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a) Cash
b) Debtors
c) Owner’s equity
d) Tax owed
e) None of the above
Ans.
d
Ans.
b
4 The financial statement that reports the revenues and expenses for a period of time such as a
year or a month is the
a. Balance Sheet
b. Income Statement
c. Statement Of Cash Flows
Ans. b
5. The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at
a specific date is the
a. Balance Sheet
b. Income Statement
c. Statement Of Cash Flows
ans. a
6. Under the accrual basis of accounting, revenues are reported in the accounting period when
the
a. Cash Is Received
b. Service Or Goods Have Been Delivered
ans. b
7. Under the accrual basis of accounting, expenses are reported in the accounting period when
the
a. Cash Is Paid
b. Expense Matches The Revenues Or Is Used Up
c. Revenues minus expenses equals
ans. b
.
8. Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on
balance sheet and are referred to as
a. Asset
b. Liability
c. Owner equity
Ans. a
Cost
Current Market Value
Expected Selling Price
a. Asset
b. Liability
c. Stockholders' (Owner's) Equity
ans. b
a. One
b. Two
c. Three
ans. b
11. Which term is associated with "left" or "left-side"?
a. Debit
b. Credit
Ans. a
a. Debit
b.Credit
ans. b
a. Debited
b. Credited
ans. a
a. Debited
b. Credited
ans. b
a. Debit
b. Credit
ans. a
16. What will usually cause the liability account Accounts Payable to increase?
a. Debit
b. Credit
ans. b
17. Entries to expenses such as Rent Expense are usually
a. Debits
b. Credits
ans. a
a. Debits
b. Credits
ans. B
19. The personal assets of the owner of a company will not appear on the company's balance
sheet because of which principle/guideline?
a. Cost
b. Economic Entity
c. Monetary Unit
ans. b
20. Which principle/guideline requires a company's balance sheet to report its land at the
amount the company paid to acquire the land, even if the land could be sold today at a
significantly higher amount?
a. Cost
b. Economic Entity
c. Monetary Unit
21. Which principle/guideline allows a company to ignore the change in the purchasing power of
the dollar over time?
a. Cost
b. Economic Entity
c. Monetary Unit
ans. c
22. Which principle/guideline requires the company's financial statements to have footnotes
containing information that is important to users of the financial statements?
a. Conservatism
b. Economic Entity
c. Full Disclosure
ans. C.
23. Which principle/guideline justifies a company violating an accounting principle because the
amounts are immaterial?
a. Conservatism
b. Full Disclosure
c. Materiality
ans. c.
24. Which principle/guideline is associated with the assumption that the company will continue
on long enough to carry out its objectives and commitments?
a. Economic Entity
b. Going Concern
c. Time Period
ans. B.
25. A very large corporation's financial statements have the dollar amounts rounded to the
nearest $1,000. Which accounting principle/guideline justifies not reporting the amounts to the
penny?
a. Full Disclosure
b. Materiality
c. Monetary Unit
ans. b
26. Accountants might recognize losses but not gains in certain situations. For example, the
company might write-down the cost of inventory, but will not write-up the cost of inventory.
Which principle/guideline is associated with this action?
a. Conservatism
b. Materiality
c. Monetary Unit
ans. A
.
27. Which principle/guideline directs a company to show all the expenses related to its revenues
of a specified period even if the expenses were not paid in that period?
a.Cost
b. Matching
c. Monetary Unit
ans. b
28. When the accountant has to choose between two acceptable alternatives, the accountant
should select the alternative that will report less profit, less asset amount, or a greater liability
amount. This is based upon which principle/guideline?
a. Conservatism
b. Cost
c. Materiality
Ans. a
29. Public utilities' balance sheets list the plant assets before the current assets. This is acceptable
under which accounting principle/guideline?
a. Conservatism
b. Cost
c. Industry Practices
30. A large company purchases a $250 digital camera and expenses it immediately instead of
recording it as an asset and depreciating it over its useful life. This practice may be acceptable
because of which principle/guideline?
a. Cost
b. Matching
c. Materiality
ans. C
31. A corporation pays its annual property tax bill of approximately $12,000 in one payment
each December 28. During the year, the corporation's monthly income statements report Property
Tax Expense of $1,000. This is an example of which accounting principle/guideline?
a. Conservatism
b. Matching
c. Monetary Unit
ans. B.
32. A company sold merchandise of $8,000 to a customer in December. The company's sales
terms require the customer to pay the company in 30 days. The company's income statement
reported the sale in December. This is proper under which accounting principle/guideline?
a. Full Disclosure
b. Monetary Unit
c. Revenue Recognition
ans. C.
a. Cost
b. Full Disclosure
c. Matching
ans. C.
34. The creative chief executive of a corporation who is personally responsible for numerous
inventions and innovations is not reported as an asset on the corporation's balance sheet. The
accounting principle/guideline that prevents the corporation for reporting this person as an asset
is
a. Conservatism
b. Cost
c. Going Concerns
ans. B.
35. An asset with a cost of $120,000 is depreciated over its useful life of 10 years rather than
expensing the entire amount when it is purchased. This complies with which principle/guideline?
a. Cost
b. Full Disclosure
c. Matching
ans. C.
36. Near the end of the current year, a company required a customer to pay $200,000 as a deposit
for work that is to begin in the following year. At the end of the current year the company
reported the $200,000 as a liability on its balance sheet. Which accounting principle/guideline
prevented the company from reporting the $200,000 on its income statement for the current
year?
A. Going Concern
b. Materiality
c. Revenue Recognition
ans. C.
37. A retailer wishes to report its merchandise inventory on its balance sheet at its retail value.
This would violate which accounting principle/guideline?
a. Cost
b. Full Disclosure
c. Monetary Unit
38. A company borrowed $100,000 in December and will make its only payment for interest
when the note comes due six months later. The total interest for the six months will be $3,600.
On the December income statement the accountant reported Interest Expense of $600. This
action was the result of which accounting principle/guideline?
a. Cost
b. Matching
c. Revenue Recognition
Ans. B
38. On Jan 2, 2014, Hope, Inc. acquired 20% of the outstanding ordinary shares of peace company for
700,000. This investment gave hope the ability to exercisw significant influence over peace. the BV of
the acquired shares was 600,00. The excess of cost over BV was attributed to a attributed to a
depreciable asset which was undervalued on Peace's balance sheet and which had ten years useful life
remaining. For the year ended December 31, 2014. Peace reportede net incommme after tax of
180,000, underealizeed gain on its investment at FV to OCI of 100,000; remeasurement loss on defined
benefit pension plan of 200,000 and paid cash dividends of 60,000 on its ordinary.
How much is the carrying value of Hope's invesment in Peace at December 31,2014?
a. 678,000 c. 714,000
b. 694,000 d. 717,200
On January, 2, 2015, Bibo Company sold equipment with a carrying amount of 480,000 in exchange for
a 600,000 non- interest bearing note due january 2, 2018. There was no established exchange price for
the equipment. the prevailing rate of interest for a note of this type at january 2,2015 was 10%. The
present value of 1 at 10& for three periode is 0.7513.
39. How much should Bibo Comp, report as interest income in its 2015 profit or Loss?
a. 45,078 c. 54,544
b. 49,586 d. 60,000
40. How much should Bibo Comp, report as gain or loss on sale of equipment in its 2015 profit or Loss?
41. What is the carrying amount of the note receivable as of December 31,2015 statement of financial
Position?
a. 450,780 c. 545,444
b. 495, 588 d. 600,000
42. The accumulated Profits and Losses accounts of Jonathan Company shows the ff. postings:
Debit:
Credit:
What is the correct balance of the accumulated profits account to be reported in the company's year-
end financial statements?
a. 691,000 c. 2,241,000
b. 2,091,000 d. 2,910,000
43. Michael Company's financial asset measured at FV to profit or loss has a carrying amount of
1,960,000 was transferred to a third party, subject to a put option whereby the transferee can compel
Michael to reacquire the asset for 2,000,000. on Jan,1, 2014, which is the date of transfer, Michael
recieved 2,120,000 representing the FV of the asset and the time value of the option as a result of the
transfer of the financial asset. On December 31, 2014, the FV of the financial asset is 1,800,000 and the
time value of the option is 100,000.
what amount of net loss should Michael Company report in its December 31,2014 profit or Loss related
to the financial assets and related financial liability?
a. None c. 140,000
b. 100,000 d. None of the above
On January, 2014, A company acquired a 30% interest in B Company at a cost of 1,000,000, investor A
Company has significant influence over B company, the associate has net assets of 2,000,000 at the date
of acquisition, which have a fair value of 2,400,000. During the year ended December 31,2014, B
company reported a post-tax profit of 400,000 and paid dividend of 36,000. B company also recognized
foreign transaction losse of 80,000 in other comprehensive income.
On January 2, 2015, B Company has right issue that investor A company does not participate in. The
right issue brings in a additional 300,000 in cash and dilutes investor A company's interest in B company
to 25%.
44. What amount of dilution gain or loss should A Company recognize on Jan, 2, 2015 assuming
goodwill is not included in the carrying amount of investment deemed disposed of?
a. None c. 63,200
b. 59,200 d. 75,000
45. What amount of dilution gain or loss should A Company recognize on Jan, 2, 2015 assuming the
deemed disposal of investment is considered as "true Disposal"
a. None c. 109,866
b. 105,866 d. 180,866
46. On Jan 2, 2013, Melody Corporation purchased photocopying machinr cost of 300,000. This machine
was estimated to have a five-year life with no salvage value and was depreciated by the straight-line
method. On Jan 4, 2016, Melody determined that this machine could no longer work efficiently, that its
value had been permanently impaired, and 90,000 could be recovered over the remaining useful lie of
the machine. In its December 31, 2016 balance sheet, how much should Melody report as carrying value
of machine?
a. 45,000 c. 90,000
b. 50,000 d. 150,000
On January 30, 2014, a fire in Beauty Company's plant caused a total loss to a production machine. the
machine was being depreciated at 20,000 annually and had a carrying amount of 160,000 at December
31, 2013. On the date of the fire, the FV of the machine was 220,000. Beauty received insurance
proceeds of 200,000 on December 1, 2014.
47. What amount of loss due to depreciation should the company recognize in its profit or loss for the
year ended December 31, 2014?
a. None c. 150,000
b. 20,000 d. 160,000
48. What amount of gain from the insurance company that should be recognized in Beauty's profit or
Loss for the year ended December 31,2014?
a. None c. 200,000
b. 50,000 d. 220,000
49. Barney Company reported in the income statement for the current year 900,000 income before
provision for the income tax.
What is the current provision for income tax for the current year?
a. 270,000 c. 210,000
b. None of the above d. 225,000
On January 1, 2015, Than Company established a share appreciation rights plan for the executives. The
plan entitled them to receive cash at any time during the next four years for the difference between the
market price of the ordinary share and a pre- established price of 20 on 60,000 share appreciation rights
of SARs. On December 31, 2017, 20,000 SARs are exercised by executives.
Market price
January 1, 2015 25 per share
December 31, 2015 28 per share
December 31,2016 35 per share
December 31, 2017 30 per share
50. What is the amount of compensation expense should be recognized for 2015?
a. 480,000 c. 300,000
b. 120,000 d. 180,000
51. What amount of compensation expense should be recognized for 2016?
a. 900,000 c. 105,000
b. 420,000 d. 225,000
52. What amount should be recognized as accrued liability for share appreciation rights on December
31, 2017?
52. In the annual report, where would a financial statement reader find out if the
company’s financial statements give a fair depiction of its financial position and
operating results?
a. Notes to the financial statements
b. Management discussion and analysis section
c. Balance sheet
d. Auditor’s report
e. None of the options listed
____
53. Which accounting assumption assumes that an enterprise will continue in
operation
long enough to carry out its existing objectives and commitments?
a. Monetary unit assumption
b. Economic entity assumption
c. Time period assumption
d. Going concern assumption
e. None of the options listed
Johnny’s Car Repair Shop started the year with total assets of $60,000 and total
liabilities of $40,000. During the year the business recorded $100,000 in car repair
revenues, $55,000 in expenses, and dividends of $10,000.
56. If beginning capital was $25,000, ending capital is $37,000, and the owner's
withdrawals were $23,000, the amount of net income or net loss for the period was:
a. net loss of $35,000
b. net income of $35,000
c. net income of $14,000
d. net loss of $14,000
e. none of the options listed
____
57. The deferred income tax liability:
a. Represents income tax payments that are
deferred until future years because of temporary
differences between GAAP rules and tax accounting rules.
b. Is a contingent liability.
c. Can result in a deferred income tax asset.
d. is never recorded.
e. Is recorded whether or not the difference
between taxable income and financial accounting
income is permanent or temporary.
58. A company normally sells it products for $20 per unit,which includes a profit
margin of 25%. However, the selling price has fallen to $15 per unit. This company'
s current inventory consists 200 units purchased at $16 per unit. Replacement cost has
now fallen to $13 per unit. Calculate the value of inventory at the lower of
cost or market.
a. $2,550.
b. $2,600.
c. $2,700.
d. $3,000.
e. $3,200.
____
58. A measure of profitability is the
a. current ratio.
b. debt to total assets ratio.
c. return on assets ratio.
d. working capital.
e. none of the options listed
____
59. Working capital is a measure of
a. consistency.
b. liquidity.
c. profitability.
d. solvency.
e. none of the options listed
65. A company began the accounting period with $50,000 in owner’s capita
l, ended with $75,000 in owner’s capital, and the owner withdrew $30,000 during the
period for personal use. What was the company’s net income or loss for the period?
a. $55,000 net income
b. $30,000 net loss
c. $5,000 net loss
d. $5,000 net income
e. none of the options listed