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Multiple Choice Quiz
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1
In order to ensure that they are meaningful and useful, financial statements should be prepared
A)in accordance with section 108 of the Sarbanes-Oxley Act.
B)on a daily basis.
C)on a timely basis.
D)using generally accepted accounting principles.
2
Which of the following statements is correct?
A)The Securities and Exchange Commission issues the Statements of Financial Accounting Standards.
B)Statements issued by the American Institute of Certified Public Accountants are binding on the members of the Financial Accounting Standards Board.
C)An act of law gave the Securities and Exchange Commission the authority to determine the form and content of accounting reports filed by companies under its jurisdiction.
D)Generally Accepted Accounting Standards were established by an act of Congress.
3
The Securities and Exchange Commission's 2003 report to the Congress on "principles-based" accounting observed that the first characteristic of objectives-based standards, dictated by the Sarbanes-Oxley Act, is that any standard must be based on
A)the cost-benefit test.
B)an improved and consistently applied framework.
C)qualitative characteristics.
D)transparency.
4
Investors and creditors expect to receive a cash flow from the business entity
A)directly from the distribution of the company's earnings.
B)indirectly through the disposition of their interests for cash.
C)Both of the above.
D)Neither of the above.
5
Accounting information is capable of making a difference in a decision by the report user is
A)comparable.
B)reliable.
C)relevant.
D)neutral.
6
The Periodicity of Income Assumption:
A)allows businesses to record property and equipment at their cost.
B)allows companies to place a value on intangible assets, such as goodwill.
C)allows companies to assume that business activities can be separated into discrete units of time.
D)allows companies to assume that the business will continue to operate indefinitely.
7
The assumption that permits preparers of the financial statements to record property and equipment as assets at their cost is the
A)periodicity of income assumption.
B)going concern assumption.
C)monetary unit assumption.
D)separate entity assumption.
8
Under the revenue recognition principle, revenue is recognized when
A)it is both earned and realized.
B)it is earned.
C)cash is received from customers.
D)there is an increase in the market value of the company's stock.
9
Which of the following statements describes the proper matching of revenue and expenses?
A)Manufacturing costs are identified with specific products and are charged to cost of goods sold when the manufacturing process is complete.
B)The cost of a building is recorded as an asset. Depreciation expense is recognized over the periods in which the asset is expected to help earn revenues for the business.
C)Insurance premiums cover specific periods and are charged to expense when they are paid.
D)General office salaries are recorded as assets when they are incurred because they benefit future periods.
10
The practical considerations recognized as constraining or modifying the application of the accounting principles include the following
A)Materiality, cost-benefit test, and conservatism, but not industry practice.
B)Materiality, cost-benefit test, and industry practice, but not conservatism.
C)Cost-benefit test, conservatism, and industry practice, but not materiality.
D)Materiality, cost-benefit test, conservatism, and industry practice.







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