Accounting Principles 1

Question:

What statements are required of a Non-Profit organization?

a. Statement of financial position, statement of cash flows, and statement of activity and changes in net assets

b. Bank Statements

c. Cash Flows and Income Statement

d. Changes in retained earnings, statement of cash flows, income statement

Question:

Who can review the filings made by public companies with the SEC?

a. Only company executives

b. Anyone using the EDGAR system

c. Only law enforcement officials

d. Only the staff of the SEC and the company executives

Question:

What is the accounting objective which best relates to the straight line method?

a. Profit Maximization

b. Conservatism

c. Tax Minimization

d. None of the above

Question:

Which sentence concerning ABC's financial statements would be correct?ABC Co. has decided to use the straight line depreciation method in its financial statements and the MACRS method in its tax return.

a. The net cash flow from operations will be less than what it would have been if the straight-line method had been used for tax purposes as well as financial statement purposes

b. The income tax expenses presented in the income statement in the early years of the useful lives of the assets would be less than the tax payments to the Federal government

c. Deferred income tax liability will be shown as a liability on the balance sheet

d. All of the above

Question:

What is the accounting objective which best relates to the weighted average inventory method?

a. Tax Minimization

b. Income Smoothing

c. Profit Maximization


Question:

What was the purpose of the Sarbanes Oxley act, in general?

a. To allow for caps on management salaries

b. To allow for price setting on the stock market

c. To regulate employee pension funds

d. To better regulate public and private companies in the wake of recent accounting scandals

Question:

Which of the following accounts may appear on a company's balance sheet when the incomes for financial and tax reporting are different?

a. Income tax expenses

b. Deferred income tax liability

c. Sales tax expenses

d. All of the above

Question:

What is the accounting objective which best relates to the percentage of completion method?

a. Conservatism

b. Accurate Presentation

c. Tax Minimization

d. Income Smoothing

Question:

What new board was created as part of the Sarbanes Oxley Act?

a. SEC – Securities and Exchange Commission

b.IRS – Internal Revenue Service

c. PCAOB – Public Company Accounting Oversight Board

d. GAAP – Generally Accepted Accounting Principles

Question:

What two filings are required when a company wishes to list its stock?

a. Forms 10K and 10Q

b.Forms S-X and S-K

c.Forms 8K and 10Q

d.Forms S-X and X-S

Question:

Which of the following methods would be employed to help accomplish the following objective: smoothing a firm's income as a means of minimizing large fluctuations in the price of its stock.

a.Weighted average inventory

b.Percentage of completion method for long term construction contracts

c.Straight line amortization of patents

d.All of the above

Question:

How is an unconditional promise to give a donation to a charity accounted for by the charity?

a.Not recorded at all until 100% contribution is received

b.Never recorded even after receipt

c.As revenue only when the donation is made

d.As revenue when the promise is made

Question:

For which of the following would the use of the straight-line method of amortization be acceptable?

a.Building

b.Patent

c.Goodwill

d.All of the above

Question:

What is the acronym for the agency authorized by the U.S. Congress to regulate the financial reporting practices of most public corporations?

a.SEC

b.IASC

c.FASB

d.None of the above

Question:

What entry would a donor make when giving a cash donation to a charity, where the donor retains the right to revoke the contribution?

a. Dr: Cash, Cr: Refundable Advance to Charity

b. Dr: Refundable Advance to Charity, Cr: Cash

c. Dr: Expense, Cr: Cash

d. Dr: Revenue, Cr: Expense

Question:

Which of the following courses of action should a firm take in order to minimize the present value of income tax payments?

a. Use the LIFO inventory method instead of FIFO durating periods of rising prices

b. Depreciate fixed assets on the straight-line method rather than theMACRS method

c. Capitalize exploration costs instead of expensing them

d. All of the above

Question:

Which of the following must generally be used for financial reporting if it is used for income tax reporting?

a. FIFO

b. LIFO

c. NIFO

d. Installment sales method

Question:

Which of the following is a valid criticism of the SOX?

a. It has made regulations more strict

b. It has made foreign companies reluctant to register on US stock exchanges due to the burden of SOX reporting

c. It allows for looser corporate standards

d. It makes a few people accountable for the misdeeds of a corporation

Question:

What is the accounting objective which best relates to the Lower of Cost or Market Price method?

a. Accurate Presentation

b. Tax Minimization


d. Conservatism

Question:

What is form 10-Q?

a. Monthly filing with the SEC reporting director salaries

b. As needed filing to disclose any significant issues or changes

c. Quarterly financial reports filed with the SEC

d. Annual financial reports filed with the SEC

Question:

Which of the following methods is normally considered to be acceptablefor financial reporting?

a. MACRS

b. Lower of cost or market price for inventories

c. Direct write off of uncollectible accounts

d. Capitalization of R&D Costs

Question:

What is the accounting objective which best relates to the double declining balance method?

a. Conservatism

b. Income Smoothing


d. Tax Minimization

Question:

What is the acronym for the organization that promotes international harmonization of accounting standards?

a. IASB

b. FASB

c. SEC

d. IRS

Question:

Companies of what size have been impacted the most by the SOX from a cost perspective?

a. Mid-sized companies feel the impact the most

b. There is no correlation between company size and the cost of implementing the provisions of the Act

c. The larger companies as the larger the company, the more it has to pay to implement the provisions of the Act

d. The smaller companies as the cost of implementing the provisions ofthe Act does not decrease proportionally with the size of the company

Question:

What is the phrase with no agreement on meaning which implies to most analysts that earnings quality increase with the likelihood of recurrence?

a. Quality of financial position

b. Quality of earnings

c. Conservatism objective


Question:

What is the accounting objective which best relates to the completed contract method?

a. Income Smoothing

b. Profit Maximization

c. Tax Minimization


Question:

What is the acronym for the agency authorized by the U.S. Congress to regulate, among other things, the financial reporting practices of most public corporations?

a. SEC

b. IASC

c. FASB

d. GAAP

Question:

In which years were the Securities & Exchange Acts created?

a. 1980 and 1981

b. 1933 and1934

c. 1920 and 1930

d. 1802 and 1920

Question:

Which of the following is a method of accounting for the exploration costs of a mineral resource that would best attain the objective of income tax accounting?

a. Expense in total when incurred

b. Capitalize only the costs related to mineral deposits

c. Capitalize all costs associated with productive as well as non-productive mineral deposits


Question:

What is the acronym for an organization that promotes the international harmonization of accounting standards?

a. SEC

b. IASC

c. FASB


Question:

How should a firm compensating its employees by granting them the option to purchase its shares report it?

a. Merely disclose the cost of those grant

b. Charge that cost as expense for the period during which it makes the grant

c. Choose either of the options a and b

d. Neither a nor b

Question:

What is the reporting objective that calls for the anticipation of alllosses incurred but defers the recognition of gains or profits until they are realized in arm's length transactions?

a. Conservatism

b. Materialism

c. Matching

d. Smoothing

Question:

What value should a contribution be accounted for at?

a. Historical value

b. Fair value

c. Market value

d. Value determined by auditors

Question:

What is Form 10-K?

a. Monthly filing with the SEC reporting salaries to the directors




Question:

Which of the following is used by the FASB in the selection of acceptable accounting principles?

a. Conservatism

b. Matching

c. Materialism

d. Conceptual Framework

Question:

In which year was the Sarbanes Oxley Act passed?

a. 2008

b. 1945

c. 2002

d. 1845

Question:

What is the phrase which, though there is no agreement on its meaning,implies to most analysts that the quality of earnings improves with the likelihood of recurrence?

a. Quality of Financial Position

b. Quality of Earnings

c. Least and Latest Rule

d. Accurate Presentation

Question:

What change was made to the internal controls of the companies by the SOX?

a. All company processes and related internal controls now need to be documented and then tested by an outside auditing firm

b. Companies no longer have to document their internal controls since the auditors do the job

c. Internal controls can be more lax than before

d. Companies have to provide for internal controls only to satisfy theauditors

Question:

Which of the following is true of the Sarbanes Oxley Act?

a. It has bolstered investor confidence

b. It has increased all stock prices

c. It has increased the number of foreign corporations registering in the US

d. It has created more work for corporate accounting departments

Question:

Which of the financial accounting objectives listed below would seem to be closest to the objective of tax reporting?

a. Conservatism

b. Fair Presentation

c. Accuracy

d. Profit Maximization

Question:

What change was made in regarding the penalization of the whistleblowers (people who alert the authorities about the illegal activities in a corporation) by the companies?

a. They are now themselves subject to fraud charges for uncovering thecrimes

b. They are put under witness protection

c. They are offered a transfer to a new department

d. They are now protected against retaliation by the company in order to encourage employees to bring the wrong doings of the companies to light

Question:

What is the purpose of a Registration Statement?

a. To offer securities to the public

b. To disclose the operations during the first year

c. To provide information to the public about a company before it is traded publicly

d. Financial records for the company from inception to date

Question:

What is the accounting objective which best relates to the disclosing of the cost of employee stock options (not expensing)?

a. Conservatism


c. Income Smoothing

d. Tax Minimization

Question:

What is the acronym for an independent board responsible, since 1973, for establishing generally accepted accounting principles?

a. SEC

b. IAS

c. FASB


Question:

What is the accounting objective which best relates to the LIFO method?

a. Income Smoothing


c. Conservatism


Question:

What is the doctrine that the firm should account for a given set of operations so as to make reported net income as large as possible known as?

a. Conservatism

b. Quality of Earnings


d. Matching

Question:

What is the database created by the SEC for companies to file electronically?

a. PCAOB

b. EDGAR

c. SEC

d. IRS

Question:

Which FASB sets the requirements for accounting for Non-Profit organizations?

a. FASB SFAS 999

b. FASB SFAS 100

c. FASB SFAS 99

d. FASB SFAS 117

Question:

What is the effect of the SOX on public companies?

a. It has made regulations more strict

b. It has added accountability to the upper management

c. It has forced companies to look at their internal controls

d. All of the above

Question:

What factors affect the balance sheet, given the articulation of the income statement with the balance sheet and the factors that imply high or low quality of earnings?

a. Quality of Financial Position


c. Quality of Earnings

d. Conceptual Framework

Question:

For which of the following accounts would the use of 'the lower of cost or market price' principle be acceptable?

a. Inventory

b. Land

c. Prepaid rent

d. All of the above

Question:

How are gifts to a charity which are to be further passed on to a 3rd party accounted for while being held by the charity?

a. Dr: Expense, Cr: Revenue

b. Dr: Liability, Cr: Revenue

c. Dr: Liability, Cr: Asset

d. Dr: Asset, Cr: Liability

Question:

How are services donated by a CPA accounted for by a non-profit organization?

a. Dr: Expenses, Cr: Revenue

b. Dr: Revenue, Cr: Liability

c. Dr: Expenses, Cr: Assets

d. Dr: Revenue, Cr: Expenses

Question:

What is the accounting objective which best relates to the expensing of R&D costs?

a. Income Smoothing

b. Accurate Reporting

c. Conservatism


Question:

What is the accounting objective which best relates to the capitalization of prepaid advertising costs?



c. Tax minimization


Question:

Which of the following statements would be incorrect in comparing the financial statements of two companies, XYZ and ABC which are identicalin all respects except that XYZ uses FIFO and ABC uses LIFO in costingits inventories? Prices have been rising steadily over the last several years.

a. The inventory of XYZ would be higher than the inventory of ABC

b. The retained earnings of XYZ would be higher than the retained earnings of ABC

c. The net income in the current year of XYZ would be higher than the net income of ABC

d. The tax liability of XYZ would be less than the tax liability of ABC

Question:

When is revenue normally recognized for financial reporting on accrualbasis?

a. At the point of sale

b. While cash is being collected

c. After all cash has been collected

d. At the end of each year

Question:

What are forms 10K and 10Q referred to as?

a. Periodic Filings

b. Financial Statements

c. Information Returns

d. Tax Returns

Question:

What is the accounting objective which best relates to the percentage of sales method for uncollectible accounts?


b. Tax Minimization


d. Conservatism

Question:

What entry would a donor make when giving a cash donation to a charity?

a. Dr: Revenue, Cr: Cash

b. Dr: Expense – Cash, Cr: Cash

c. Dr: Liability, Cr: Cash

d. Dr: Expense – Contributions, Cr: Cash

Question:

How are third party adjustments to patient bills reflected in the financial statements?

a. As an addition to revenue

b. As a deduction from revenue

c. As a liability

d. As an asset

Question:

What is 'paying the least amount of taxes as late as possible within the law to minimize the present value of tax payments for a given set of operations' a description of?


b. Least and Latest Rule

c. Conservatism

d. Income Smoothing

Question:

What change was made by the Act regarding the authority competent to sign the company tax returns?

a. Only the CEO now has the authority to sign the company tax returns

b. Any employee can now sign a tax return

c. Only the firm's CPA can sign the tax returns

d. Only the person who has prepared the return can sign it

Question:

What is the accounting objective which best relates to the expensing the cost of employee stock options?


b. Income Smoothing

c. Conservatism


Question:

Which of the following is a method of timing business transactions or choosing accounting principles so that the firm reports smaller variations in income from year to year than it would otherwise?

a. Conservatism

b. Income Smoothing


d. Least and Latest Rule

Question:

What is form 8-K?

a. Monthly filing with the SEC reporting director salaries

Accounting Principles 1

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