MCQs > Finance & Management > Accounting Principles MCQs > Basic Accounting Principles MCQs

Basic Accounting Principles MCQ

1.

Which sentence concerning ABC's financial statements would be correct? ABC Co. has decided to use the straight line depreciation method in its financial statements and the MACRS method in its tax return.

Answer

Correct Answer: Deferred income tax liability will be shown as a liability on the balance sheet

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2.

Which of the following is a method of timing business transactions or choosing accounting principles so that the firm reports smaller variations in income from year to year than it would otherwise?

Answer

Correct Answer: Income Smoothing

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3.

What change was made in regarding the penalization of the whistleblowers (people who alert the authorities about the illegal activities in a corporation) by the companies?

Answer

Correct Answer: They are now protected against retaliation by the company in order to encourage employees to bring the wrong doings of the companies to light

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4.

Which of the following courses of action should a firm take in order to minimize the present value of income tax payments?

Answer

Correct Answer: Use the LIFO inventory method instead of FIFO durating periods of rising prices

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5.

What is the accounting objective which best relates to the completed contract method?

Answer

Correct Answer: Profit Maximization

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6.

Which of the following must generally be used for financial reporting if it is used for income tax reporting?

Answer

Correct Answer: LIFO

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7.

What are forms 10K and 10Q referred to as?

Answer

Correct Answer: Periodic Filings

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8.

In which years were the Securities & Exchange Acts created?

Answer

Correct Answer: 1933 and1934

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9.

What is the accounting objective which best relates to the expensing the cost of employee stock options?

Answer

Correct Answer: Conservatism

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10.

Which of the following methods would be employed to help accomplish the following objective: smoothing a firm's income as a means of minimizing large fluctuations in the price of its stock.

Answer

Correct Answer: All of the above

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11.

Which of the following is true of the Sarbanes Oxley Act?

Answer

Correct Answer: It has created more work for corporate accounting departments

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12.

Which of the following is used by the FASB in the selection of acceptable accounting principles?

Answer

Correct Answer: Conceptual Framework

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13.

What is the accounting objective which best relates to the weighted average inventory method?

Answer

Correct Answer: Income Smoothing

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14.

For which of the following accounts would the use of 'the lower of cost or market price' principle be acceptable?

Answer

Correct Answer: Inventory

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15.

What kind of organization issuing securities would NOT have to register them with the SEC?

Answer

Correct Answer: The government

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16.

What entry would a donor make when giving a cash donation to a charity?

Answer

Correct Answer: Dr: Expense – Contributions, Cr: Cash

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17.

How is an unconditional promise to give a donation to a charity accounted for by the charity?

Answer

Correct Answer: As revenue only when the donation is made

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18.

What is the accounting objective which best relates to the expensing of R&D costs?

Answer

Correct Answer: Income Smoothing

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19.

How are gifts to a charity which are to be further passed on to a 3rd party accounted for while being held by the charity?

Answer

Correct Answer: Dr: Asset, Cr: Liability

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20.

Which FASB sets the requirements for accounting for Non-Profit organizations?

Answer

Correct Answer: FASB SFAS 117

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21.

Which of the financial accounting objectives listed below would seem to be closest to the objective of tax reporting?

Answer

Correct Answer: Conservatism

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22.

Which of the following is a method of accounting for the exploration costs of a mineral resource that would best attain the objective of income tax accounting?

Answer

Correct Answer: Expense in total when incurred

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23.

How should a firm compensating its employees by granting them the option to purchase its shares report it?

Answer

Correct Answer: Choose either of the options a and b

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24.

In which year was the Sarbanes Oxley Act passed?

Answer

Correct Answer: 2002

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25.

How is a donated asset accounted by a non-profit organization based on its fair market value?

Answer

Correct Answer: Dr: Asstes, Cr: Revenue

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26.

What is 'paying the least amount of taxes as late as possible within the law to minimize the present value of tax payments for a given set of operations' a description of?

Answer

Correct Answer: Least and Latest Rule

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27.

What is the effect of the SOX on public companies?

Answer

Correct Answer: All of the above

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28.

What is the qualitative accounting objective suggesting that information reported in a financial statement should correspond as precisely as possible to the economic effects underlying transactions and events?

Answer

Correct Answer: Accurate Presentation

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29.

Which of the following statements would be incorrect in comparing the financial statements of two companies, XYZ and ABC which are identical in all respects except that XYZ uses FIFO and ABC uses LIFO in costing its inventories? Prices have been rising steadily over the last several years.

Answer

Correct Answer: The tax liability of XYZ would be less than the tax liability of ABC

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30.

What is the acronym for the agency authorized by the U.S. Congress to regulate the financial reporting practices of most public corporations?

Answer

Correct Answer: SEC

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31.

What was the purpose of the Sarbanes Oxley act, in general?

Answer

Correct Answer: To better regulate public and private companies in the wake of recent accounting scandals

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32.

What is the accounting objective which best relates to the percentage of sales method for uncollectible accounts?

Answer

Correct Answer: Conservatism

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33.

What is the acronym for an independent board responsible, since 1973, for establishing generally accepted accounting principles?

Answer

Correct Answer: FASB

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34.

What is the accounting objective which best relates to the straight line method?

Answer

Correct Answer: Conservatism

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35.

Which doctrine lays down that a firm should account for a given set of operations so as to make reported net income as large as possible?

Answer

Correct Answer: Profit maximization

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36.

What is the acronym for the organization that promotes international harmonization of accounting standards?

Answer

Correct Answer: IASB

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37.

What is the accounting objective which best relates to the disclosing of the cost of employee stock options (not expensing)?

Answer

Correct Answer: Conservatism

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38.

Which of the following methods is normally considered to be acceptable for financial reporting?

Answer

Correct Answer: Lower of cost or market price for inventories

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39.

What statements are required of a Non-Profit organization?

Answer

Correct Answer: statement of financial position, statement of cash flows, and statement of activity and changes in net assets

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40.

What is Form 10-K?

Answer

Correct Answer: Annual financial reports filed with the SEC

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41.

What value should a contribution be accounted for at?

Answer

Correct Answer: Fair value

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42.

What new board was created as part of the Sarbanes Oxley Act?

Answer

Correct Answer: PCAOB – Public Company Accounting Oversight Board

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43.

What is the accounting objective which best relates to the capitalization of prepaid advertising costs?

Answer

Correct Answer: Profit Maximization

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44.

What is the accounting objective which best relates to the Lower of Cost or Market Price method?

Answer

Correct Answer: Conservatism

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45.

What is the accounting objective which best relates to the MACRS method?

Answer

Correct Answer: Tax Minimization

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46.

What is form 10-Q?

Answer

Correct Answer: Quarterly financial reports filed with the SEC

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47.

What is the database created by the SEC for companies to file electronically?

Answer

Correct Answer: EDGAR

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48.

What is the acronym for the independent board responsible, since 1973, for establishing generally accepted accounting principles?

Answer

Correct Answer: FASB

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49.

For which of the following would the use of the straight-line method of amortization be acceptable?

Answer

Correct Answer: All of the above

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50.

What is the accounting objective which best relates to the FIFO method?

Answer

Correct Answer: Profit Maximization

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51.

What is the acronym for an organization that promotes the international harmonization of accounting standards?

Answer

Correct Answer: IASC

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52.

What is the purpose of a Registration Statement?

Answer

Correct Answer: To provide information to the public about a company before it is traded publicly

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53.

What is the accounting objective which best relates to the percentage of completion method?

Answer

Correct Answer: Accurate Presentation

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54.

How are third party adjustments to patient bills reflected in the financial statements?

Answer

Correct Answer: As a deduction from revenue

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55.

Companies of what size have been impacted the most by the SOX from a cost perspective?

Answer

Correct Answer: The larger companies as the larger the company, the more it has to pay to implement the provisions of the Act

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56.

What is the reporting objective that calls for the anticipation of all losses incurred but defers the recognition of gains or profits until they are realized in arm's length transactions?

Answer

Correct Answer: Conservatism

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57.

When is revenue normally recognized for financial reporting on accrual basis?

Answer

Correct Answer: At the point of sale

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58.

Which of the following is a valid criticism of the SOX?

Answer

Correct Answer: It has made foreign companies reluctant to register on US stock exchanges due to the burden of SOX reporting

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59.

What entry would a donor make when giving a cash donation to a charity, where the donor retains the right to revoke the contribution?

Answer

Correct Answer: Dr: Refundable Advance to Charity, Cr: Cash

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60.

What are the 3 types of Health Care Organizations for accounting purposes?

Answer

Correct Answer: Investor-owned, Non-Profit, Governmental

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61.

Which of the following accounts may appear on a company's balance sheet when the incomes for financial and tax reporting are different?

Answer

Correct Answer: Deferred income tax liability

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62.

What two filings are required when a company wishes to list its stock?

Answer

Correct Answer: Forms S-X and S-K

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63.

What is the acronym for the agency authorized by the U.S. Congress to regulate, among other things, the financial reporting practices of most public corporations?

Answer

Correct Answer: SEC

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64.

What is the accounting objective which best relates to the LIFO method?

Answer

Correct Answer: Income Smoothing

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65.

What change was made to the internal controls of the companies by the SOX?

Answer

Correct Answer: All company processes and related internal controls now need to be documented and then tested by an outside auditing firm

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66.

Who can review the filings made by public companies with the SEC?

Answer

Correct Answer: Anyone using the EDGAR system

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67.

What is form 8-K?

Answer

Correct Answer: As needed filing to disclose any significant issues or changes

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68.

What is the phrase with no agreement on meaning which implies to most analysts that earnings quality increase with the likelihood of recurrence?

Answer

Correct Answer: Quality of financial position

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69. What change was made by the Act regarding the authority competent to sign the company tax returns?


Answer

Correct Answer: Only the CEO now has the authority to sign the company tax returns

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70. What is the accounting objective which best relates to the double declining balance method?


Answer

Correct Answer: Conservatism

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71. What is the phrase which, though there is no agreement on its meaning, implies to most analysts that the  quality of earnings improves with the likelihood of recurrence?


Answer

Correct Answer: Quality of Earnings

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72. What factors affect the balance sheet, given the articulation of the income statement with the balance sheet and the factors that imply high or low quality of earnings?


Answer

Correct Answer: Quality of Financial Position

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