Essay about Sample Midterm - Solution

1996 Words 8 Pages
Part 1: Multiple Choice (25 questions @ 3 pts ea. Suggested time 50 minutes)

Use a scantron to fill in the letter corresponding to the “best” answer.

1. Which of the following statements is NOT an objective of financial reporting?
a. Provide information that is useful in investment and credit decisions.
b. Provide information about enterprise resources, claims to those resources, and changes to them.
c. Provide information on the liquidation value of an enterprise.
d. Provide information that is useful in assessing cash flow prospects.

2. Accrual accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of ability to generate cash flows than the cash basis.
c. it recognizes
…show more content…
Materiality
c. Conservatism
d. Full disclosure

7. A decrease in net assets arising from peripheral or incidental transactions is called a(n)
a. capital expenditure.
b. cost.
c. loss.
d. expense.

8. Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles?
a. To reduce the federal income tax liability
b. To aid management in cash-flow analysis
c. To match the costs of with revenues as earned
d. To adhere to the accounting constraint of conservatism

9. Which of the following is an example of an accrued expense?
a. Office supplies purchased at the beginning of the year and debited to an expense account.
b. Property taxes incurred during the year, to be paid in the first quarter of the subsequent year.
c. Depreciation expense
d. Rent earned during the month, to be received on the 5th day of the following month.

10. An accrued expense can best be described as an amount
a. paid and currently matched with earnings.
b. paid and not currently matched with earnings.
c. not paid and not currently matched with earnings.
d. not paid and currently matched with earnings.

11. A deferred revenue can best be described as an amount
a. collected and not yet earned.
b. collected and earned.
c. not collected and not yet earned.
d. not collected and earned.

12. The failure to properly record an adjusting entry to accrue a revenue item will result in an:
a. understatement of

Related Documents