Reference no: EM13790988
1. Which of the following statements about directors of a company is true?
- Directors are elected by management of a company
- Directors only get paid if the company increases its profitability that year
- Directors are shareholders' representatives
- All directors of a company are senior managers in that company
2. Which of the following would affect the comparability of accounting information for a given company from one accounting period to the next?
I. Change in accounting principles
II. Disposition of segment of business
III. Restructuring expense
IV. Change in auditors
- I and II
- I and III
- I, II, and III
- I, III, and IV
3. Accounting Standards are best described as:
- the result of a political process among groups with diverse interests.
- presentation standards mandated by the Securities and Exchange Commission.
- the state of the art presentation of the science of accounting.
- measuring the quality of safeguarding assets.
4. The two secondary qualities of accounting information that make it useful for decision making are _________.
- consistency and comparability
- relevance and reliability
- materiality and comparability
- full disclosure and relevance
5. Which phrase DOES NOT accurately complete the following sentence? When using the 10-Q, the analyst should be aware that the usefulness of the quarterly financial statements might be affected by _________.
- seasonality
- adjustments made in final quarter of the year
- the use of cash accounting
- the increased use of estimates
6. Which of the following is not a component of pension expense?
- Service cost
- Interest cost
- Actual return on plan assets
- Expected return on plan assets
7. When analyzing post retirement benefits one should evaluate the actuarial assumptions and their effect on the:
- stock prices.
- cash requirement.
- balance sheet statements.
- financial statements.
8. Minority interest appears on the balance sheet of some companies. Minority interest:
- is classified as a liability.
- is classified as equity.
- arises when company records investments using the equity method.
- arises when company owns controlling interest in another company, but less than 100%.
9. A lessee must account for a lease as a capital lease if:
- the lease is shorter than 20 years.
- the present value of leases is greater than 10% of lessee's assets.
- the lease is longer than 20 years.
- None of the above
10. Deferral of unrealized gains or losses may generate major difference between the economic pension cost and the:
- reported pension.
- company pension.
- past pension.
- post retirement pension.
11. FIFO provides a better ending inventory figure more closely reflecting:
- current assets.
- current costs.
- current liabilities.
- current inventory.
12. Which of the following is not an effect of capitalization?
- Capitalization usually reduces net income.
- Capitalization usually yields a smoother net income.
- Capitalization usually decreases the volatility of the return on investment.
- Capitalization usually increases net income.
13. If a company factors its accounts receivables, this will have the effect of making:
- its cash cycle appear longer.
- its cash cycle appear even.
- its cash cycle appear shorter.
- its cash cycle appear exact.
14. Which of the following would rarely be classified as a current asset?
- Prepaid insurance
- Goodwill
- Marketable securities
- Work in progress
15. The LIFO Conformity rule states that if a company uses LIFO for tax purposes, it must also use it for:
- balance sheet reporting.
- cash reporting.
- financial reporting.
- liability reporting.
16. If revenue is recognized for financial reporting purposes but deferred for tax purposes, this results in a:
- deferred asset liability.
- deferred tax liability.
- deferred liability.
- None of the above
17. Under GAAP, comprehensive income:
- may be reported in addition to net income.
- must be reported in addition to net income.
- may be reported instead of net income.
- must be reported instead of net income.
18. Compared with companies that expense costs, firms that capitalize costs can be expected to report:
- higher asset levels and lower equity levels.
- higher asset levels and higher equity levels.
- lower asset levels and higher equity levels.
- lower asset levels and lower equity levels.
19. If a company changes the useful life of its assets from 10 years to 12 years, this will be recorded as _________.
- a non recurring gain
- an extraordinary item
- a change in accounting principle
- None of the above
20. Differences in taxable income and pretax accounting income that will not be offset by corresponding differences or turn around in future periods are called:
- timing differences.
- circular differences.
- permanent differences.
- reverse differences.