Exam (elaborations)
Financial Accounting Exam #1 Questions and Answers
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Financial Accounting Exam #1 Questions and Answers
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Financial Accounting Exam #1Questions and Answers
Which of the following statements is false?
a. The focus of financial accounting is on the creation of financial information that will be
used chiefly by managers of a business in making decisions about adding or removing
product lines.✓
b. The focus of managerial accounting is on the creation of financial information that will
be used chiefly by managers of a business in making decisions about the performance
of divisions or departments within the firm.
c. The focus of financial accounting is on the creation of financial information that will
assist investors and creditors when making decisions about whether to invest in the
stock of the firm or extend loans to the firm.
d. Managerial accounting information may be prepared in a manner that fits the needs
of management rather than the external investment community. - Answer-a. The focus
of financial accounting is on the creation of financial information that will be used chiefly
by managers of a business in making decisions about adding or removing product lines.
According to the conceptual framework jointly developed by the IASB and the FASB,
financial information is relevant when it - Answer-provides predictive or confirmatory
value.
The primary source of generally accepted accounting principles (GAAP) in the United
States at this time is the: - Answer-Financial Accounting Standards Board (FASB).
According to the conceptual framework jointly developed by the IASB and the FASB,
fundamental qualitative characteristics of financial reporting include: - Answer-
Relevance and faithful representation.
The principal benefit of a single set of global financial reporting standards is - Answer-
Increased ease of international capital flow.
Which of the following statements is true?
a. U.S. generally accepted accounting principles (GAAP) are principles-based.
b. International financial reporting standards (IFRS) are principles-based.
c. U.S. GAAP is less detailed than IFRS.
d. U.S. GAAP involves more judgement in the application of accounting principles. -
Answer-b. International financial reporting standards (IFRS) are principles-based.
Compared to International Financial Reporting Standards (IFRS), U.S. GAAP - Answer-
is less prone to legal difficulty because U.S. GAAP is rules-based, while IFRS is
principles-based.
Which of the following accounts would not appear on an income statement?
, a. Accounts payable.
b. Salary expense.
c. Client service revenue.
d. Income tax expense. - Answer-a. Accounts payable.
Which of the following is not one of the three basic financial statements?
a. Balance Sheet (Statement of Financial Position).
b. Income Statement.
c. Statement of Functional Expenses.
d. Statement of Cash Flows. - Answer-c. Statement of Functional Expenses.
As of December 31, 20X7, ABC Co. had total assets of $22,000,000 and total owners'
equity of $14,000,000. During 20X7, ABC Co. had total revenues of $9,000,000 and
total expenses of $7,800,000. For the year-ended December 31, 20X7, what was ABC
Co.'s net income? - Answer-Net income = Revenue - Expense
$1,200,000.
Which of the following accounts would not appear on a statement of financial position
(balance sheet)?
a. Accounts receivable.
b. Rent expense.
c. Cash.
d. Notes payable. - Answer-b. Rent expense.
As of December 31, 20X7, ABC Co. had total assets of $22,000,000 and total owners'
equity of $14,000,000. During 20X7, ABC Co. had total revenues of $9,000,000 and
total expenses of $7,800,000. As of December 31, 20X7, what were ABC Co.'s total
liabilities? - Answer-c. $8,000,000.
Davis Co.'s external auditor rendered an opinion on the financial statements which
stated that the financial statements and related disclosures fairly presented financial
information in all material respects in terms of U.S. GAAP except for the fact certain
lease were not properly accounted for as finance leases. This is an example of a (an) -
Answer-qualified opinion.
An internal audit function should report to the - Answer-audit committee of the board.
Internal control is a process that has certain objectives including
a. the reasonable assurance of reliable financial reporting.
b. compliance with laws and regulations.
c. effective and efficient operations.
d. all of the above. - Answer-d. all of the above.
Current assets normally include all of the following except
a. Cash.
b. Accounts receivable.
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