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INTERMEDIATE ACCOUNTING 1 FINAL EXAM REVIEW QUESTIONS WITH CORRECT ANSWERS
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INTERMEDIATE ACCOUNTING 1 FINAL EXAM REVIEW QUESTIONS WITH CORRECT ANSWERS
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INTERMEDIATE ACCOUNTING 1 FINALEXAM REVIEW QUESTIONS WITH
CORRECT ANSWERS
External decision makers would not look primarily to financial accounting information to
assist them in making decisions related to:
a. The purchase of stocks and bonds
b. Compensation of company executives
c. Making loans to the company
d. Estimates of the potential for future profits - Answer-b. Compensation of company
executives
Which of the following is not true about net operating cash flow?
a. It is a measure used in accrual accounting and is recognized as the best predictor of
future operating cash flows.
b. It is easy to understand and all information required to measure it is factual
c. Over short periods of time, it may not be indicative of long-run cash-generating ability
d. It is the difference between cash receipts and cash disbursements from providing
goods and services - Answer-a. It is a measure used in accrual accounting and is
recognized as the best predictor of future operating cash flows.
Porite Company recognizes revenue in the period in which its records an asset for the
related accounts receivable, rather than in the period in which the account receivable is
collected in cash. Porite's practice is an example of:
a. Accrual accounting
b. Cash basis accounting
c. Economic entity
d. The matching principle - Answer-a. Accrual accounting
In a recent annual report, Apple Computer reported the following in ones of its
disclosure notes: "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
GAAP is an abbreveation for:
a. Generally authorized accounting procedures
b. Generally accepted auditing practices
c. Generally applied accounting procedures
, d. Generally accepted accounting principles - Answer-d. Generally accepted accounting
principles
The FASB's standard-setting process includes, in the correct order: - Answer-Research,
discussion paper, exposure draft, Accounting Standards Update
Independent auditors express an opinion on the: - Answer-Fairness of financial
statements
The possibility that the capital markets' focus on periodic profits may tempt a company's
management to bend or even break accounting rules to inflate reported net income as
an example of: - Answer-An ethical dilemma
One of the elements that many believe distinguishes a profession from other
occupations is the acceptance of responsibility by its members for the interests of those
it serves, which is often articulated in: - Answer-a code of ethics
A firm's comprehensive income always:
a. is less than its net income
b. is greater than its net income
c. is the same as its net income
d. could be greater than or less than net income - Answer-d. Could be greater than or
less than net income
Net income equals: - Answer-Revenue minus expenses
The enhancing qualitative characteristic of understandability means that information
should be understood by: - Answer-Those who have a. reasonable understanding of
business and economic activities
When there is an agreement between a measure or description and the phenomenon it
purports to represent, information possesses what characteristic? - Answer-Faithful
representation
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
Cash dividends are an example of which of the following elements?
a. Expenses
b. Distribution to owners
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