AI Accounting Flashcards.docx

1. Question: The private sector has sometimes been forced to change accounting standards because the: A\) Profit-oriented companies withdrew financial support for the private sector body that set the standards. B\) SEC did not agree with a particular standard issued by the private sector. C\) Co...

1. Question: The private sector has sometimes been forced to change accounting standards because the: A\) Profit-oriented companies withdrew financial support for the private sector body that set the standards. B\) SEC did not agree with a particular standard issued by the private sector. C\) Cost of gathering data to comply with a given standard was prohibitive. D\) Difficulties in measurement required by the standard were too great. Answer: B) SEC did not agree with a particular standard issued by the private sector. 2: Question: When there is agreement between a measure or description and the phenomenon it purports to represent, information possesses which characteristic? A\) Timeliness B\) Verifiability C\) Faithful representation Answer: C) Faithful representation 3: Question: Which of the following is true regarding equity? A\) It represents the residual interest in the assets of an entity that remains after deducting its liabilities. B\) It represents how much the owner profits from the business. C\) It represents the owner's return for investing in the business. D\) It represents the accumulated earnings of the business over time. Answer: A) It represents the residual interest in the assets of an entity that remains after deducting its liabilities. 4: Question: Which of the following has the statutory authority to set accounting standards in the United States? A\) SEC B\) FASB C\) IRS D\) AICPA Answer: A) SEC 5: Question: Accounting standard-setting has been characterized as: A\) Pure deductive reasoning. B\) A political process. C\) Pure inductive reasoning. D\) Using the scientific method. Answer: B) A political process. 6: Question: Long-lived, revenue-producing assets are measured at: A\) Present value. B\) Fair value. C\) Current cost. D\) Depreciated (or amortized) cost. Answer: D) Depreciated (or amortized) cost. 7: Question: The enhancing qualitative characteristic of understandability means that information should be understood by: A\) Those who have a reasonable understanding of business and economic activities. B\) Financial analysts. C\) CPAs. D\) Those who are experts in the interpretation of financial information. Answer: A) Those who have a reasonable understanding of business and economic activities. 8: Question: Surefeet Corporation changed its inventory valuation method. Which characteristic is jeopardized by this change? A\) Feedback value B\) Comparability C\) Consistency D\) Representational faithfulness Answer: C) Consistency. 9: Question: A firm\'s comprehensive income always: A\) Could be greater than or less than net income. B\) Is the same as its net income. C\) Is greater than its net income. D\) Is less than its net income. Answer: A) Could be greater than or less than net income. 10: Question: Net income equals: A\) Revenues minus cost of goods sold. B\) Revenues minus expenses. C\) Assets minus liabilities. D\) Cash receipts minus cash payments. Answer: B) Revenues minus expenses. 11: Question: The International Accounting Standards Board: A\) Can overrule the FASB when their policies disagree. B\) Promotes the use of high-quality, understandable global accounting standards. C\) Was the predecessor to the IASC. D\) Has its headquarters in Geneva. Answer: B) Promotes the use of high-quality, understandable global accounting standards. 12: Question: Of the following, the most important objective for financial reporting is to provide information useful for: A\) Determining taxable income. B\) Making decisions. C\) Providing accountability. D\) Increasing future profits. Answer: B) Making decisions. 13: Question: Elements of financial statements do not include: A\) Monetary unit. B\) Losses. C\) Comprehensive income. D\) Investments by owners. Answer: A) Monetary unit. 14: Question: Cash dividends are an example of which of the following elements? A\) Investment by owners B\) Expenses C\) Equity D\) Distribution to owners Answer: D) Distribution to owners. 15: Question: Four different competent accountants independently agree on the amount and method of reporting an economic event. The concept demonstrated is: A\) Verifiability. B\) Comparability. C\) Completeness. D\) Reliability. Answer: A) Verifiability. 16: Question: The FASB issues accounting standards in the form of: A\) Financial Technical Bulletins. B\) Accounting Research Bulletins. C\) Accounting Standards Updates. D\) Financial Accounting Standards. Answer: D) Financial Accounting Standards. 17: Question: Which of the following is not a potential benefit of accrual accounting, compared to cash-basis accounting? A\) Better matching of revenues and expenses B\) Periodicity C\) Better reflecting economic activity D\) Timeliness Answer: B) Periodicity. 18: Question: In a recent annual report, Apple Computer reported: \"Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized.\" This note exemplifies Apple\'s use of: A\) Matching. B\) Conservatism. C\) Revenue recognition. D\) Economic entity. Answer: A) Matching. 19: Question: Fundamental qualitative characteristics of accounting information are: A\) Relevance and comparability. B\) Faithful representation and relevance. C\) Comparability and consistency. D\) Neutrality and consistency. Answer: B) Faithful representation and relevance. 20: Question: Recognizing expected losses immediately, but deferring expected gains, is an example of: A\) Timeliness. B\) Cost-effectiveness. C\) Conservatism. D\) Materiality. Answer: C) Conservatism. 21: Question: Independent auditors express an opinion on the: A\) Fairness of financial statements. B\) Accuracy of financial statements. C\) Quality of a company\'s management. D\) Soundness of a company\'s future. Answer: A) Fairness of financial statements. 22: Question: The primary professional organization for those accountants working in industry is the: A\) AICPA. B\) AAA. C\) IIA. D\) IMA. Answer: D) IMA. 23: Question: 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 peripheral transactions of an entity. D\) None of these answer choices are correct. Answer: C) Increases in equity from peripheral transactions of an entity. 24: Question: Regarding convergence of accounting standards, the FASB and IASB: A\) Do not intend to work together to achieve convergence where possible. B\) Have achieved full convergence with respect to financial instruments. C\) Are not likely to achieve full convergence of accounting standards in the near future. D\) Have agreed to combine their organizations to form the BUSYB. Answer: C) Are not likely to achieve full convergence of accounting standards in the near future. 25: Question: Confirmatory value is central to the concept of "earnings quality" because it: A\) Helps investors predict a company's future earnings. B\) Helps investors predict a company's future cash flows. C\) Allows investors to compare the performance of a company over time. D\) Allows investors to verify or change their prior assessments of a company's performance. Answer: A) Helps investors predict a company's future earnings. 26: Question: Which of the following is not a required disclosure for related-party transactions? A\) A description of the transactions B\) The impact of the transactions on current year\'s income C\) The nature of the relationship D\) The amounts due from or to related parties Answer: C) The nature of the relationship. 27: Question: Which of the following would most likely appear under the heading of "Other Long-Term Assets" in the balance sheet? A\) Significant investment in equity securities of another company B\) Goodwill from the acquisition of another company C\) Long-term operating leases used in primary operations D\) Equipment used in primary operations Answer: A) Significant investment in equity securities of another company. 28: Question: If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period? A\) Net income will be too high. B\) It is not possible to determine. C\) Net income will be correct. D\) Net income will be too low. Answer: A) Net income will be too high. 29: Question: Disclosure notes would not include: A\) Depreciation methods used and estimated useful life. B\) Data to adjust the financial statements so that they are not misleading. C\) Details of pension plans. D\) Definition of cash equivalents. Answer: C) Details of pension plans. 30: Question: Which of the following potentially limits the usefulness of the balance sheet? A\) Property, plant, and equipment are recorded at their book values rather than fair values. B\) Many valuable resources of the company are not recorded as assets. C\) Many items in the balance sheet reflect estimates and judgments of management. D\) All of the other answer choices represent potential limitations of the balance sheet. Answer: D) All of the other answer choices represent potential limitations of the balance sheet. 31: Question: Current assets include cash and all other assets expected to become cash or be consumed within: A\) One year. B\) One operating cycle. C\) One year or one operating cycle, whichever is longer. D\) One year or one operating cycle, whichever is shorter. Answer: D) One year or one operating cycle, whichever is shorter. Flashcard 32: Question: A subsequent event for an entity with a December 31, 2024, year-end would not include a(n): A\) Issuance of bonds in January 2025. B\) Major uncertainty on December 31, resolved in January 2025. C\) Change in the estimated useful lives of equipment in January 2025. D\) Acquisition of another company in January 2025. Answer: D) Acquisition of another company in January 2025. Flashcard 33: Question: Which of the following would be disclosed in the summary of significant accounting policies disclosure note? A\) Composition of Long-term debt \| Depreciation Method a\) No \| Yes b\) Yes \| No c\) Yes \| Yes d\) No \| No Answer: b) Yes \| No. Flashcard 34: Question: How many of the following items are generally long-term assets? A\) Land B\) Accounts Receivable C\) Notes Payable (due in three years) D\) Accounts Payable E\) Retained Earnings F\) Prepaid Rent G\) Deferred Revenue H\) Buildings I\) Notes Payable (due in six months) J\) Equipment Answer choices: A\) Four B\) Three C\) Two D\) Five Answer: C) Two. Flashcard 35: Question: A classified balance sheet: A\) Contains confidential information. B\) Shows only current assets and current liabilities. C\) Shows subtotals for current assets and current liabilities. D\) Shows changes in assets, liabilities, revenues, and expenses. Answer: C) Shows subtotals for current assets and current liabilities. Flashcard 36: Question: Accrued liabilities occur when: A\) Cash is paid, but an expense is never recorded. B\) An obligation to pay cash occurs before the expense recognition. C\) An expense is recorded at the same time as the cash payment. D\) An expense has been recorded but is not yet paid. Answer: D) An expense has been recorded but is not yet paid. Flashcard 37: Question: The usual difference between accounts payable and notes payable is: A\) Explicitly stated interest. B\) Current--Long-term classification. C\) Legally enforceable debt. D\) Known payment terms. Answer: A) Explicitly stated interest. Flashcard 38: Question: Which of the following is not a required disclosure for related-party transactions? A\) A description of the transactions B\) The impact of the transactions on current year\'s income C\) The nature of the relationship D\) The amounts due from or to related parties Answer: C) The nature of the relationship. Flashcard 39: Question: Which of the following would most likely appear under the heading of "Other Long-Term Assets" in the balance sheet? A\) Significant investment in equity securities of another company B\) Goodwill from the acquisition of another company C\) Long-term operating leases used in primary operations D\) Equipment used in primary operations Answer: A) Significant investment in equity securities of another company. Flashcard 40: Question: If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period? A\) Net income will be too high. B\) It is not possible to determine. C\) Net income will be correct. D\) Net income will be too low. Answer: A) Net income will be too high. Flashcard 41: Question: If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period? A\) Net income will be too high. B\) It is not possible to determine. C\) Net income will be correct. D\) Net income will be too low. Answer: A) Net income will be too high. Flashcard 42: Question: Cash flows from financing activities include: A\) Interest paid. B\) Dividends paid. C\) Interest received. D\) Dividends received. Answer: B) Dividends paid. Flashcard 43: Question: A company has decided to discontinue a component of its business and sells the component by the end of the year. The amount that the company would report as income from discontinued operations is (ignore tax effects): A\) Only income from operations for the year. B\) Income from operations for the year and either a gain or loss on the disposal of the component's assets. C\) Only the gain or loss on the disposal of the component's assets. D\) Income from operations for the year and only a loss on the disposal of the component's assets. Answer: C) Only the gain or loss on the disposal of the component's assets. Flashcard 44: Question: Classification shifting by managers has the effects of increasing which level of profitability? A\) All of the other answer choices are correct. B\) Net income C\) Operating income D\) Income before taxes Answer: D) Income before taxes. Flashcard 45: Question: Financial statement users typically begin their assessment of permanent earnings with: A\) Sales revenue. B\) Gross profit. C\) Income from continuing operations. D\) Net income. Answer: D) net income. Flashcard 46: Question: Restructuring costs typically can be defined as costs: A\) Associated with safeguarding a company's assets and ensuring accuracy of financial reporting. B\) Of expenditures made on capital projects and executive compensation. C\) Associated with management's plans to materially change the scope of business operations or the manner in which they are conducted. D\) Of external financing through issuance of debt or equity securities. Answer: C) Associated with management's plans to materially change the scope of business operations or the manner in which they are conducted. Flashcard 47: Question: In the operating activities section of the statement of cash flows, we start with net income in: A\) Both the direct and the indirect methods. B\) The direct method. C\) Neither the direct nor the indirect methods. D\) The indirect method. Answer: D) The indirect method. Flashcard 48: Question: Popson Incorporated incurred a material loss that was unusual in character. This loss should be reported as a: A\) Line item in the retained earnings statement. B\) Discontinued operation. C\) Line item within income from continuing operations. D\) Line item between income from continuing operations and income from discontinued operations. Answer: D) Line item between income from continuing operations and income from discontinued operations. Flashcard 49: Question: Reporting comprehensive income can be accomplished by each of the following methods except: A\) In two separate, but consecutive statements. B\) A single, continuous statement of comprehensive income. C\) In the statement of shareholders\' equity. D\) All of the other answer choices describe acceptable methods. Answer: D) All of the other answer choices describe acceptable methods. Flashcard 50: Question: Intraperiod tax allocation is the process of associating income tax effects with the income statement components that create those effects. Group: True or False Answer: True. Flashcard 51: Question: Which of the following items would affect the balance of accumulated other comprehensive income (AOCI)? A\) Loss on the write-down of obsolete inventory. B\) Foreign currency translation adjustment. C\) Income from discontinued operations. D\) Interest income from loans to company employees. Answer: B) Foreign currency translation adjustment. Flashcard 52: Question: Which of the following is most likely to be classified as discontinued operations? A\) All of the other answers would be classified as discontinued operations. B\) Sale of a small equity method investment in another company C\) Sale of undeveloped land due to lack of customer demand for additional store locations D\) Sale of a group of assets that represents a strategic shift in operations Answer: D) Sale of a group of assets that represents a strategic shift in operations. Flashcard 53: Question: The direct and indirect methods of reporting the statement of cash flows present different information for investing and financing activities. Group: True or False Answer: False. Flashcard 54: Question: The measure of profit reported on a multiple-step income statement that represents the primary-revenue generating activities of the company is: A\) Gross profit. B\) Operating income. C\) Net income. D\) Income before taxes. Answer: B) Operating income. Flashcard 55: Question: Earnings quality refers to the ability of: A\) Management to budget for expenditures in the following year. B\) Management to quickly collect cash from customers. C\) Management to sell its inventory for a profit. D\) Reported earnings to predict a company's future earnings. Answer: D) Reported earnings to predict a company's future earnings. Flashcard 56: Question: Comprehensive income reports an expanded version of income to include certain types of gains and losses not included in traditional income statements. Group: True or False Answer: True. Flashcard 57: Question: In comparing the direct method with the indirect method of preparing the statement of cash flows: A\) Only investing activities are presented differently. B\) Only operating activities are presented differently. C\) All activities are presented differently. D\) Only financing activities are presented differently. Answer: B) Only operating activities are presented differently. Flashcard 58: Question: Comprehensive income is the change in equity from: A\) Nonowner transactions. B\) Owner transactions. C\) Capital transactions. D\) Owner and nonowner transactions. Answer: D) Owner and nonowner transactions. Flashcard 59: Question: Operating cash outflows would include: A\) Payment of cash dividends. B\) Purchase of investments. C\) Purchase of equipment. D\) Purchases of inventory. Answer: D) Purchases of inventory. Flashcard 60: Question: The relationship between revenue from selling inventory and the cost of that inventory is measured as: A\) Income before taxes. B\) Operating income. C\) Gross profit. Answer: C) Gross profit. Flashcard 61: Question: A primary advantage of the multiple-step format of the income statement over the single-step format is that the multiple-step format: A\) Separately lists income tax expense. B\) Lists revenues and expenses in order of their dollar amount. C\) Results in a higher amount of net income. D\) Classifies expenses by function. Answer: D) Classifies expenses by function. Flashcard 62: Question: The principal benefit of separately reporting discontinued operations is to enhance: A\) Comprehensive reporting. B\) Predictive ability of future profitability. C\) Consistency in reporting. D\) Intraperiod continuity. Answer: B) Predictive ability of future profitability.