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INTERMEDIATE ACCOUNTING EXAM (CH.1-4) QUESTIONS WITH COMPLETE ANSWERS
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INTERMEDIATE ACCOUNTING EXAM (CH.1-4) QUESTIONS WITH COMPLETE ANSWERS
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INTERMEDIATE ACCOUNTING EXAM(CH.1-4) QUESTIONS WITH COMPLETE
ANSWERS
According to Statement of Financial Accounting Concepts No. 2, predictive value is an
ingredient of the fundamental quality of:
Relevance: Faithful Representation:
a. yes no
b. yes yes
c. no no
d. no yes - Answer-a: yes; no
Financial information exhibits the characteristic of consistency when:
a. expenses are reposted as charges against revenue in the period in which they are
paid
b. companies apply the same accounting treatment to similar events, from period to
period
c. extraordinary gains and losses are not included on the income statement
d. accounting procedures are adopted which give a consistent rate of net income -
Answer-b. companies apply the same accounting treatment to similar events, from
period to period
In classifying the elements of financial statements, the primary distinction between
revenues and gains is
a. the materiality of the amounts involved
b. the likelihood that the transactions involved will recur in the future
c. the nature of the activities that gave rise to the transactions involved
d. the costs verses the benefits of the alternative methods of disclosing the transactions
involved - Answer-c. the nature of the activities that gave rise to the transactions
involved
Which of the following basic accounting assumptions is threatened by the existence of
severe inflation in the economy?
a. monetary unit assumption
b. periodicity assumption
c. going-concern assumption
d. economic entity assumption - Answer-a. monetary unit assumption
What accounting concept justifies the usage of depreciation and amortization policies?
, a. going-concern assumption
b. fair value principle
c. full disclosure principle
d. monetary unit assumption - Answer-a. going-concern assumption
The allowance for doubtful accounts, which appears as a deduction from accounts
receivable on a balance sheet and which is based on an estimate of bad debts, is an
application of the:
a. consistency characteristic
b. expense recognition principle
c. materiality contraint
d. revenue recognition principle - Answer-b. expense recognition principle
Application of the full disclosure principle:
a. is theoretically desirable but not practical because the costs of complete disclosure
exceed the benefits
b. is violated when important financial information is buried in the notes to the financial
statements
c. is demonstrated by the use of supplementary information presenting the effects of
changing prices
d. requires that the financial statements be consistent and comparable - Answer-c. is
demonstrated by the use of supplementary information presenting the effects of
changing prices
*Use the following information for the next 3 questions*
The income statement of Dolan Corporation for 2017 included the following items:
Interest Revenue $141,000
Salaries and Wages Expense 210,000
Insurance Expense 21,000
The following balance have been excerpted from Dolan Corporation's balance sheets:
Dec 31, 2017 Dec 31, 2016
Interest Receivable $18,200 $15,000
Salaries and Wages payable 17,800 8,400
Prepaid Insurance 2,200 3,000
1) The cash received for interest durning 2017 was?
a. $122,800
b. $137,800
c. $141,000
d. $144,200
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