1 The objectives of financial reporting include all of the following except to provide information that a is useful to the Internal Revenue Service in allocating the tax burden to the business community b is useful to those making investment and credit decisions c is helpful in assessing future cash flows d identifies the economic resources assets the claims to those resources liabilities and the changes in those resources and claims 2 Which of the following is a fundamental characteristic of useful accounting information a Comparability b Relevance c Neutrality d Materiality 3 What is meant by comparability when discussing financial accounting information a Information has predictive or confirmatory value b Information is reasonably free from error c Information that is measured and reported in a similar fashion across companies d Information is timely 4 What is meant by consistency when discussing financial accounting information a Information that is measured and reported in a similar fashion across points in time b Information is timely c Information is measured similarly across the industry d Information is verifiable 5 ABC Company issuing its annual financial reports within one month of the end of the year is an example of which ingredient of fundamental quality of accounting information a Neutrality b Timeliness c Predictive value d Completeness 6 The pervasive criterion by which accounting information can be judged is that of a decision usefulness b freedom from bias c timeliness d comparability 7 According to Statement of Financial Accounting Concepts No 2 materiality is an ingredient of the fundamental quality of Relevance Faithful Representation a Yes Yes b No Yes c Yes No d No No 8 Financial information does not demonstrate consistency when a firms in the same industry use different accounting methods to account for the same type of transaction b a company changes its estimate of the salvage value of a fixed asset c a company fails to adjust its financial statements for changes in the value of the measuring unit d none of these 9 The elements of financial statements include investments by owners These are increases in an entity s net assets resulting from owners a transfers of assets to the entity b rendering services to the entity c satisfaction of liabilities of the entity d all of these 10 In classifying the elements of financial statements the primary distinction between revenues and gains is a the materiality of the amounts involved b the likelihood that the transactions involved will recur in the future c the nature of the activities that gave rise to the transactions involved d the costs versus the benefits of the alternative methods of disclosing the transactions involved 11 A decrease in net assets arising from peripheral or incidental transactions is called a n a capital expenditure b cost c loss d expense 12 According to the FASB conceptual framework which of the following elements describes transactions or events that affect a company during a period of time a Assets b Expenses c Equity d Liabilities 13 According to the FASB Conceptual Framework the elements assets liabilities and equity describe amounts of resources and claims to resources at during a a b c d 14 Moment in Time Yes Yes No No Period of Time No Yes Yes No Which of the following basic elements of financial statements is more associated with the balance sheet than the income statement a b c d Equity Revenue Gains Expenses 15 Which of the following is not a basic assumption underlying the financial accounting structure a Economic entity assumption b Going concern assumption c Periodicity assumption d Historical cost assumption 16 Which basic assumption may not be followed when a firm in bankruptcy reports financial results a Economic entity assumption b Going concern assumption c Periodicity assumption d Monetary unit assumption 17 During the lifetime of an entity accountants produce financial statements at artificial points in time in accordance with the concept of a b c d Relevance No Yes No Yes Periodicity No No Yes Yes 18 Which of the following is an implication of the going concern assumption a The historical cost principle is credible b Depreciation and amortization policies are justifiable and appropriate c The current noncurrent classification of assets and liabilities is justifiable and signifycant d All of these 19 Proponents of historical cost ordinarily maintain that in comparison with all other valuation alternatives for general purpose financial reporting statements prepared using historical costs are more a faithfully representative b relevant c indicative of the entity s purchasing power d conservative 20 Generally revenue from sales should be recognized at a point when a management decides it is appropriate to do so b the product is available for sale to the ultimate consumer c the entire amount receivable has been collected from the customer and there remains no further warranty liability d None of these answer choices are correct 21 The allowance for doubtful accounts which appears as a deduction from accounts receivable on a balance sheet and which is based on an estimate of bad debts is an application of the a consistency characteristic b expense recognition principle c materiality constraint d revenue recognition principle 22 Which of the following serves as the justification for the periodic recording of depreciation expense a Association of efforts expense with accomplishments revenue b Systematic and rational allocation of cost over the periods benefited c Immediate recognition of an expense d Minimization of income tax liability 23 Which of the following is an argument against using historical cost in accounting a Fair values are more relevant b Historical costs are based on an exchange transaction c Historical costs are reliable d Fair values are subjective 24 What is the general approach as to when product costs are recognized as expenses a In the period when the expenses are paid b In the period when the expenses are incurred c In the period when the vendor invoice is received d In the period when the related revenue is recognized 25 Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company s stock price a Full disclosure b Going concern c Historical cost d Expense recognition 26 A