MULTIPLE CHOICE

36. The financial statements most frequently provided include all of the following except the
a. statement of financial position.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.

37. All the following are differences between financial and managerial accounting in how
accounting information is used except to
a. plan and control company's operations.
b. decide whether to invest in the company.
c. evaluate borrowing capacity to determine the extent of a loan to grant.
d. All of these answers are differences.

38. Which of the following represents a form of communication through financial reporting but
not through financial statements?
a. Statement of financial position.
b. President's letter.
c. Income statement.
d. Notes to financial statements.

39. The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization’s operations is
called
a. financial accounting.
b. managerial accounting.
c. tax accounting.
d. auditing.

40. The major financial statements include all of the following except:
a. Statement of financial position.
b. Statement of changes in financial position.
c. Statement of comprehensive income.
d. Statement of changes in equity.

41. Which of the following statements is true?

a. Over 149 jurisdictions require or permit use of International Financial Reporting
Standards (IFRS).
b. Canada is the most significant holdout from use of International Financial Reporting
Standards (IFRS).
c. Nearly 50% of investors in the United States own foreign securities, either directly or
through funds.
d. To facilitate efficient capital allocation, investors need relevant information stated in a
common currency.

42. How does accounting help the capital allocation process attract investment capital?
a. Provides timely, relevant information.
 b. Encourages innovation.
c. Promotes productivity.
d. Provides timely, relevant information and encourages innovation.

43. An effective capital allocation process

a. promotes productivity.
b. encourages innovation.
c. provides an efficient market for buying and selling securities.
d. All of these answers are correct.

44. What would be an advantage of having all countries adopt and follow the same accounting
standards?
a. Consistency.
b. Comparability.
c. Lower preparation costs.
d. Comparability and lower preparation costs

45. General-purpose financial statements are the product of

a. financial accounting.
b. managerial accounting.
c. both financial and managerial accounting.
d. neither financial nor managerial accounting.

46. Users of financial reports include all of the following except:

a. creditors.
b. government agencies.
c. unions.
d. All of these are users.

47. The information provided by financial reporting pertains to

a. individual business enterprises, rather than to industries or an economy as a whole or
to members of society as consumers.
b. business industries, rather than to individual enterprises or an economy as a whole or
to members of society as consumers.
c. individual business enterprises, industries, and an economy as a whole, rather than to
members of society as consumers.
d. an economy as a whole and to members of society as consumers, rather than to
individual enterprises or industries.

48. What is the major objective of financial reporting?

a. Provide information that is useful to management in making decisions.
b. Provide information that clearly portray nonfinancial transactions.
c. Provide information that is useful to present and potential equity investors, lenders,
and other creditors in making decisions..
d. Provide information that excludes claims to the resources.

49. Which of the following statements is not an objective of financial reporting?

a. Provide information that is useful in investment and credit decisions.
b. Provide information about enterprise resources, claims to those resources, and changes
to them.
c. Provide information on the liquidation value of an enterprise.
 d. Provide information that is useful in assessing cash flow prospects.

50. Accrual accounting is used because

a. cash flows are considered less important.
b. it provides a better indication of ability to generate cash flows than the cash basis.
c. it recognizes revenues when cash is received and expenses when cash is paid.
d. None of these answers are correct.

51. One element of the objective of financial reporting is to provide

a. information about the investors in the business entity.
b. information about the liquidation values of the resources held by the enterprise.
c. information that is useful in assessing cash flow prospects.
d. information that will attract new investors.

52. As part of the objective of general-purpose financial reporting, there is an emphasis on

“assessing cash flow prospects.” Under International Financial Reporting Standards (IFRS)
this is interpreted to mean:
a. Cash basis accounting is preferred over accrual based accounting.
b. Information about the financial effects of cash receipts and cash payments is
generally considered the best indicator of a company’s present and continuing ability
to generate favorable cash flows.
c. Over the long run, trends in revenues and expenses are generally more meaningful
than trends in cash receipts and disbursements.
d. All of the choices are correct regarding “assessing cash flow prospects” under IFRS.

53. What is due process in the context of standard setting at the IASB?
a. IASB operates in full view of the public.
b. Public hearings are held on proposed accounting standards.
c. Interested parties can make their views known.
d. All of these answers are correct.

54. Which of these statements regarding the IFRS and U.S. GAAP is correct?
a. U.S. GAAP is considered to be "principles-based" and more detailed than IFRS.
b. U.S. GAAP is considered to be "rules-based" and less detailed than IFRS.
c. IFRS is considered to be "principles-based" and less detailed than U.S. GAAP
d. Both U.S. GAAP and IFRS are considered to be "rules-based", but U.S. GAAP tends
to be more complex.

55. The IASB's standard-setting structure includes all of the following except:
a. IFRS Interpretations Committee
b. IFRS Advisory Council
c. IFRS Comparison Committee
d. Trustees

P
56. The following published documents are part of the "due process" system used by the IASB
in the evolution of a typical IASB Standard
1. Exposure Draft
2. IASB Standard
 3. Discussion Paper
The chronological order in which these items are released is as follows:
a. 1, 2, 3.
b. 1, 3, 2.
c. 2, 3, 1.
d. 3, 1, 2.

57. The purpose of the International Accounting Standards Board is to

a. issue enforceable standards which regulate the financial accounting and reporting of
multinational corporations.
b. develop a uniform currency in which the financial transactions of companies through-
out the world would be measured.
c. develop a single set of high-quality IFRS.
d. arbitrate accounting disputes between auditors and international companies.

58. In the past, many countries have relied on their own standard-setting organizations. The
standards issued by these various standard-setting organizations around the world
include
a. Tax-oriented standards.
b. Business-based standards.
c. Principles-based standards.
d. All of these answers are correct.

59. The two major standard-setting organizations in the world are

a. Financial Accounting Standards Board (FASB) and the International Organization of
Securities Commission (IOSCO).
b. Financial Accounting Standards Board (FASB) and the International Accounting
Standards Board (IASB).
c. The International Accounting Standards Board (IASB) and International Organization
of Securities Commission (IOSCO).
d. The International Accounting Standards Board (IASB) and the Standards Advisory
Council (SAC).

60. When comparing U.S. GAAP and International Financial Reporting Standards (IFRS)
a. IFRS are considered more comprehensive than U.S. GAAP.
b. IFRS contain more implementation guidance than U.S. GAAP.
c. IFRS are considered more principles-based than U.S. GAAP.
d. All of the choices are correct regarding U.S. GAAP and IFRS.

61. Which of the following organizations is not among the four international standard-setting
organizations?
a. IFRS Foundation.
b. IFRS.
c. IFRS.
d. International Organization of Securities Commissions (IOSCO).
62. The International Accounting Standards Board (IASB) follows specific steps in developing
International Financial Reporting Standards (IFRS). Place the following steps in the
correct order:
1) Research and analysis conducted; preliminary views of pros and cons
issued.
2) Topics identified and placed on the agenda.
3) Board evaluates responses, final standard issued.
4) Public hearing on proposed standard
5) Board evaluates research, issues exposure draft.

a. 1, 2, 3, 4, 5
b. 2, 1, 4, 5, 3
c. 1, 2, 5, 4, 3
d. 1, 2, 5, 3, 4

63. Which of the following is true with regard to the characteristics of the International
Accounting Standards Board (IASB)?
a. A unanimous vote by all Board members is needed to issue a new International
Financial Reporting Standard (IFRS).
b. The IASB consists of 13 part-time members.
c. Each member of the IASB must come from a different country.
d. IASB members are appointed for 5-year renewable terms.

64. International financial reporting interpretations (issued by the International Accounting

Standards Board)
a. Are considered authoritative and must be followed.
b. Cover newly identified financial reporting issues not specifically addressed by the
IASB.
c. Cover issues where unsatisfactory or conflicting interpretations have developed.
d. All of the choices are correct regarding International financial reporting
interpretations.

65. Which of the following statements is true regarding the International Accounting Standards
Board (IASB)?
a. The IASB is a regulatory agency with enforcement powers for its International
Financial Reporting Standards (IFRS).
b. The IASB is a public organization, funded by taxpayer dollars from member
countries.
c. Is comprised of 13 members.
d. All of the choices are correct regarding the IASB.

66. Which of the following is not one of the major types of pronouncements issued by the
International Accounting Standards Board (IASB)?
a. International financial reporting standard.
b. Memorandum of understanding.
c. Framework for financial reporting.
 d. International financial reporting interpretations.

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
36. d 42. a 48. c 54. c 60. c 66. b
37. d 43. d 49. c 55. c 61. d
38. b 44. d 50. b 56. d 62. b
39. b 45. a 51. c 57. c 63. d
40. b 46. d 52. c 58. d 64. d
41. a 47. a 53. d 59. b 65. c

51.A soundly developed conceptual framework of concepts and objectives should

a. increase financial statement users’ understanding of and confidence in financial
reporting.
b. enhance comparability among companies’ financial statements.
c. allow new and emerging practical problems to be more quickly solved.
d. all of these answers are correct.

52. Which of the following is not true concerning a conceptual framework in accounting?
a. It should be a basis for standard-setting.
b. It should allow practical problems to be solved more quickly by reference to it.
c. It should be based on fundamental truths that are derived from the laws of nature.
d. All of these answers are correct.

53. What is a purpose of having a conceptual framework?

a. To make sure that economic activity can be identified with a particular legal entity.
b. To segregate activities among competing companies.
c. To provide comparable information for different companies.
d. To enable the profession to more quickly solve emerging practical problems and to
provide a foundation from which to build more useful standards.
S
54. Which of the following is not a benefit associated with the IASB Conceptual Framework
Project?
a. A conceptual framework should increase financial statement users’ understanding of
and confidence in financial reporting.
b. Practical problems should be more quickly solvable by reference to an existing
conceptual framework.
c. A coherent set of accounting standards and rules should result.
d. Business entities will need far less assistance from accountants because the financial
reporting process will be quite easy to apply.

55. A soundly developed conceptual framework enables the International Accounting

Standards Board (IASB) to
I. Issue more useful and consistent pronouncements over time.
II. More quickly solve new and emerging practical problems by referencing basic
theory.
a. I only.
b. II only.
 c. Both I and II.
d. Neither I nor II.

56. In the conceptual framework for financial reporting, what provides “the why”–the purpose
of accounting?
a. Recognition, measurement, and disclosure concepts such as assumptions, principles,
and constraints
b. Qualitative characteristics of accounting information
c. Elements of financial statements
d. Objective of financial reporting

57. The underlying theme of the conceptual framework is

a. decision usefulness.
b. understandability.
c. faithful representation.
d. comparability.

58. What is the objective of general-purpose financial reporting?

a. to provide financial information about the reporting entity that is useful to present and
potential equity investors, lenders, and other creditors in making decisions in their
capacity as capital providers.
b. to provide companies with the option to select information that favors one set of
interested parties over another.
c. to provide users with financial information that implies total freedom from error.
d. to provide a metric for financial information used to determine when the boundary
between two or more entities should be disregarded and the entities considered to be
a licensing arrangement.

59. The International Accounting Standards Board’s (IASB’s) Conceptual Framework includes
all of the following except:
a. Objective of financial reporting.
b. Supplementary information
c. Elements of financial statements.
d. Qualitative characteristics of accounting information.

60. The second level in the International Accounting Standards Board’s (IASB’s) Conceptual
Framework
a. Identifies the objective of financial reporting.
b. Identifies recognition, measurement, and disclosure concepts used in establishing
and applying accounting standards.
c. Provides the elements of financial statements.
d. Includes assumptions, principles, and constraints.

61. The objective of financial reporting in the International Accounting Standards Board’s
(IASB’s) Conceptual Framework
a. Is the foundation for the Framework.
b. Includes the qualitative characteristics that make accounting information useful.
c. Is found on the third level of the Framework.
d. All of the choices are correct regarding the objective of financial reporting.
62. An implicit assumption of the International Accounting Standards Board’s (IASB’s)
Conceptual Framework is that
a. Information must be decision-useful to all potential users of financial reporting.
b. General-purpose financial reporting is the primary source of information for users of
financial reporting.
c. Users need reasonable knowledge of business and financial accounting matters to
understand the information contained in financial statements.
d. All of the choices are correct.

63. The overriding criterion by which accounting information can be judged is that of
a. usefulness for decision making.
b. freedom from bias.
c. timeliness.
d. comparability.

64. Which of the following is a fundamental quality of useful accounting information?

a. Comparability.
b. Relevance.
c. Neutrality.
d. Materiality.

65. Which of the following is a fundamental quality of useful accounting information?

a. Conservatism.
b. Comparability.
c. Faithful representation.
d. Consistency.

66. What is meant by comparability when discussing financial accounting information?

a. Information has predictive or feedback value.
b. Information is reasonably free from error.
c. Information that is measured and reported in a similar fashion across companies.
d. Information is timely.

67. What is meant by consistency when discussing financial accounting information?

a. Information presented by a company that applies the same accounting treatment to
similar events, from period to period.
b. Information is timely.
c. Information that is classified, characterized, and presented clearly and concisely.
d. Information is verifiable.

68. Which of the following is an ingredient of relevance?

a. Verifiability.
b. Timeliness.
c. Predictive value.
d. Neutrality.

69. Which of the following is an ingredient of faithful representation?

a. Predictive value.
b. Materiality.
 c. Neutrality.
d. Confirmatory value.

70. Changing the method of inventory valuation should be reported in the financial statements
under what qualitative characteristic of accounting information?
a. Consistency.
b. Verifiability.
c. Timeliness.
d. Comparability.

Item Ans. Item Ans.

51. d 67. a
52. c 68. c
53. d 69. c
54. d 70. d
55. c
56. d
57. a
58. a
59. b
60. c
61. a
62. c
63. a
64. b
65. c
66. c

41.Factors that shape an accounting information system include the

a. nature of the business.
b. size of the firm.
c. volume of data to be handled.
d. All of these answers are correct.

42. An accounting record where a company initially records transactions and selected other
events is called the
a. ledger.
b. account.
c. trial balance.
d. journal.
43. Which of the following is a real (permanent) account?
a. Goodwill
b. Sales Revenue
c. Accounts Receivable
d. Both Goodwill and Accounts Receivable

44. Which of the following is a nominal (temporary) account?

a. Unearned Service Revenue
b. Salaries and Wages Expense
c. Inventory
d. Retained Earnings

45. Nominal accounts are also called

a. temporary accounts.
b. permanent accounts.
c. real accounts.
d. None of these answers are correct.

46. Under International Financial Reporting Standards (IFRS) real accounts include all of the
following except
a. Dividends
b. Assets
c. Liabilities
d. Equity

47. Under International Financial Reporting Standards (IFRS) the "book of original entry" is
also known as the
a. Subsidiary ledger
b. Trial balance
c. General ledger
d. Journal

48. Which of the following statements is true regarding debits and credits?
a. On the income statement, debits are used to increase account balances, whereas on
the statement of financial position, credits are used to increase account balances.
b. Before adjustments, debits will not equal credits in the trial balance.
c. The rules for debit and credit and the normal balance of Share Capital–Ordinary are
the same as for liabilities.
d. On the income statement, revenues are increased by debit whereas on the statement
of financial position retained earnings is increased by a credit.

49. Which of the following accounts is reported in the equity section of the statement of
financial postion?
a. Dividends.
b. Share Capital–Ordinary.
c. Sales Revenue.
d. All of the choices are reported in the equity section of the statement of financial
position.
50. Revenues are
a. Impacted by debits and credits in the same way that expenses are impacted by debits
and credits.
b. A subdivision of equity, providing information about why equity increased.
c. Reported on the statement of financial position as a current item.
d. All of these answers are correct.

51. Debit always means

a. right side of an account.
b. increase.
c. decrease.
d. None of these answers are correct.

52. The double-entry accounting system means

a. Each transaction is recorded with two journal entries.
b. Each item is recorded in a journal entry, then in a general ledger account.
c. The dual effect of each transaction is recorded with a debit and a credit.
d. More than one of the above.

53. When a corporation pays a note payable and interest,

a. the account Notes Payable will be increased.
b. the account Interest Expense will be decreased.
c. they will debit Notes Payable and Interest Expense.
d. they will debit Cash.

54. Equity is not affected by

a. cash receipts.
b. dividends.
c. revenues.
d. expenses.

55. The debit and credit analysis of a transaction normally takes place
a. before an entry is recorded in a journal.
b. when the entry is posted to the ledger.
c. when the trial balance is prepared.
d. at some other point in the accounting cycle.

56. The accounting equation must remain in balance

a. throughout each step in the accounting cycle.
b. only when journal entries are recorded.
c. only at the time the trial balance is prepared.
d. only when formal financial statements are prepared.

57. An optional step in the accounting cycle is the preparation of

a. adjusting entries.
b. closing entries.
c. a statement of cash flows.
d. a post-closing trial balance.
58. Basic steps in the recording process include all of the following except
a. Transfer the journal information to the appropriate account in the statement of financial
postion.
b. Analyze each transaction for its effect on the accounts.
c. Enter the transaction information in a journal.
d. All of these choices are corrrect.

59. The trial balance

a. Proves that debits are greater than credits when the company has net income.
b. Uncovers any errors in journalizing and posting prior to preparation of the statement
of financial position.
c. Is useful in preparing the statement of financial position.
d. All of these choices are correct.

60. The trial balance will not balance when a company

a. Fails to journalize a transaction.
b. Omits posting a correct journal entry.
c. Posts a journal entry twice.
d. Debits two statement of financial position accounts and no income statement
accounts.

Item Ans. Item Ans.

41. d 55. a
42. d 56. a
43. d 57. d
44. b 58. a
45. a 59. c
46. a 60. d
47. d
48. c
49. b
50. b
51. d
52. c
53. c
54. a

21. The major elements of the income statement are

a. revenue, cost of goods sold, selling expenses, and general expense.
b. operating section, nonoperating section, discontinued operations and cumulative
effect.
c. revenues, expenses, gains, and losses.
d. All of these.

22. Information in the income statement helps users to

a. evaluate the past performance of the enterprise.
b. provide a basis for predicting future performance.
c. help assess the risk or uncertainty of achieving future cash flows.
 d. All of these.

23. Limitations of the income statement include all of the following except
a. items that cannot be measured reliably are not reported.
b. only actual amounts are reported in determining net income.
c. income measurement involves judgment.
d. income numbers are affected by the accounting methods employed.
S
24. Which of the following would represent the least likely use of an income statement
prepared for a business enterprise?
a. Use by customers to determine a company's ability to provide needed goods and
services.
b. Use by labor unions to examine earnings closely as a basis for salary discussions.
c. Use by government agencies to formulate tax and economic policy.
d. Use by investors interested in the financial position of the entity.
S
25. The income statement reveals
a. resources and equities of a firm at a point in time.
b. resources and equities of a firm for a period of time.
c. net earnings (net income) of a firm at a point in time.
d. net earnings (net income) of a firm for a period of time.

26. The income statement information would help in which of the following tasks?
a. Evaluate the liquidity of a company.
b. Evaluate the solvency of a company.
c. Estimate future cash flows.
d. Estimate future financial flexibility.

27. Which of the following is an example of managing earnings down?

a. Changing estimated bad debts from 3 percent to 2.5 percent of sales.
b. Revising the estimated life of equipment from 10 years to 8 years.
c. Not writing off obsolete inventory.
d. Reducing research and development expenditures.

28. Which of the following is an example of managing earnings up?

a. Decreasing estimated salvage value of equipment.
b. Writing off obsolete inventory.
c. Underestimating warranty claims.
d. Accruing a contingent liability for an ongoing lawsuit.

29. What might a manager do during the last quarter of a fiscal year if she wanted to improve
current annual net income?
a. Increase research and development activities.
b. Relax credit policies for customers.
c. Delay shipments to customers until after the end of the fiscal year.
d. Delay purchases from suppliers until after the end of the fiscal year.

30. What might a manager do during the last quarter of a fiscal year if she wanted to decrease
current annual net income?
a. Delay shipments to customers until after the end of the fiscal year.
b. Relax credit policies for customers.
 c. Pay suppliers all amounts owed.
d. Delay purchases from suppliers until after the end of the fiscal year.

31. The income statement provides investors and creditors information that helps them predict
a. the amounts of future cash flows.
b. the timing of future cash flows.
c. the uncertainty of future cash flows.
d. All of these answers are correct.

32. Investors and creditors use income statement information for each of the following
except to
a. evaluate the future performance of the company.
b. provide a basis for predicting future performance.
c. help assess the risk and uncertainty of achieving future cash flows.
d. All of these answers are correct.

33. The planned timing of revenues, expenses, gains, and losses to smooth out bumps in
earnings is the definition of
a. quality of earnings.
b. earnings management.
c. smoothing of earnings.
d. earnings averaging.

34. Which of the following situations involving different accounting methods or accounting
estimates results in comparison difficulties between companies?
a. Estimated useful lives for depreciable assets.
b. Inventory methods.
c. Estimates of bad debts.
d. All of the above.

35. Which method of income measurement is used in the preparation of the income
statement?
a. Capital maintenance approach.
b. Transaction approach.
c. Cash-flow approach.
d. Income components approach.

36. Which of the following equations expresses the definition of “income”?

a. Income = Revenues – Expenses
b. Income = (Revenues + Gains) – (Expenses + Losses)
c. Income = Revenues + Gains
d. Income = Gains – Losses

37. Which of the following is not required to be presented on the income statement
under IFRS?
a. Revenue.
b. Other gains/losses.
c. Finance costs.
d. Tax expense.

38. The non-controlling interest section of the income statement is shown

 a. below net income.
b. below income from operations.
c. above other income and expenses.
d. above income tax.

39. The definition of expenses includes

a. losses only.
b. expenses and losses.
c. expenses only.
d. expenses, losses and unrealized losses on available-for-sale securities.

40. IFRS requires that a single amount be disclosed within the income statement for
a. the post-tax profit/loss on discontinued operations and the pre-tax gain/loss on the
disposal of discontinued operational assets.
b. the pre-tax profit/loss on discontinued operations and the post-tax gain/loss on the
disposal of discontinued operational assets.
c. the pre-tax profit/loss on discontinued operations and the pre-tax gain/loss on the
disposal of discontinued operational assets.
d. the post-tax profit/loss on discontinued operations and the post-tax gain/loss on the
disposal of discontinued operational assets.

Item Ans. Item Ans. Item Ans.

21. c 29. b 37. b
22. d 30. a 38. a
23. b 31. d 39. b
24. d 32. a 40. d
25. d 33. b
26. c 34. d
27. b 35. b
28. c 36. c

31. Which of the following is a limitation of the statement of financial position?

a. Many items that are of financial value are omitted.
b. Judgments and estimates are used.
c. Current fair value is not reported.
d. All of these choices are correct.

32. The statement of financial position is useful for analyzing all of the following except
a. liquidity.
b. solvency.
c. profitability.
d. financial flexibility.

33. Statement of financial position information is useful for all of the following except to
a. compute rates of return
b. analyze cash inflows and outflows for the period
c. evaluate capital structure
d. assess future cash flows
 34. Statement of financial position information is useful for all of the following except
a. assessing a company's risk
b. evaluating a company's liquidity
c. evaluating a company's financial flexibility
d. determining free cash flows.

35. A limitation of the balance sheet that is not also a limitation of the income statement is
a. the use of judgments and estimates
b. omitted items
c. the numbers are affected by the accounting methods employed
d. valuation of items at historical cost
S
36. The statement of financial position contributes to financial reporting by providing a basis
for all of the following except
a. computing rates of return.
b. evaluating the capital structure of the enterprise.
c. determining the increase in cash due to operations.
d. assessing the liquidity and financial flexibility of the enterprise.
S
37. One criticism not normally aimed at a statement of financial position prepared using
current accounting and reporting standards is
a. failure to reflect current value information.
b. the extensive use of separate classifications.
c. an extensive use of estimates.
d. failure to include items of financial value that cannot be recorded objectively.
P
38. The amount of time that is expected to elapse until an asset is realized or otherwise
converted into cash is referred to as
a. solvency.
b. financial flexibility.
c. liquidity.
d. exchangeability.

39. The statement of financial position

e. Omits many items that are of financial value.
f. Makes very limited use of judgments and estimates.
g. Uses fair value for most assets and liabilities.
h. All of the choices are correct regarding the statement of financial position.

40. The statement of financial position can help assess all of the following except
a. Solvency.
b. Financial flexibility.
c. Profitability.
d. Liquidity.

41. The net assets of a business are equal to

a. current assets minus current liabilities.
b. total assets plus total liabilities.
c. total assets minus total shareholders' equity.
 d. none of these choices are correct.

42. The correct order to present current assets is

a. cash, accounts receivable, prepaid items, inventories.
b. inventories, receivables, prepaid items, cash.
c. cash, inventories, accounts receivable, prepaid items.
d. inventories, prepaid items, accounts receivable, cash.

43. The basis for classifying assets as current or noncurrent is conversion to cash within
a. the accounting cycle or one year, whichever is shorter.
b. the operating cycle or one year, whichever is longer.
c. the accounting cycle or one year, whichever is longer.
d. the operating cycle or one year, whichever is shorter.

44. The basis for classifying assets as current or noncurrent is the period of time normally
required by the accounting entity to convert cash invested in
a. inventory back into cash, or 12 months, whichever is shorter.
b. receivables back into cash, or 12 months, whichever is longer.
c. tangible fixed assets back into cash, or 12 months, whichever is longer.
d. inventory back into cash, or 12 months, whichever is longer.

45. The current assets section of the statement of financial position should include
a. machinery.
b. patents.
c. goodwill.
d. inventory.

46. Which of the following is a current asset?

a. Cash surrender value of a life insurance policy of which the company is the bene-
ficiary.
b. Investment in equity securities for the purpose of controlling the issuing company.
c. Cash designated for the purchase of tangible fixed assets.
d. Trade installment receivables normally collectible in 18 months.

47. Equity or debt securities held to finance future construction of additional plants should be
classified on a balance sheet as
a. current assets.
b. property, plant, and equipment.
c. intangible assets.
d. long-term investments.

48. Each of the following are an intangible asset except

a. copyrights.
b. goodwill.
c. plant expansion fund.
d. trademarks.

49. Which of the following is not a long-term investment?

a. Investments in ordinary shares
b. Franchise
c. Land held for speculation
 d. A sinking fund

50. A generally accepted method of valuation is

1. trading securities at market value.
2. accounts receivable at net realizable value.
3. inventories at current cost.
a. 1
b. 2
c. 3
d. 1 and 2

Item Ans. Item Ans.

31. d 44. d
32. c 45. d
33. b 46. d
34. d 47. d
35. d 48. c
36. c 49. b
37. b 50. d
38. c
39. a
40. c
41. d
42. d
43. b