acc 421 final exam 498213

ACC 421—- FINAL EXAM .

The Financial Accounting Standards Board employs a “due process” system which

(Points: 5) has all CPAs in the United States vote on a new Statement. enables interested parties to express their views on issues under consideration. identifies the accounting issues that are the most important. requires that all accountants receive a copy of financial standards.

2. (TCO A) The IASB: (Points: 5) governs accounting standards in the U.S. is working on a convergence project with the FASB. sets the accounting standards for only European countries. plays only a minor part in accounting rule making throughout the world.

3. (TCO A) International GAAP, or i-GAAP: (Points: 5) has different standards than under U.S. GAAP. has some commonality with U.S. GAAP in many areas. is accepted by many countries throughout the world all of the above are true.

4. (TCO A) Information is neutral if it: (Points: 5) provides benefits which are at least equal to the costs of its preparation. can be compared with similar information about an enterprise at other points in time. would have no impact on a decision maker. is free from bias toward a predetermined result.

5. (TCO A) Which of the following elements of financial statements is not a component of comprehensive income? (Points: 5) Revenues Distributions to owners Losses Expenses

6. (TCO A) Issuance of common stock for cash affects which basic element of financial statements? (Points: 5) Revenues Losses Liabilities Equity

7. (TCO A) Which basic element of financial statements arise from peripheral or incidental transactions? (Points: 5) Assets Liabilities Gains Expenses

8. (TCO A) Which basic assumption may not be followed when a firm in bankruptcy reports financial results? (Points: 5) Economic entity assumption Going concern assumption Periodicity assumption Monetary unit assumption

9. (TCO A) What is the quality of information that enables users to better forecast future operations? (Points: 5) Reliability. Materiality. Comparability. Relevance.

10. (TCO A) Financial information exhibits the characteristic of consistency when (Points: 5) expenses are reported as charges against revenue in the period in which they are paid. accounting entities give accountable events the same accounting treatment from period to period. extraordinary gains and losses are not included on the income statement. accounting procedures are adopted which give a consistent rate of net income

11. (TCO A) Which of the following is true with regard to the element “comprehensive income”? (Points: 5) includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. is optional for financial statement preparers. is not in accordance with GAAP. came into law with the passing of the Sarbanes-Oxley Act.

Not 100% sure about 11

12. (TCO A) Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy? (Points: 5) Monetary unit assumption. Periodicity assumption. Going-concern assumption. Economic entity assumption.

13. (TCO D) One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is (Points: 5) failure to reflect current value information. the extensive use of separate classifications. an extensive use of estimates. failure to include items of financial value that cannot be recorded objectively.

14. (TCO D) The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as (Points: 5) solvency. financial flexibility. liquidity. exchangeability.

15. (TCO D) The net assets of a business are equal to (Points: 5) current assets minus current liabilities. total assets plus total liabilities. total assets minus total stockholders’ equity. none of these.

16. (TCO D) Houghton Company has the following items: common stock, $720,000; treasury stock, $85,000; deferred taxes, $100,000 and retained earnings, $313,000. What total amount should Houghton Company report as stockholders’ equity? (Points: 5) $848,000 $948,000 $1,048,000 $1,118,000

17. (TCO D) The current assets section of the balance sheet should include (Points: 5) machinery patents goodwill inventory

18. (TCO D) An example of an item which is not an element of working capital is: (Points: 5) accrued interest on notes receivable. goodwill. goods in process. temporary investments.

19. (TCO D) Which of the following is not an acceptable major asset classification? (Points: 5) Current assets Long-term assets Property, plant, and equipment Deferred charges

20. (TCO D) The presentation of long-term liabilities in the balance sheet should disclose: (Points: 5) maturity dates interest rates conversion rights all of the above

21. (TCO D) Equity or debt securities held to finance future construction of additional manufacturing plants should be classified on the balance sheet as: (Points: 5) current assets. property, plant and equipment. intangible assets. long-term investments.

22. (TCO D) Treasury stock should be reported as a(n) (Points: 5) current asset. investment other asset. reduction of stockholder’s equity.

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