pg. 1 Financial Accounting Exam 1 (Chapters 1-4) Actual Exam Questions with Correct Detailed Answers (Verified Answers) Graded A+
The characteristic that is demonstrated when a high degree of consensus can be
secured among interdependent measures using the same measurement methods is: -
Correct Answer - Verifiability
Information about different entities and different periods of the same entity can be prepared and presented in a similar manner. Comparability and consistency are related
to which of these objectives: - Correct Answer - Comparability - entities
Consistency - periods
One of the elements of financial statements is comprehensive income. As described comprehensive income is equal to: - Correct Answer - Revenues - Expenses + Gains - Losses
Which of the following basic accounting assumptions is threatened by existence of
severe inflation in the economy: - Correct Answer - Monetary unit assumption
Preparation of consolidated financial statements when a parent-subsidiary relationship
exists is an example of: - Correct Answer - Economic entity assumption
During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept: - Correct Answer - Periodicity assumption
The double entry accounting system means: - Correct Answer - The dual effect of each transaction is recorded with a debit and a credit 1 / 3
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When a crop pays a note payable and interest: - Correct Answer - They will debit notes payable and interest expense
A trial balance: - Correct Answer - - proves that debits and credits are equal in the ledger
- supplies a listing of open accounts and their balances that are used in preparing
- is normally prepared three times in the accounting cycle
financial statements
Which of the following is real account: - Correct Answer - Goodwill and Accounts Receivable
Which is not a long-term investment: - Correct Answer - Franchise
Which is not an acceptable approach in applying the lower of cost or market method to
inventory: - Correct Answer - Inventory location
In which account are postage stamps classified: - Correct Answer - Office supplies
The correct order to present current assets is: - Correct Answer - Cash, A/R,
inventories, prepaid items
The basis for classifying assets as current or non-current is conversion to cash with: - Correct Answer - The operating cycle or one year, whichever is longer
In what section of the balance sheet would the following be reported: debt that matures in 5 months but has the positive intent and ability to refinance for an additional 4 years: - Correct Answer - Long term liabilities
Information in the income statement helps users to: - Correct Answer - - evaluate the past performance of the enterprise 2 / 3
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- provide a basis for predicting future performance
- help assess the risk or uncertainty of achieving future cash flows
The single step income statement emphasizes: - Correct Answer - Total revenue and total expenses
Which is a nominal (temp) account: - Correct Answer - Salary Expense
How do these prepaid expenses expire: - Correct Answer - Rent - with the passage of time
Supplies - through use and consumption
An accrued expense can be best described as an amount: - Correct Answer - Not paid and currently matched with earnings
An adjusted trial balance: - Correct Answer - Proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made
Assets do not include: - Correct Answer - Paid in capital
Assets that are expected to provide economic benefit beyond one year or the operating
cycle are called: - Correct Answer - Noncurrent Assets
Revenue should not be recognized until: - Correct Answer - the earnings process is complete and collection is reasonably assured
The matching principle is: - Correct Answer - An accrual accounting principle
A cause and effect relationship between revenue and expense is best exemplified by: - Correct Answer - Units of production depreciation expense
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