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Accounting Basics
Accounting Basics MCQs
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An objective of financial reporting is
"Providing information useful to investors, creditors, donors, and other users for decision making."
Assessing the adequacy of internal control.
Evaluating management results compared with standards.
Providing information on compliance with established procedures.
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The accounting measurement that is not consistent with the going concern concept is
Historical cost.
Realization.
The transaction approach.
Liquidation value
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Noncurrent debt should be included in the current section of the statement of financial position if
It is to be converted into common stock before maturity.
It matures within the year and will be retired through the use of current assets.
Management plans to refinance it within the year.
A bond retirement fund has been set up for use in its scheduled retirement during the next year.
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A primary objective of external financial reporting is
Direct measurement of the value of a business enterprise.
"Provision of information that is useful to present and potential investors, creditors, and others in making rational financial decisions regarding the enterprise."
Establishment of rules for accruing liabilities.
Direct measurement of the enterprise’s stock price.
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Which of the following is true regarding the comparison of managerial and financial accounting?
Managerial accounting is generally more precise.
Managerial accounting has a past focus, and financial accounting has a future focus.
The emphasis on managerial accounting is relevance, and the emphasis on financial accounting is timeliness.
Managerial accounting need not follow generally accepted accounting principles (GAAP), while financial accounting must follow them.
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The primary purpose of the statement of financial position is to reflect
The fair value of the firm assets at some moment in time.
The status of the firm assets in case of forced liquidation of the firm.
The success of a company operations for a given amount of time.
Items of value, debt, and net worth.
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When classifying assets as current and noncurrent for reporting purposes,
The amounts at which current assets are carried and reported must reflect realizable cash values.
Prepayments for items such as insurance or rent are included in an ’other assets’ group rather than as current assets as they will ultimately be expensed
The time period by which current assets are distinguished from noncurrent assets is determined by the seasonal nature of the business.
Assets are classified as current if they are reasonably expected to be realized in cash or consumed during the normal operating cycle.
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A statement of financial position is intended to help investors and creditors
Assess the amount, timing, and uncertainty of prospective net cash inflows of a firm
Evaluate economic resources and obligations of a firm.
Evaluate economic performance of a firm.
Evaluate changes in the ownership equity of a firm
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A statement of financial position provides a basis for all of the following except
Computing rates of return.
Evaluating capital structure.
Assessing liquidity and financial flexibility.
Determining profitability and assessing past performance.
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ABC operates a catering service that specializes in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in...
Customer places an order.
Luncheon is served.
Billing is mailed.
Customer’s payment is received.
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A company provides fertilization, insect control, and disease control services for a variety of trees, plants, and shrubs on a contract basis. For $50...
When the cash is collected.
Evenly over the year as the services are performed.
At the end of the contract year after all of the services have been performed.
At the end of the fiscal year.
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A department store sells gift certificates that may be redeemed for merchandise. Each certificate expires 3 years after issuance. The revenue from the...
Evenly over 3 years from the date of issuance.
In the period the certificates are sold.
In the period the certificates are sold.
In the period the certificates are redeemed or in the period they expire if they are allowed to lapse.
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In a process-costing system, the cost of abnormal spoilage should be
Prorated between units transferred out and ending inventory.
Included in the cost of units transferred out.
Treated as a loss in the period incurred.
Ignored.
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Fact Pattern: Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at the beginning of ...
5,000 units
6,000 units
4,400 units
3,800 units
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Fact Pattern: " Levittown Company employs a process cost system for its manufacturing operations. All direct materials are added at t...
3,400 units
3,800 units
4,000 units
4,400 units
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Management accounting differs from financial accounting in that financial accounting is
More oriented toward the future
Primarily concerned with external financial reporting.
Primarily concerned with non quantitative information.
Heavily involved with decision analysis and implementation of decisions.
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A distinction between a surety and a cosurety is that only a cosurety is entitled to
Reimbursement (Indemnification).
Subrogation.
Contribution.
Exoneration.
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Ivor borrowed $420,000 from Lear Bank. At Lear’s request, Ivor entered into an agreement with Ash, Kane, and Queen for them to act as cosuret...
$0 from Ash and $0 from Kane.
$42,000 from Ash and $63,000 from Kane.
$70,000 from Ash and $70,000 from Kane.
$56,000 from Ash and $84,000 from Kane.
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Nash, Owen, and Polk are cosureties with maximum liabilities of $40,000, $60,000, and $80,000, respectively. The amount of the loan on which they ha...
$0
$ 24,000
$ 28,000
$140,000
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Ingot Corp. lent Flange $50,000. At Ingot’s request, Flange entered into an agreement with Quill and West for them to act as compensated cosu...
Quill will be liable for 50% of the loan balance.
Quill will be liable for the entire loan balance.
Ingot’s release of West will have no effect on Flange’s and Quill’s liability to Ingot.
Flange will be released for 50% of the loan balance.
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Mane Bank lent Eller $120,000 and received securities valued at $30,000 as collateral. At Mane’s request, Salem and Rey agreed to act as unco...
$30,000
$45,000
$60,000
$90,000
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Lane promised to lend Turner $240,000 if Turner obtained sureties to secure the loan. Turner agreed with Rivers, Clark, and Zane for them to act as ...
$0
$56,000
$70,000
$84,000
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Which of the following rights does one cosurety generally have against another cosurety?
Exoneration.
Subrogation.
Reimbursement.
Contribution.
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Which of the following is not one of the approaches for reporting accounting changes?
The change approach.
The retrospective approach.
The prospective approach.
All of these answer choices are approaches for reporting accounting changes.
