The balance sheet

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Reference no: EM13511064

MULTIPLE CHOICE

1.Which of the following is a true statement?

a.Under the articulated concept, accounting elements are defined using the revenue-expense approach rather than the asset-liability approach.

b.The articulated approach severs the mathematical relationships between the balance sheet and income statement.

c.Under the articulated approach, contributed capital, retained earnings, and unrealized capital adjustments are sub-classifications of owners’ equity.

d.Recent SFASs have advocated the non-articulated approach to financial statements.

2.Which of the following is a true statement?

a.Under the articulation approach, all accounting transactions are reported on the income statement.

b.Because income is a sub-classification of retained earnings, the income statement and balance sheet articulate.

c.Under articulation, adjustments to the income of prior years are reflected on the current year income statement.

d.All transactions can be easily categorized using the current accounting classification system.

3.Which of the following is not true regarding the revenue-expense approach to defining accounting elements?

a.The revenue-expense approach defines assets and liabilities as a by-product of revenues and expenses.

b.Under the revenue-expense approach, the balance sheet is burdened with by-products of income measurement rules.

c.Deferred charges and deferred credits are ambiguous debits and credits that appear on the balance sheet under the revenue-expense approach.

d.There are very few examples of the use of the revenue-expense approach in recent accounting standards.

4.Which of the following is not true regarding the asset-liability approach to defining accounting elements?

a.The asst-liability approach focuses on the measurement of net assets.

b.The asset-liability approach is arguably superior to the revenue-expense approach.

c.The asset-liability approach is the basic orientation of current financial reporting practices.

d.SFAS No. 109 uses the asset-liability approach by focusing income tax accounting on the recognition of tax assets and liabilities.

5.Which of the following is a true statement?

a.Asset-liability advocates are not prepared to tolerate a fluctuating income statement that may include unrealized holding gains and losses.

b.Asset-liability advocates and revenue-expense advocates are polarized in part because the financial statements are non-articulated.

c.Revenue-expense proponents are prepared to introduce deferred charges and deferred credits in order to smooth income measurement.

d.With articulation, it is possible to have a revenue-expense based income statement and an asset-liability based balance sheet.

6.Which of the following is not a formal definition of assets that has been used by the accounting profession in the United States?

a.Something represented by a debit balance that is or would be properly carried forward upon a closing of books of account according to the rules or principles of accounting, on the basis that it represents either a property right or value acquired, or an expenditure made which has created a property or is properly applicable to the future.

b.Economic resources of an enterprise that are recognized and measured in conformity with generally accepted accounting principles as well as certain deferred charges that are not resources but that are recognized and measured in conformity with generally accepted accounting principles.

c.Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.

d.Only those economic resources that can be severed from the firm and sold.

7.Which of the following applies to the measurement and recognition of an asset?

a.A pervasive principle in accounting is that an asset is measured at the market value of the consideration exchanged or sacrificed to acquire it and place it in operating condition.

b.In some cases, an asset may be recorded at an amount greater than its cash equivalent purchase price.

c.When the consideration given for an asset is non-monetary, the market value of that consideration generally provides the most reliable basis for measuring acquisition cost.

d.Assets are always measured and reported based on historical cost.

8.Which one of the following measurement bases applies to receivables?

a.Historical cost

b.An approximation of net realizable value

c.Selling price through factoring

d.Discounted present value

9.Which one of the following measurement bases applies to investments not subject to equity accounting that are classified as trading securities?

a.Current value

b.Book value

c.Effective rate of interest method

d.Lower-of-cost-or-market

10.Which one of the following measurement bases applies to investments that are classified as held-to-maturity?

a.Current value

b.Book value

c.Effective rate of interest method

d.Lower-of-cost-or-market

11.Which of the following is not a true statement regarding assets as they appear on the balance sheet?

a.Historical cost gives a good indication of the productive value of assets.

b.Assets held for sale and measured at net realizable value represent a high degree of certainty as to measurement reliability.

c.Certain types of deferred charges do not have any direct effect on future cash flows.

d.In terms of additivity, it is questionable if a balance sheet should be added.

12.Which of the following statements is not true regarding the three major definitions of accounting liabilities that have evolved over time?

a.Two of the three definitions imply a proprietary view of the firm.

b.The first definition made no distinction between owner’s equity and liabilities.

c.Not all definitions have included deferred credits as liabilities.

d.In all three definitions, liabilities include only credit balances that involve a debtor and creditor relation.

Reference no: EM13511064

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