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ACC253 FINAL EXAM

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Areas directly affected by FASB standards included all of the following except
a. financial statements
b. management's discussion and analysis
c. notes to the financial statements
d. supplementary information
b. management's discussion and analysis

 

Which of the following is not a reason for the increase in disclosure requirements?
a. accounting as a control and monitoring device
b. complexity of the business environment
c. full disclosure principle 
d. necessity for timely information
c. full disclosure principle

 

Common notes to the financial statements include disclosures for all of the following except
a. credit claims
b. equity holders' claims
c. executive compensation
d. property, plant & equipment
c. executive compensation

 

The financial statements are not corrected for
a. errors
b. illegal acts
c. related party transactions
d. irregularities
c. related party transactions

 

A subsequenty event that would require adjustment of the financial statements is the
a. sale of bonds or capital stock
b. settlement of litigation when the event causing the claim took place after the balance sheet date
c. loss of plant or inventories from a flood
d. loss on an accounts receivable resulting from a customer's bankruptcy
d. loss on an accounts receivable resulting from a customer's bankruptcy

 

An operating segment is identified as a reportable segment if
a its revenue is greater than 10% of the combined revenue of all the company's operating segments
b. its identifiable assets are greater than 10% of the combined assets of all operating segments
c. the absolute amount of its profit (loss) is 10% or more of the greater of the combined operating segments' profit or the combined operating segments' loss
d. any of the options are satisfied

c. the absolute amount of its profit (loss) is 10% or more of the 

greater of the combined operating segments' profit or the combined 

operating segments' loss

 

The FASB requires that a company report all of the following information except
a. segment assets
b. major customers
c. information about products and services
d. all of the options are reported
d. all of the options are reported

 

Which of the following statements related to interm reporting is not correct?
a. inventory market declines should not be deferred beyond the interm period unless they are temporary
b. When LIFO inventories are liquidated at an interm date and are expected to be replaced by year end, cost of goods sold should include the expected cost of replacing the liquidating LIFO base
c. Companies may use the gross profit method for annual inventory pricing, but disclosure of the method is required
d. planned variances under a standard cost system ordinarily should be deferred
c. Companies may use the gross profit method for annual inventory pricing, but disclosure of the method is required

 

Extraordinary items that occur in interim reports are
a. prorated over the 4 quarters
b. omitted from the quarterly net income
c. disclosed only by note
d. absorbed entirely in the quarter in which they occur
d. absorbed entirely in the quarter in which they occur

 

In preparing the auditor's report, the auditor follows all of the following reporting standards except the report shall
a. contain either an expression of opinion regarding the financial statements or an assertion that an opinion cannot be expressed
b. identiry circumstances in which accounting principles have not been consistently observed in the current period in relation to the prior period
c. state whether the financial statements are presented in accordance with generally accepted auditing standards
d. all of the options are followed by the auditor
c. state whether the financial statements are presented in accordance with generally accepted auditing standards

 

When the scope of the auditor's examination is limited or affected by conditions or restrictions, the auditor would
a. express an adverse opinion
b. express a qualified opinion
c. disclaim an opinion
d. issue an unqualified opinion
b. express a qualified opinion

 

Management's discussion and analysis (MD & A) section covers all of the following financial aspects of an enterprise's business except
a. capital resources
b. cash flows
c. liquidity
d. results of operations
b. cash flows

 

Propspective financial statements that present, to the best of the responsible party's knowledge and belief, an entity's expected financial position, results of operations, and cash flows is a financial 
a. estimate
b. forecast
c. projection
d. forecast or projection
b. forecast

 

Arguments for requiring published forecasts include all of the following except that
a. investment decisions are based on future expectations
b. forecasts are already circulated informally, but are uncontrolled
c. circumstances now change so rapidly that historical information is no longer adequate for prediction
d. disclosure of forecasts will be beneficial to organizations
d. disclosure of forecasts will be beneficial to organizations

 

Which of the following would not be an opportunity for fraudulent financial reporting?
a. accounting estimates, requiring significant subjective judgment
b. unusual or complex transactions
c. weak or nonexistent internal accounting controls
d. all of the options would be opportunities
d. all of the options would be opportunities

 

Which of the following should be disclosed in Summary of Significant Accounting Policies?
a. Types of executory contracts
b. Amount for cumulative effect or change in accounting principle
c. Claims of equity holders
d. Depreciation method followed
d. Depreciation method followed

 

An example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the 
a. amound of income resulting from the involuntary liquidiation of LIFO
b. major backlogs of inventory orders
c. method used for pricing inventory
d. composition of inventory into raw materials, work in process, and finished goods
c. method used for pricing inventory

 

The full disclosure principle, as adopted by the accounting profession, is best described by which of the following?
a. all information related to an entity's business and operating objectives is required to be disclosed in the financial statements
b. information about each account balance appearing in the financial statements is to be included in the notes to the financial statements
c. enough information should be disclosed in the financial statements so a person wishing to invest in the stock of the company can make a profitable decision
d. disclosure of any financial facts significant enough to influence the judgment of an informed reader
d. disclosure of any financial facts significant enough to influence the judgment of an informed reader

 

If a business entity entered into certain related party transaction, it would be required to disclose all of the following information except the
a. nature of the relationship between the parties to the transactions
b. nature of any future transactions planned between the parties and the terms involved
c. dollar amount of the transactions for each of the periods for which an income statement is presented
d. amounts due from or to related parties as of the date of each balance sheet presented
b. nature of any future transactions planned between the parties and the terms involved

 

Events that occur after 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 shoud be
a. discussed only in the MD&A section of the annual report
b. disclosed in the Notes to the Financial Statements
c. used to record an adjustment to Bad Debt Expense for the year ending December 31, 2008
d. used to record an adjustment directly to the Retained Earnings account
c. used to record an adjustment to Bad Debt Expense for the year ending December 31, 2008

 

Which of the following post balance sheet events would generally require disclosure, but no adjustment of the financial statements?
a. retirement of the company president
b. settlement of litigation when the event that gave rise to the litigation occurred prior to the balance sheet date
c. employee strikes
d. issue of a large amount of capital stock
d. issue of a large amount of capital stock

 

Which of the following subsequent events (post balance sheet events) would require adjustment of the accounts before issuance of the financial statements?
a. loss of plant as a result of fire
b. changes in the quoted market prices of securities held as an investment
c. loss on an uncollectible account receivable resulting from a customer's major flood loss
d. loss on a lawsuit, the outcome of which was deemed uncertain at year end
d. loss on a lawsuit, the outcome of which was deemed uncertain at year end

 

A segment of a business enterprise is to be reported separately when the revenues of the segment exceed 10% of the
a. total combined revenues of all segments reporting profits
b. total revenues of all the enterprise's industry segments
c. total export and foreign sales
d. combined net income of all segments reporting profits
b. total revenues of all the enterprise's industry segments

 

The profession requires disaggregated information in the following ways
a. products or services
b. geographic areas
c. major customers
d. all of these
d. all of these

 

APB Opinion No. 28 indicates that
a. all companies that issue an annual report should issue interim financial reports
b. the discrete view is the most appropriate approach to take in preparing interim financial reports
c. the 3 basic financial statments should be presented each time an interim period is reported upon
d. the same accounting princeiples used for the annual report should be employed for interim reports
d. the same accounting princeiples used for the annual report should be employed for interim reports

 

In considering interim financial reporting, how does the profession conclude that such reporting should be viewed?
a. as a "special" type of reporting that need not follow generally accepted accounting principles
b. as useful only if activity is evenly spread throughout the year so that estimates are unnecessary
c. as reporting for a basic accounting period
d. as reporting for an intergral part of an annual period
d. as reporting for an intergral part of an annual period

 

The required approach for handling extraordinary items in interm repots is to
a. prorate them over all 4 quarters
b. prorate them over the current and remaining quareters
c. change or credit the loss or gain in the quarter that it occurs
d. disclose them only in the notes
c. change or credit the loss or gain in the quarter that it occurs

 

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
a. unqualified
b. qualified
c. adverse
d. exceptional
b. qualified

 

The MD&A section of an entrerprise's annual report is to cover the following 3 items:
a. income statement, balance sheet, and statement of owners' equity
b. income statement, balance sheet, and statement of cash flows
c. liquidity, capital resources, and results of operations
d. changes in stock price, mergers, and acquisitions
c. liquidity, capital resources, and results of operations

 

Which of the following best characterizes the difference between a financial forecast and a financial projections?
a. forecasts include a complete set of financial statements, while projections include only summary financial data
b. a forecast is normally for a full year or more and a projection presents data for less than a year
c. a forecast attempts to provide information on what is expected to happen, whereas a projection may provide information on what is not necessarily expected to happen
d. a forecast includes data which can be verified about future expectations, while the data in a projection is not susceptible to verification

c. a forecast attempts to provide information on what is expected to 

happen, whereas a projection may provide information on what is not 

necessarily expected to happen

 

Theoretically, in computing the receivables turnover, the numerator should include
a. net sales
b. net credit sales
c. sales
d. credit sales
b. net credit sales

 

The rate of return on common stock equity is calculated by dividing
a. net income by average common stockholders' equity
b. net income less preferred dividends by average common stockholders' equity
c. net income by ending common stockholders' equity
d. net income less preferred dividends by ending common stockholders' equity
b. net income less preferred dividends by average common stockholders' equity

 

The payout ratio is calculated by dividing
a. dividends per share by earnings per share
b. cash dividends by net income plus preferred dividends
c. cash dividends by market price per share
d. cash dividends by net income less preferred dividends
d. cash dividends by net income less preferred dividends

 

Which of te following ratios measures long term solvency?
a. acid test ratio
b. receivables turnover
c. debt to total assets
d. current ratio
c. debt to total assets

 

The calculation of the number of times interest is earned involves dividing
a. net income by annual interest expense
b. net income plus income taxes by annual interest expense
c. net income plus income taxes and interest expense by annual interest expense
d. none of these
c. net income plus income taxes and interest expense by annual interest expense