Question 1

Use the following information to answer questions 
 
-The total obligations that have resulted from past transactions are

Accepted Answer

A)  $ 20,000.
B)  $ 40,000.
C)  $ 96,000.
D)  $170,000.

Question 2

Office equipment is classified on the statement of financial position as

Accepted Answer

A)  a current asset.
B)  property, plant, and equipment.
C)  shareholders' equity.
D)  a long-term investment.

Question 3

The current ratio

Accepted Answer

A)  is calculated by dividing total assets by total liabilities.
B)  takes into account the composition of current assets.
C)  takes into account the composition of current assets and current liabilities.
D)  is calculated by dividing current assets by current liabilities.

Question 4

The qualitative characteristic that says the value of information should exceed the cost of preparing it is called

Accepted Answer

A)  relevance.
B)  understandability.
C)  cost constraint.
D)  verifiability.

Question 5

Which one of the following is a fundamental qualitative characteristic?

Accepted Answer

A)  relevance
B)  timeliness
C)  understandability
D)  comparability

Question 6

The debt to total assets ratio measures the percentage of assets financed by creditors rather than shareholders.

Accepted Answer

A) True 
 B)False

Question 7

Use the following information to answer questions 
 
-The dollar amount of net property, plant and equipment is

Accepted Answer

A)  $ 80,000.
B)  $180,000.
C)  $210,000.
D)  $350,000.

Question 8

The going concern assumption assumes that the business

Accepted Answer

A)  will be liquidated in the near future.
B)  will be purchased by another business.
C)  is in a growth industry.
D)  will remain in operation for the foreseeable future.

Question 9

Use the following information to answer questions 
 
-The total dollar amount of assets to be classified as net property, plant, and equipment is

Accepted Answer

A)  $329,500.
B)  $164,500.
C)  $252,000.
D)  $235,000.

Question 10

Which of the following is not considered a measure of liquidity?

Accepted Answer

A)  current ratio
B)  working capital
C)  both current ratio and working capital
D)  debt to total assets

Question 11

In general, standard setters require that most assets be recorded using historical cost because

Accepted Answer

A)  fair values may overstate assets and equity.
B)  fair values may not always be representationally faithful.
C)  cost often cannot be verified.
D)  cost values may or may not be relevant.

Question 12

A short-term creditor is primarily interested in the ___ of the borrower.

Accepted Answer

A)  liquidity
B)  profitability
C)  comparability
D)  solvency

Question 13

The measurement principle that says assets are reported at the price that would be received if the item were sold is called

Accepted Answer

A)  fairvalue.
B)  historical cost.
C)  materiality.
D)  going concern.

Question 14

Solvency ratios measure the short-term ability of the company to pay its maturing obligations.

Accepted Answer

A) True 
 B)False

Question 15

What is the difference between intracompany and intercompany comparisons?

Accepted Answer

A)  Intracompany comparisons are based on comparisons with a competitor in the same industry, while intercompany comparisons cover two or more periods for the same company.
B)  Intercompany comparisons cover two or more periods for the same company, while intracompany comparisons are based on comparisons to average ratios for the industry that a company operates in.
C)  Intracompany comparisons are based on comparisons to average ratios for the industry that a company operates in, while intercompany comparisons are based on comparisons with a competitor in the same industry.
D)  Intercompany comparisons are based on comparisons with a competitor in the same industry, while intracompany comparisons cover two or more periods for the same company.

Question 16

Use the following information to answer questions 
 
-The dollar amount of current assets is

Accepted Answer

A)  $ 26,000.
B)  $ 40,000.
C)  $ 25,000.
D)  $196,000.

Question 17

A liability is normally classified as a current liability if it is to be paid within the coming year.

Accepted Answer

A) True 
 B)False

Question 18

The cost basis of accounting states that assets and liabilities should be recorded at their cost not only when originally acquired, but also during the time the entity holds them.

Accepted Answer

A) True 
 B)False

Question 19

Intracompany comparisons are based on comparisons with competitors in the same industry.

Accepted Answer

A) True 
 B)False

Question 20

A conceptual framework is still under development for companies using International Financial Reporting Standards (IFRS).

Accepted Answer

A) True 
 B)False

Exam 2: A Further Look at Financial Statements

Which one of the following is a fundamental qualitative characteristic?

Correct AnswerverifiedShow Answer

The cost basis of accounting states that assets and liabilities should be recorded at their cost not only when originally acquired, but also during the time the entity holds them.

Correct AnswerverifiedShow Answer

The measurement principle that says assets are reported at the price that would be received if the item were sold is called

Correct AnswerverifiedShow Answer

A conceptual framework is still under development for companies using International Financial Reporting Standards (IFRS).

Correct AnswerverifiedShow Answer

Use the following information to answer questions -The total dollar amount of assets to be classified as net property, plant, and equipment is

Correct AnswerverifiedShow Answer

The current ratio

Correct AnswerverifiedShow Answer

Intracompany comparisons are based on comparisons with competitors in the same industry.

Correct AnswerverifiedShow Answer

A short-term creditor is primarily interested in the ___ of the borrower.

Correct AnswerverifiedShow Answer

The going concern assumption assumes that the business

Correct AnswerverifiedShow Answer

Office equipment is classified on the statement of financial position as

Correct AnswerverifiedShow Answer

A liability is normally classified as a current liability if it is to be paid within the coming year.

Correct AnswerverifiedShow Answer

The debt to total assets ratio measures the percentage of assets financed by creditors rather than shareholders.

Correct AnswerverifiedShow Answer

In general, standard setters require that most assets be recorded using historical cost because

Correct AnswerverifiedShow Answer

Which of the following is not considered a measure of liquidity?

Correct AnswerverifiedShow Answer

What is the difference between intracompany and intercompany comparisons?

Correct AnswerverifiedShow Answer

Solvency ratios measure the short-term ability of the company to pay its maturing obligations.

Correct AnswerverifiedShow Answer

The qualitative characteristic that says the value of information should exceed the cost of preparing it is called

Correct AnswerverifiedShow Answer

Use the following information to answer questions -The dollar amount of net property, plant and equipment is

Correct AnswerverifiedShow Answer

Use the following information to answer questions -The dollar amount of current assets is

Correct AnswerverifiedShow Answer

Use the following information to answer questions -The total obligations that have resulted from past transactions are

Correct AnswerverifiedShow Answer

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