Sale!

Intermediate Accounting 14th Edition, Kieso Test Bank

$34.99 $27.99

Test Bank For Intermediate Accounting 14th Edition, Kieso. Note: This is not a text book. Description: ISBN-13: 978-0470587232, ISBN-10: 0470587237.

Add to Wishlist
Add to Wishlist
Category: Tag:

Description

Test Bank Intermediate Accounting 14th Kieso, Weygandt & Warfield

MULTIPLE CHOICE
CHAPTER 1: FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS

1. 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.
2. Users of financial reports include all of the following except
a. creditors.
b. government agencies.
c. unions.
d. All of these are users.
3. The financial statements most frequently provided include all of the following except the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. statement of retained earnings.
4. 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.
5. 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 the above.
6. Which of the following represents a form of communication through financial reporting but not through financial statements?
a. Balance sheet.
b. President’s letter.
c. Income statement.
d. Notes to financial statements.
7. 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.
8. How does accounting help the capital allocation process attract investment capital?
a. Provides timely, relevant information.
b. Encourages innovation.
c. Promotes productivity.
d. a and b above.
9. Whether a business is successful and thrives is determined by
a. markets.
b. free enterprise.
c. competition.
d. all of these.
10. 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.
11. Financial statements in the early 2000s provide information related to
a. nonfinancial measurements.
b. forward-looking data.
c. hard assets (inventory and plant assets).
d. none of these.
12. Which of the following is not a major challenge facing the accounting profession?
a. Nonfinancial measurements.
b. Timeliness.
c. Accounting for hard assets.
d. Forward-looking information.
13. What is the 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 about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.
d. Provide information that excludes claims to the resources.
14. Primary users for general-purpose financial statements include
a. creditors.
b. employees.
c. investors.
d. both creditors and investors.
15. When making decisions, investors are interested in assessing
a. the company’s ability to generate net cash inflows.
b. management’s ability to protect and enhance the capital providers’ investments.
c. Both a and b.
d. the company’s ability to generate net income.
16. 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 the above.
17. Which perspective is adopted as part of the objective of general-purpose financial reporting?
a. Decision-usefulness perspective.
b. Proprietary perspective.
c. Entity perspective.
d. Financial reporting perspective.
18. Accounting principles are “generally accepted” only when
a. an authoritative accounting rule-making body has established it in an official pro- nouncement.
b. it has been accepted as appropriate because of its universal application.
c. both a and b.
d. neither a nor b.
19. A common set of accounting standards and procedures are called
a. financial accounting standards.
b. generally accepted accounting principles.
c. objectives of financial reporting.
d. statements of financial accounting concepts.
20. Which of the following is a general limitation of “general purpose financial statements”?
a. General purpose financial statements may not be the most informative for a specific enterprise.
b. General purpose financial statements are comparable.
c. General purpose financial statements are assumed to present fairly the company’s financial operations.
d. None of the above.

CHAPTER 2: CONCEPTUAL FRAMEWORK UNDERLYING FINANCIAL ACCOUNTING
1. Generally accepted accounting principles
a. are fundamental truths or axioms that can be derived from laws of nature.
b. derive their authority from legal court proceedings.
c. derive their credibility and authority from general recognition and acceptance by the accounting profession.
d. have been specified in detail in the FASB conceptual framework.
2. 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.
3. Which of the following are not true concerning a conceptual framework in account-ing?
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 the above (a-c) are true.
4. What is a purpose of having a conceptual framework?
a. To enable the profession to more quickly solve emerging practical problems.
b. To provide a foundation from which to build more useful standards.
c. Neither a nor b.
d. Both a and b.
5. Which of the following is not a benefit associated with the FASB 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.
6. 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
7. The underlying theme of the conceptual framework is
a. decision usefulness.
b. understandability.
c. faithful representation.
d. comparability.
8. Which of the following is not an objective of financial reporting?
a. To provide information about economic resources, the claims to those resources, and the changes in them.
b. To provide information that is helpful to investors and creditors and other users in assessing the amounts, timing, and uncertainty of future cash flows.
c. To provide information that is useful to those making investment and credit decisions.
d. All of these are objectives of financial reporting.
9. The objectives of financial reporting include all of the following except to provide information that
a. is useful to the Internal Revenue Service in allocating the tax burden to the business community.
b. is useful to those making investment and credit decisions.
c. is helpful in assessing future cash flows.
d. identifies the economic resources (assets), the claims to those resources (liabilities), and the changes in those resources and claims.
10. What is a primary objective of financial reporting as indicated in the conceptual framework?
a. provide information that is useful to those making investing and credit decisions.
b. provide information that is useful to management.
c. provide information about those investing in the entity.
d. All of the above.
11. What is a primary objective of financial reporting as indicated in the conceptual framework?
a. Provide information that is helpful to present and potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.
b. Provide information that is helpful to present investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.
c. Provide information that is helpful to potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.
d. None of the above.
12. Which of the following is a fundamental characteristic of useful accounting information?
a. Comparability. b. Relevance.
c. Neutrality. d. Materiality.
13. Which of the following is a primary characteristic of useful accounting information?
a. Conservatism. b. Comparability.
c. Faithful representation. d. Consistency.
14. What is meant by comparability when discussing financial accounting information?
a. Information has predictive or confirmatory 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.
15. What is meant by consistency when discussing financial accounting information?
a. Information that is measured and reported in a similar fashion across points in time.
b. Information is timely.
c. Information is measured similarly across the industry.
d. Information is verifiable.
16. Which of the following is an ingredient of relevance?
a. Verifiability. b. Neutrality.
c. Timeliness. d. Materiality.
17. Which of the following is an ingredient of faithful representation?
a. Predictive value.
b. Materiality.
c. Neutrality.
d. Confirmatory value.
18. 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.
19. Company A issuing its annual financial reports within one month of the end of the year is an example of which ingredient of fundamental quality of accounting information?
a. Neutrality. b. Timeliness.
c. Predictive value. d. Completeness.
20. What is the quality of information that enables users to better forecast future operations?
a. Faithful representation. b. Materiality.
c. Timeliness. d. Relevance.

CHAPTER 3: THE ACCOUNTING INFORMATION SYSTEM
1. 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.
2. Maintaining a set of accounting records is
a. optional.
b. required by the Internal Revenue Service.
c. required by the Foreign Corrupt Practices Act.
d. required by the Internal Revenue Service and the Foreign Corrupt Practices Act.
3. Debit always means
a. right side of an account.
b. increase.
c. decrease.
d. none of these.
4. An accounting record into which the essential facts and figures in connection with all transactions are initially recorded is called the
a. ledger.
b. account.
c. trial balance.
d. none of these.
5. A trial balance
a. proves that debits and credits are equal in the ledger.
b. supplies a listing of open accounts and their balances that are used in preparing financial statements.
c. is normally prepared three times in the accounting cycle.
d. all of these.
6. Which of the following is a real (permanent) account?
a. Goodwill
b. Sales
c. Accounts Receivable
d. Both Goodwill and Accounts Receivable
7. Which of the following is a nominal (temporary) account?
a. Unearned Revenue
b. Salary Expense
c. Inventory
d. Retained Earnings
8. Nominal accounts are also called
a. temporary accounts.
b. permanent accounts.
c. real accounts.
d. none of these.
9. 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.
10. 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.
11. Stockholders’ equity is not affected by all
a. cash receipts.
b. dividends.
c. revenues.
d. expenses.
12. 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.
13. 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.
14. The difference between the accounting process and the accounting cycle is
a. the accounting process results in the preparation of financial statements, whereas the accounting cycle is concerned with recording business transactions.
b. the accounting cycle represents the steps taken to accomplish the accounting process.
c. the accounting process represents the steps taken to accomplish the accounting cycle.
d. merely semantic, because both concepts refer to the same thing.
15. 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.
16. Which of the following criteria must be met before an event or item should be recorded for accounting purposes?
a. The event or item can be measured objectively in financial terms.
b. The event or item is relevant and reliable.
c. The event or item is an element.
d. All of these must be met.
17. Which of the following is a recordable event or item?
a. Changes in managerial policy
b. The value of human resources
c. Changes in personnel
d. None of these
18. Which of the following is not an internal event?
a. Depreciation
b. Using raw materials in the production process
c. Dividend declaration and subsequent payment
d. All of these are internal transactions.
19. External events do not include
a. interaction between an entity and its environment.
b. a change in the price of a good or service that an entity buys or sells, a flood or earthquake.
c. improvement in technology by a competitor.
d. using buildings and machinery in operations.
20. A trial balance may prove that debits and credits are equal, but
a. an amount could be entered in the wrong account.
b. a transaction could have been entered twice.
c. a transaction could have been omitted.
d. all of these.

CHAPTER 4: INCOME STATEMENT AND RELATED INFORMATION
1. 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, extraordinary items, and cumulative effect.
c. revenues, expenses, gains, and losses.
d. all of these.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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
7. 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.
8. 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.
9. 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.
10. 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.
11. Which of the following is an advantage of the single-step income statement over the multiple-step income statement?
a. It reports gross profit for the year.
b. Expenses are classified by function.
c. It matches costs and expenses with related revenues.
d. It does not imply that one type of revenue or expense has priority over another.
12. The single-step income statement emphasizes
a. the gross profit figure.
b. total revenues and total expenses.
c. extraordinary items and accounting changes more than these are emphasized in the multiple-step income statement.
d. the various components of income from continuing operations.
13. Which of the following is an acceptable method of presenting the income statement?
a. A single-step income statement
b. A multiple-step income statement
c. A consolidated statement of income
d. All of these
14. Which of the following is not a generally practiced method of presenting the income statement?
a. Including prior period adjustments in determining net income
b. The single-step income statement
c. The consolidated statement of income
d. Including gains and losses from discontinued operations of a component of a business in determining net income
15. The occurrence which most likely would have no effect on 2012 net income (assuming that all amounts involved are material) is the
a. sale in 2012 of an office building contributed by a stockholder in 1983.
b. collection in 2012 of a receivable from a customer whose account was written off in
2011 by a charge to the allowance account.
c. settlement based on litigation in 2012 of previously unrecognized damages from a serious accident which occurred in 2010.
d. worthlessness determined in 2012 of stock purchased on a speculative basis in 2008.
16. The occurrence that most likely would have no effect on 2012 net income is the
a. sale in 2012 of an office building contributed by a stockholder in 1961.
b. collection in 2012 of a dividend from an investment.
c. correction of an error in the financial statements of a prior period discovered subsequent to their issuance.
d. stock purchased in 1996 deemed worthless in 2012.
17. Which of the following is not a selling expense?
a. Advertising expense
b. Office salaries expense
c. Freight-out
d. Store supplies consumed
18. The accountant for the Lintz Sales Company is preparing the income statement for 2012 and the balance sheet at December 31, 2012. The January 1, 2012 merchandise inventory balance will appear
a. only as an asset on the balance sheet.
b. only in the cost of goods sold section of the income statement.
c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet.
d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.
19. In order to be classified as an extraordinary item in the income statement, an event or transaction should be
a. unusual in nature, infrequent, and material in amount.
b. unusual in nature and infrequent, but it need not be material.
c. infrequent and material in amount, but it need not be unusual in nature.
d. unusual in nature and material, but it need not be infrequent.
20. Classification as an extraordinary item on the income statement would be appropriate for the
a. gain or loss on disposal of a component of the business.
b. substantial write-off of obsolete inventories.
c. loss from a strike.
d. none of these.

CHAPTER 5: BALANCE SHEET AND STATEMENT OF CASH FLOWS
1. Which of the following is a limitation of the balance sheet?
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
2. The balance sheet is useful for analyzing all of the following except
a. liquidity.
b. solvency.
c. profitability.
d. financial flexibility.
3. Balance sheet 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
4. Balance sheet 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.
5. 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
6. The balance sheet 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.
7. One criticism not normally aimed at a balance sheet 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.
8. 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.
9. 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 stockholders’ equity.
d. none of these.
10. The correct order to present current assets is
a. cash, accounts receivable, prepaid items, inventories.
b. cash, accounts receivable, inventories, prepaid items.
c. cash, inventories, accounts receivable, prepaid items.
d. cash, inventories, prepaid items, accounts receivable.
11. 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.
12. 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.
13. The current assets section of the balance sheet should include
a. machinery. b. patents. c. goodwill. d. inventory.
14. 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.
15. Which of the following should not be considered as a current asset in the balance sheet?
a. Installment notes receivable due over 18 months in accordance with normal trade practice.
b. Prepaid taxes which cover assessments of the following operating cycle of the business.
c. Equity or debt securities purchased with cash available for current operations.
d. The cash surrender value of a life insurance policy carried by a corporation, the beneficiary, on its president.
16. 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.
17. When a portion of inventories has been pledged as security on a loan,
a. the value of the portion pledged should be subtracted from the debt.
b. an equal amount of retained earnings should be appropriated.
c. the fact should be disclosed but the amount of current assets should not be affected.
d. the cost of the pledged inventories should be transferred from current assets to noncurrent assets.
18. Which of the following is not a long-term investment?
a. Cash surrender value of life insurance b. Franchise
c. Land held for speculation d. A sinking fund
19. 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
20. Which item below is not a current liability?
a. Unearned revenue
b. Stock dividends distributable
c. The currently maturing portion of long-term debt
d. Trade accounts payable

CHAPTER 6: ACCOUNTING AND THE TIME VALUE OF MONEY

1. Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of the asset obtained or liability owed at the date of incurrence?
a. A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.
b. A capital lease is entered into with the initial lease payment due one month subse- quent to the signing of the lease agreement.
c. A ten-year 8% bond is issued on January 2 with interest payable semiannually on July 1 and January 1 yielding 7%.
d. A ten-year 8% bond is issued on January 2 with interest payable semiannually on July
1 and January 1 yielding 9%.
2. What best describes the time value of money?
a. The interest rate charged on a loan.
b. Accounts receivable that are determined uncollectible.
c. An investment in a checking account.
d. The relationship between time and money.
3. Which of the following situations does not base an accounting measure on present values?
a. Pensions.
b. Prepaid insurance.
c. Leases.
d. Sinking funds.
4. What is interest?
a. Payment for the use of money.
b. An equity investment.
c. Return on capital. d. Loan.
5. What is NOT a variable that is considered in interest computations?
a. Principal.
b. Interest rate.
c. Assets.
d. Time.
6. If you invest $50,000 to earn 8% interest, which of the following compounding approaches would return the lowest amount after one year?
a. Daily.
b. Monthly.
c. Quarterly.
d. Annually.
7. Which factor would be greater — the present value of $1 for 10 periods at 8% per period or the future value of $1 for 10 periods at 8% per period?
a. Present value of $1 for 10 periods at 8% per period.
b. Future value of $1 for 10 periods at 8% per period.
c. The factors are the same.
d. Need more information.
8. Which of the following tables would show the smallest value for an interest rate of 5% for six periods?
a. Future value of 1
b. Present value of 1
c. Future value of an ordinary annuity of 1
d. Present value of an ordinary annuity of 1
9. Which table would you use to determine how much you would need to have deposited three years ago at 10% compounded annually in order to have $1,000 today?
a. Future value of 1 or present value of 1 b. Future value of an annuity due of 1
c. Future value of an ordinary annuity of 1 d. Present value of an ordinary annuity of 1
10. Which table would you use to determine how much must be deposited now in order to provide for 5 annual withdrawals at the beginning of each year, starting one year hence?
a. Future value of an ordinary annuity of 1 b. Future value of an annuity due of 1
c. Present value of an annuity due of 1 d. None of these
11. Which table has a factor of 1.00000 for 1 period at every interest rate?
a. Future value of 1
b. Present value of 1
c. Future value of an ordinary annuity of 1
d. Present value of an ordinary annuity of 1
12. Which table would show the largest factor for an interest rate of 8% for five periods?
a. Future value of an ordinary annuity of 1
b. Present value of an ordinary annuity of 1
c. Future value of an annuity due of 1
d. Present value of an annuity due of 1
13. Which of the following tables would show the smallest factor for an interest rate of 10% for six periods?
a. Future value of an ordinary annuity of 1
b. Present value of an ordinary annuity of 1
c. Future value of an annuity due of 1
d. Present value of an annuity due of 1
14. The figure .94232 is taken from the column marked 2% and the row marked three periods in a certain interest table. From what interest table is this figure taken?
a. Future value of 1
b. Future value of annuity of 1
c. Present value of 1
d. Present value of annuity of 1
15. Which of the following tables would show the largest value for an interest rate of 10% for 8 periods?
a. Future amount of 1 table.
b. Present value of 1 table.
c. Future amount of an ordinary annuity of 1 table.
d. Present value of an ordinary annuity of 1 table.
16. On June 1, 2012, Pitts Company sold some equipment to Gannon Company. The two companies entered into an installment sales contract at a rate of 8%. The contract required 8 equal annual payments with the first payment due on June 1, 2012. What type of compound interest table is appropriate for this situation?
a. Present value of an annuity due of 1 table.
b. Present value of an ordinary annuity of 1 table.
c. Future amount of an ordinary annuity of 1 table.
d. Future amount of 1 table.
17. Which of the following transactions would best use the present value of an annuity due of
1 table?
a. Fernetti, Inc. rents a truck for 5 years with annual rental payments of $20,000 to be made at the beginning of each year.
b. Edmiston Co. rents a warehouse for 7 years with annual rental payments of $120,000 to be made at the end of each year.
c. Durant, Inc. borrows $20,000 and has agreed to pay back the principal plus interest in three years.
d. Babbitt, Inc. wants to deposit a lump sum to accumulate $50,000 for the construction of a new parking lot in 4 years.
18. A series of equal receipts at equal intervals of time when each receipt is received at the beginning of each time period is called an
a. ordinary annuity.
b. annuity in arrears.
c. annuity due.
d. unearned receipt.
19. In the time diagram below, which concept is being depicted?
0 1 2 3 4
$1 $1 $1 $1
PV

a. Present value of an ordinary annuity b. Present value of an annuity due
c. Future value of an ordinary annuity d. Future value of an annuity due
20. On December 1, 2012, Richards Company sold some machinery to Fleming Company.
The two companies entered into an installment sales contract at a predetermined interest rate. The contract required four equal annual payments with the first payment due on December 1, 2012, the date of the sale. What present value concept is appropriate for this situation?
a. Future amount of an annuity of 1 for four periods
b. Future amount of 1 for four periods
c. Present value of an ordinary annuity of 1 for four periods
d. Present value of an annuity due of 1 for four periods.

CHAPTER 7: CASH AND RECEIVABLES
1. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Postdated checks and I.O.U.’s
2. Which of the following is considered cash?
a. Certificates of deposit (CDs)
b. Money market checking accounts
c. Money market savings certificates
d. Postdated checks
3. Travel advances should be reported as
a. supplies.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these.
4. Which of the following items should not be included in the Cash caption on the balance sheet?
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
5. All of the following may be included under the heading of “cash” except
a. currency.
b. money market funds.
c. checking account balance.
d. savings account balance.
6. In which account are post-dated checks received classified?
a. Receivables.
b. Prepaid expenses.
c. Cash.
d. Payables.
7. In which account are postage stamps classified?
a. Cash.
b. Office supplies.
c. Receivables.
d. Inventory.
8. What is a compensating balance?
a. Savings account balances.
b. Margin accounts held with brokers.
c. Temporary investments serving as collateral for outstanding loans.
d. Minimum deposits required to be maintained in connection with a borrowing arrangement.
9. Under which section of the balance sheet is “cash restricted for plant expansion” reported?
a. Current assets.
b. Non-current assets.
c. Current liabilities.
d. Stockholders’ equity.
10. A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and
a. is acceptable as a means to pay current liabilities.
b. has a current market value that is greater than its original cost
c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.
11. Bank overdrafts, if material, should be
a. reported as a deduction from the current asset section.
b. reported as a deduction from cash.
c. netted against cash and a net cash amount reported.
d. reported as a current liability.
12. Deposits held as compensating balances
a. usually do not earn interest.
b. if legally restricted and held against short-term credit may be included as cash.
c. if legally restricted and held against long-term credit may be included among current assets.
d. none of these.
13. The category “trade receivables” includes
a. advances to officers and employees.
b. income tax refunds receivable.
c. claims against insurance companies for casualties sustained.
d. none of these.
14. Which of the following should be recorded in Accounts Receivable?
a. Receivables from officers
b. Receivables from subsidiaries
c. Dividends receivable
d. None of these
15. What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet?
a. As offsets to capital.
b. By means of footnotes only.
c. As assets but separately from other receivables.
d. As trade notes and accounts receivable if they otherwise qualify as current assets.
16. When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n)
a. trade discount.
b. nominal discount.
c. enhancement discount.
d. cash discount.
17. Trade discounts are
a. not recorded in the accounts; rather they are a means of computing a price.
b. used to avoid frequent changes in catalogues.
c. used to quote different prices for different quantities purchased.
d. all of the above.
18. If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as
a. a deduction from sales in the income statement.
b. an item of “other expense” in the income statement.
c. a deduction from accounts receivable in determining the net realizable value of accounts receivable.
d. sales discounts forfeited in the cost of goods sold section of the income statement.
19. Why do companies provide trade discounts?
a. To avoid frequent changes in catalogs.
b. To induce prompt payment.
c. To easily alter prices for different customers.
d. Both a. and c.
20. The accounting for cash discounts and trade discounts are
a. the same.
b. always recorded net.
c. not the same.
d. tied to the timing of cash collections on the account.

CHAPTER 8: VALUATION OF INVENTORIES: A COST-BASIS APPROACH
1. Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer?
a. Raw materials. b. Work-in-process. c. Finished goods. d. Supplies.
2. Where should raw materials be classified on the balance sheet?
a. Prepaid expenses.
b. Inventory.
c. Equipment.
d. Not on the balance sheet.
3. Which of the following accounts is not reported in inventory?
a. Raw materials. b. Equipment.
c. Finished goods. d. Supplies.
4. Why are inventories included in the computation of net income?
a. To determine cost of goods sold.
b. To determine sales revenue.
c. To determine merchandise returns.
d. Inventories are not included in the computation of net income.
5. Which of the following is a characteristic of a perpetual inventory system?
a. Inventory purchases are debited to a Purchases account.
b. Inventory records are not kept for every item.
c. Cost of goods sold is recorded with each sale.
d. Cost of goods sold is determined as the amount of purchases less the change in inventory.
6. How is a significant amount of consignment inventory reported in the balance sheet?
a. The inventory is reported separately on the consignor’s balance sheet.
b. The inventory is combined with other inventory on the consignor’s balance sheet.
c. The inventory is reported separately on the consignee’s balance sheet.
d. The inventory is combined with other inventory on the consignee’s balance sheet.
7. Where should goods in transit that were recently purchased f.o.b. destination be included on the balance sheet?
a. Accounts payable.
b. Inventory.
c. Equipment.
d. Not on the balance sheet.
8. If a company uses the periodic inventory system, what is the impact on net income of including goods in transit f.o.b. shipping point in purchases, but not ending inventory?
a. Overstate net income.
b. Understate net income.
c. No effect on net income.
d. Not sufficient information to determine effect on net income.
9. If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit f.o.b. shipping point in purchases, but not ending inventory?
a. Overstate the current ratio.
b. Understate the current ratio.
c. No effect on the current ratio.
d. Not sufficient information to determine effect on the current ratio.
10. What is consigned inventory?
a. Goods that are shipped, but title transfers to the receiver.
b. Goods that are sold, but payment is not required until the goods are sold.
c. Goods that are shipped, but title remains with the shipper.
d. Goods that have been segregated for shipment to a customer.
11. When using a perpetual inventory system,
a. no Purchases account is used.
b. a Cost of Goods Sold account is used.
c. two entries are required to record a sale.
d. all of these.
12. Goods in transit which are shipped f.o.b. shipping point should be
a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these.
13. Goods in transit which are shipped f.o.b. destination should be
a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these.
14. Which of the following items should be included in a company’s inventory at the balance sheet date?
a. Goods in transit which were purchased f.o.b. destination.
b. Goods received from another company for sale on consignment.
c. Goods sold to a customer which are being held for the customer to call for at his or her convenience.
d. None of these.

Use the following information for questions 35 and 16.

During 2012 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2013. Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne. In 2013 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan.

15. This transaction is known as a(n)
a. consignment.
b. installment sale.
c. assignment for the benefit of creditors.
d. product financing arrangement.
16. On whose books should the cost of the inventory appear at the December 31, 2012 balance sheet date?
a. Carne Corporation
b. Nolan Corporation
c. Norwalk Bank
d. Nolan Corporation, with Carne making appropriate note disclosure of the transaction
17. Goods on consignment are
a. included in the consignee’s inventory.
b. recorded in a Consignment Out account which is an inventory account.
c. recorded in a Consignment In account which is an inventory account.
d. all of these
18. Valuation of inventories requires the determination of all of the following except
a. the costs to be included in inventory.
b. the physical goods to be included in inventory.
c. the cost of goods held on consignment from other companies.
d. the cost flow assumption to be adopted.
19. The accountant for the Pryor Sales Company is preparing the income statement for 2012 and the balance sheet at December 31, 2012. Pryor uses the periodic inventory system. The January 1, 2012 merchandise inventory balance will appear
a. only as an asset on the balance sheet.
b. only in the cost of goods sold section of the income statement.
c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet.
d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.
20. If the beginning inventory for 2012 is overstated, the effects of this error on cost of goods sold for 2012, net income for 2012, and assets at December 31, 2013, respectively, are
a. overstatement, understatement, overstatement. b. overstatement, understatement, no effect.
c. understatement, overstatement, overstatement. d. understatement, overstatement, no effect.

CHAPTER 9: INVENTORIES: ADDITIONAL VALUATION ISSUES
1. Which of the following is true about lower-of-cost-or-market?
a. It is inconsistent because losses are recognized but not gains.
b. It usually understates assets.
c. It can increase future income.
d. All of these.
2. The primary basis of accounting for inventories is cost. A departure from the cost basis of pricing the inventory is required where there is evidence that when the goods are sold in the ordinary course of business their
a. selling price will be less than their replacement cost.
b. replacement cost will be more than their net realizable value.
c. cost will be less than their replacement cost.
d. future utility will be less than their cost.
3. When valuing raw materials inventory at lower-of-cost-or-market, what is the meaning of the term “market”?
a. Net realizable value
b. Net realizable value less a normal profit margin
c. Current replacement cost
d. Discounted present value
4. In no case can “market” in the lower-of-cost-or-market rule be more than
a. estimated selling price in the ordinary course of business.
b. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal.
c. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin.
d. estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate reserve for possible future losses.
5. Designated market value
a. is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.
b. should always be equal to net realizable value.
c. may sometimes exceed net realizable value.
d. should always be equal to net realizable value less a normal profit margin.
6. Lower-of-cost-or-market
a. is most conservative if applied to the total inventory.
b. is most conservative if applied to major categories of inventory.
c. is most conservative if applied to individual items of inventory.
d. must be applied to major categories for taxes.
7. An item of inventory purchased this period for $15.00 has been incorrectly written down to its current replacement cost of $10.00. It sells during the following period for $10.00, its normal selling price, with disposal costs of $3.00 and normal profit of $12.00. Which of the following statements is not true?
a. The cost of sales of the following year will be understated.
b. The current year’s income is understated.
c. The closing inventory of the current year is understated.
d. Income of the following year will be understated.
8. When the cost-of-goods-sold method is used to record inventory at market
a. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale.
b. a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline.
c. only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements.
d. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold.
9. Lower-of-cost-or-market as it applies to inventory is best described as the
a. drop of future utility below its original cost.
b. method of determining cost of goods sold.
c. assumption to determine inventory flow.
d. change in inventory value to market value.
10. The floor to be used in applying the lower-of-cost-or-market method to inventory is determined as the
a. net realizable value.
b. net realizable value less normal profit margin.
c. replacement cost.
d. selling price less costs of completion and disposal.
11. What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory?
a. Prevents understatement of the inventory value.
b. Allows for a normal profit to be earned.
c. Allows for items to be valued at replacement cost.
d. Prevents overstatement of the value of obsolete or damaged inventories.
12. Why are inventories stated at lower-of-cost-or-market?
a. To report a loss when there is a decrease in the future utility.
b. To be conservative.
c. To report a loss when there is a decrease in the future utility below the original cost.
d. To permit future profits to be recognized.
13. Which of the following is not an acceptable approach in applying the lower-of-cost-or- market method to inventory?
a. Inventory location.
b. Categories of inventory items.
c. Individual item.
d. Total of the inventory.
14. Which method(s) may be used to record a loss due to a price decline in the value of inventory?
a. Cost-of-goods-sold. b. Sales method.
c. Loss method d. Both a and c.
15. Why might inventory be reported at sales prices (net realizable value or market price)
rather than cost?
a. When there is a controlled market with a quoted price applicable to all quantities and when there are no significant costs of disposal.
b. When there are no significant costs of disposal.
c. When a non-cancellable contract exists to sell the inventory.
d. When there is a controlled market with a quoted price applicable to all quantities.
16. Recording inventory at net realizable value is permitted, even if it is above cost, when there are no significant costs of disposal involved and
a. the ending inventory is determined by a physical inventory count.
b. a normal profit is not anticipated.
c. there is a controlled market with a quoted price applicable to all quantities.
d. the internal revenue service is assured that the practice is not used only to distort reported net income.
17. When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?
a. Sales price
b. Net realizable value
c. Historical cost
d. Net realizable value reduced by a normal profit margin
18. Net realizable value is
a. acquisition cost plus costs to complete and sell. b. selling price.
c. selling price plus costs to complete and sell. d. selling price less costs to complete and sell.
19. If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is
a. net realizable value.
b. original cost.
c. market value.
d. net realizable value less a normal profit margin.
20. Inventory may be recorded at net realizable value if
a. there is a controlled market with a quoted price.
b. there are no significant costs of disposal.
c. the inventory consists of precious metals or agricultural products.
d. all of these.

CHAPTER 10: ACQUISITION AND DISPOSITION OF PROPERTY, PLANT, AND EQUIPMENT
1. Plant assets may properly include
a. deposits on machinery not yet received.
b. idle equipment awaiting sale.
c. land held for possible use as a future plant site.
d. none of these.
2. Which of the following is not a major characteristic of a plant asset?
a. Possesses physical substance
b. Acquired for resale
c. Acquired for use
d. Yields services over a number of years
3. Which of these is not a major characteristic of a plant asset?
a. Possesses physical substance
b. Acquired for use in operations
c. Yields services over a number of years
d. All of these are major characteristics of a plant asset.
4. Cotton Hotel Corporation recently purchased Emporia Hotel and the land on which it is located with the plan to tear down the Emporia Hotel and build a new luxury hotel on the site. The cost of the Emporia Hotel should be
a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down.
b. written off as an extraordinary loss in the year the hotel is torn down.
c. capitalized as part of the cost of the land.
d. capitalized as part of the cost of the new hotel.
5. The cost of land does not include
a. costs of grading, filling, draining, and clearing.
b. costs of removing old buildings.
c. costs of improvements with limited lives.
d. special assessments.
6. The cost of land typically includes the purchase price and all of the following costs except
a. grading, filling, draining, and clearing costs.
b. street lights, sewers, and drainage systems cost.
c. private driveways and parking lots.
d. assumption of any liens or mortgages on the property.
7. If a corporation purchases a lot and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on
a. the significance of the cost allocated to the building in relation to the combined cost of the lot and building.
b. the length of time for which the building was held prior to its demolition.
c. the contemplated future use of the parking lot.
d. the intention of management for the property when the building was acquired.
8. The debit for a sales tax properly levied and paid on the purchase of machinery preferably would be a charge to
a. the machinery account.
b. a separate deferred charge account.
c. miscellaneous tax expense (which includes all taxes other than those on income).
d. accumulated depreciation–machinery.
9. Fences and parking lots are reported on the balance sheet as
a. current assets.
b. land improvements.
c. land.
d. property and equipment.
10. Historical cost is the basis advocated for recording the acquisition of property, plant, and equipment for all of the following reasons except
a. at the date of acquisition, cost reflects fair market value.
b. property, plant, and equipment items are always acquired at their original historical cost.
c. historical cost involves actual transactions and, as such, is the most reliable basis.
d. gains and losses should not be anticipated but should be recognized when the asset is sold.
11. To be consistent with the historical cost principle, overhead costs incurred by an enterprise constructing its own building should be
a. allocated on the basis of lost production.
b. eliminated completely from the cost of the asset.
c. allocated on an opportunity cost basis.
d. allocated on a pro rata basis between the asset and normal operations.
12. Which of the following costs are capitalized for self-constructed assets?
a. Materials and labor only
b. Labor and overhead only
c. Materials and overhead only
d. Materials, labor, and overhead
13. Which of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets?
a. Assets under construction for an enterprise’s own use.
b. Assets intended for sale or lease that are produced as discrete projects.
c. Assets financed through the issuance of long-term debt.
d. Assets not currently undergoing the activities necessary to prepare them for their intended use.
14. Assets that qualify for interest cost capitalization include
a. assets under construction for a company’s own use.
b. assets that are ready for their intended use in the earnings of the company.
c. assets that are not currently being used because of excess capacity.
d. All of these assets qualify for interest cost capitalization.
15. When computing the amount of interest cost to be capitalized, the concept of “avoidable interest” refers to
a. the total interest cost actually incurred.
b. a cost of capital charge for stockholders’ equity.
c. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
d. that portion of average accumulated expenditures on which no interest cost was incurred.
16. The period of time during which interest must be capitalized ends when
a. the asset is substantially complete and ready for its intended use.
b. no further interest cost is being incurred.
c. the asset is abandoned, sold, or fully depreciated.
d. the activities that are necessary to get the asset ready for its intended use have begun.
17. Which of the following statements is true regarding capitalization of interest?
a. Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account.
b. The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.
c. When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized.
d. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period.
18. Construction of a qualifying asset is started on April 1 and finished on December 1. The fraction used to multiply an expenditure made on April 1 to find weighted-average accumulated expenditures is
a. 8/8.
b. 8/12.
c. 9/12.
d. 11/12.
19. When funds are borrowed to pay for construction of assets that qualify for capitalization of interest, the excess funds not needed to pay for construction may be temporarily invested in interest-bearing securities. Interest earned on these temporary investments should be
a. offset against interest cost incurred during construction.
b. used to reduce the cost of assets being constructed.
c. multiplied by an appropriate interest rate to determine the amount of interest to be capitalized.
d. recognized as revenue of the period.
20. Interest cost that is capitalized should
a. be written off over the remaining term of the debt.
b. be accumulated in a separate deferred charge account and written off equally over a
40-year period.
c. not be written off until the related asset is fully depreciated or disposed of.
d. none of these.

AND MUCH MORE