DEVRY acct304 midterm exam

Question 1. Question : (TCO 1) Which of the following has the authority to set accounting standards in the United States?

FASB

IRS

SEC

AICPA

: 1

Question 2. Question : (TCO 2) SFAC No.5 focuses on:

objectives of financial reporting.

qualitative characteristics of accounting information.

Recognition and measurement concepts in accounting, including assumptions and principles.

elements of financial statements.

: 1

5 of 5

Question 3. Question : (TCO 3) Mary Parker Co. invested $15,000 in ABC Corporation and received capital stock in exchange. Mary Parker Co.’s journal entry to record this transaction would include a:

debit to investments.

credit to retained earnings.

credit to capital stock.

debit to expense.

: 2

5 of 5

Question 4. Question : (TCO 3) The adjusting entry required to record accrued expenses includes:

a credit to cash.

a debit to an asset.

a credit to an asset.

a credit to liability.

: 2

5 of 5

Question 5. Question : (TCO 3) Temporary accounts would not include:

salaries payable.

depreciation expense.

supplies expense.

cost of goods sold.

: 2

5 of 5

Question 6. Question : (TCO 4) Notes payable:

is a current liability account.

usually has a debit balance.

is a non-current liability account.

cannot determine its classification without additional information.

: 2

5 of 5

Question 7. Question : (TCO 4) The current ratio is given by:

current assets divided by non-current assets.

current assets divided by total assets.

current assets divided by current liabilities.

current assets divided by total liabilities.

: 3

5 of 5

Question 8. Question : (TCO 5) The distinction between operating and non-operating income relates to:

continuity of income.

principal activities of the reporting entity.

consistency of income stream.

reliability of measurements.

: 4

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Question 9. Question : (TCO 5) A voluntary change in accounting principle is accounted for by:

a cumulative effect on income in the year of the change.

a retrospective reporting of all comparative financial statements shown.

a prior period adjustment.

a separate line component of income.

: 4

5 of 5

Question 10. Question : (TCO 5) Cash flows from investing activities do not include:

proceeds from issuing bonds.

payment for the purchase of equipment.

proceeds from the sale of marketable securities.

cash outflows from acquiring land.

: 4

5 of 5

Question 11. Question : (TCO 5) The Maytag Corporation’s income statement includes income from continuing operations, a loss from discontinued operations, and extraordinary items. Earnings per share information would be provided for:

net income only.

income from continuing operations and net income only.

income from continuing operations, loss from discontinued operations, and net income only.

income from continuing operations, loss from discontinued operations, extraordinary items, and net income.

: 4

5 of 5

Question 12. Question : (TCO 5) In a statement of cash flows prepared under International Financial Reporting Standards, each of the following items is typically classified as a financing cash flow except:

interest paid.

dividends paid.

proceeds from the issuance of long-term debt.

dividends received.

: 4

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Question 13. Question : (TCO 4) Which is a shareholders’ equity account in the balance sheet?

Accumulated depreciation

Paid-in capital

Dividends payable

Marketable securities

: 3

5 of 5

Question 14. Question : (TCO 4) Which of the following groups is not among the external users for whom financial statements are prepared?

Customers

Suppliers

Employees

All of the above are external users of financial statements.

(TCO 5) Misty Company reported the following before-tax items during the current year:

Misty’s effective tax rate is 40% and there were 1,000 shares of common stock outstanding.

What would be Misty’s income before extraordinary item(s)?

Question 2. Question : (TCO 4) Listed below are account balances (in $millions) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system.

What would Symphony report as total assets? Hint: Don’t forget to deduct the contra assets.

(TCO 4) Explain how management’s discussion and analysis of its operations and liquidity may be helpful to investors.

Question 2. Question : (TCO 2) What are the key provisions of the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002?

Question 3. Question : (TCO 5) Give an example of a non-cash financing and investing activity and explain when and how it would be reported in the financial statements.

Question 4. Question : (TCO 3) What is the purpose of the closing process?

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