Part 1: Multiple Choice (25 questions @ 3 pts ea. Suggested time 50 minutes)
Use a scantron to fill in the letter corresponding to the “best” answer.
1. Which of the following properly describes a deferral?
a.Cash is received after revenue is earned.
b.Cash is received before revenue is earned.
c.Cash is paid after expense is incurred.
d.Cash is paid in the same time period that an expense is incurred.
2. The failure to properly record an adjusting entry to accrue a revenue item will result in an: a.understatement of revenues and an understatement of liabilities. b.overstatement of revenues and an overstatement of liabilities. c.overstatement of revenues and an overstatement of assets. d.understatement of revenues and an understatement of assets.
3. Unearned revenue on the books of one company is likely to be a.a prepaid expense on the books of the company that made the advance payment. b.an unearned revenue on the books of the company that made the advance payment. c.an accrued expense on the books of the company that made the advance payment. d.an accrued revenue on the books of the company that made the advance payment.
4. Maso Company recorded journal entries for the issuance of common stock for $80,000, the payment of $26,000 on accounts payable, and the increase of salaries expense of $42,000. What net effect do these entries have on owners’ equity?
a.Increase of $80,000.
b.Increase of $54,000.
c.Increase of $38,000.
d.Increase of $12,000.
5. Characteristics of generally accepted accounting principles include all of the following except a.authoritative accounting the rule-making body established a principle of reporting. b.standards are considered useful by the profession.
c.each principle is approved by the SEC.
d.practice has become universally accepted over time.
6. When a registrant company submits its annual filing to the SEC, it uses: a. Form 10-A.
b. Form 10-K.
c. Form 10-Q.
d. Form S-1.
7. Independent auditors express an opinion on the:
a. Fairness of financial statements.
b. Accuracy of financial statements.
c. Soundness of a company's future.
d. Quality of a company's management.
8. Gains are:
a. Inflows from selling a product or service to a customer. b. Increases in equity resulting from transfers of assets to the company from owners. c. Increases in equity from transactions unrelated to an entity’s primary business purpose. d. None of these.
9. Which of the following is NOT a provision of the Sarbanes-Oxley Act? a. Changed the entity responsible for setting auditing standards. b. Increased corporate executive responsibility for financial statements. c. Limited nonaudit services that can be performed by auditors for audit clients. d. Changed the entity responsible for setting accounting standards.
10. Surefeet Corporation changed its inventory valuation method. Which characteristic of accounting information is jeopardized by this change? a. Comparability.
d. Predictive value.
11. Brown Corporation has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors. The qualitative concept improved is: a. Comparability.
12. The best argument in support of historical cost information is: a. Relevance.
b. Predictive value for future cash flows.