAAP in 10 years. enables recognition and extraction of items of information for various analytical purposes has been applied extensively by financial analysts for over 30 years 43. On September 1, 2010, the Baker Company received $44,940 from 4Most Finance Company. To pay off this loan, the Baker Company will have to pay 4Most $10,000 each year for 10 years. The first payment is due September 1, 2011. Which interest rate compounded annually is Baker paying on this loan? (Points: 4) 12% 15% 18% 24% 44. In the present value of an annuity table, the factors (Points: 4) increase as the interest rates increase decrease as the periods increase remain the same as the periods increase decrease as the interest rates increase 45. On January 31, 2010, Richie Company acquired a new machine by paying $40,000 cash and agreeing to pay $20,000 annually for three years, beginning on January 31, 2011. Assuming an interest rate of 10%, Richie should record the acquisition cost of the machine on January 31, 2010, at (Points: 4) $100,000 $94,712 $89,738 $62,092 46. Paul’s Painting Co. acquired a new $800,000 press on April 1, 2010. Paul’s will make six equal payments based upon 8% compound interest, starting on March 31, 2011. How much will each payment be? (Points: 4) $504,136 $173,056 $160,234 $109,052 47. Which of the following methods may not be appropriate for estimating bad debt expense? (Points: 4) percentage of net credit sales percentage of outstanding accounts receivable aging of accounts receivable percentage of sales 48. When an uncollectible account is written off under the estimated bad debts method, it (Points: 4) decreases net income increases working capital increases the accounts receivable net realizable value leaves total assets unchanged 49. When a company writes off an account receivable using the direct writeoff method, the effect of this writeoff on the financial statements is to (Points: 4) increase the net realizable value of accounts receivable reduce total expenses reduce total assets increase working capital 50. Which of the following is not a disadvantage of using the direct writeoff method for recording uncollectible accounts? (Points: 4) reports actual losses violates the matching principle allows manipulation of income overstates accounts receivable
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