ACCT 201 EXAM 1 QUESTIONS
AND ANSWERS
What does the PCAOB stand for and what do they do? - Answer- Public company,
accounting oversight board: determines US auditing standards and reviews the
performance of auditing firms
Match each item with the appropriate concept or principle
Ability to easily evaluate one company's result relative to another's - Answer-
Comparability: enhancing
Match each item with the appropriate concept or principle
The judgment concerning whether an item is large enough to matter to decision-makers
- Answer- Materiality: fundamental relevance
Match each item with the appropriate concept or principle
The quality of information that indicates the information makes a difference in a decision
- Answer- Relevance
Match each item with the appropriate concept or principle
A belief that item should be reported on the balance sheet at the price that was paid to
acquire the item - Answer- Historical cost
Put the balance sheet categories in order - Answer- Current assets, long-term
investments, property, plant, and equipment, intangible assets, current liabilities, long-
term liabilities, and stockholders equity
The following information in millions of dollars is available for all brands for a recent
year: sales revenue $8940, net income $189, preferred dividends zero dollars, and
weighted average common shares outstanding 300 million. Compute the earnings per
share. - Answer- $.63
Net Income Equation Cash Basis - Answer- Net Income = Revenues - Expenses
Earnings Per Share (EPS) - Answer- net income - preferred dividends / weighted
average common shares outstanding
Match each of the fundamental and enhancing qualitative characteristics of financial
information
, Accounting information cannot be selected, prepared or presented to favor one set of
interest users over another - Answer- Neutrality: fundamental faithful representation
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information must be available to decision-makers before it loses its ability to
influence their decisions - Answer- Timeliness: enhancing
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information is prepared on the assumption that users have a reasonable
understanding of accounting and general business and economic conditions - Answer-
Understandability: enhancing
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information includes everything that it needs to; nothing important is omitted.
This is an important component of faithful representation. - Answer- Completeness:
fundamental faithful representation
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information helps users make predictions about the outcome of pass,
present, and future future events - Answer- Predictive value: fundamental relevance
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information about accompany can be confirmed by two or more independent
users to be a faithful representation - Answer- Verifiability: enhancing
Which fundamental or enhancing quality states that accounting has few inaccuracies? -
Answer- Free from material error: fundamental faithful representation
Which fundamental or enhancing qualitative characteristic states that accounting
information provides a basis to evaluate a previously made decision? - Answer-
Confirmatory value: fundamental relevance
Indicate to which business activity each item relates
Cash received from customers - Answer- Operating activity
Indicate to which business activity each item relates
Cash paid to stockholders (dividends) - Answer- Financing activity
Indicate to which business activity each item relates
Cash received from issuing new common stock - Answer- Financing activity
AND ANSWERS
What does the PCAOB stand for and what do they do? - Answer- Public company,
accounting oversight board: determines US auditing standards and reviews the
performance of auditing firms
Match each item with the appropriate concept or principle
Ability to easily evaluate one company's result relative to another's - Answer-
Comparability: enhancing
Match each item with the appropriate concept or principle
The judgment concerning whether an item is large enough to matter to decision-makers
- Answer- Materiality: fundamental relevance
Match each item with the appropriate concept or principle
The quality of information that indicates the information makes a difference in a decision
- Answer- Relevance
Match each item with the appropriate concept or principle
A belief that item should be reported on the balance sheet at the price that was paid to
acquire the item - Answer- Historical cost
Put the balance sheet categories in order - Answer- Current assets, long-term
investments, property, plant, and equipment, intangible assets, current liabilities, long-
term liabilities, and stockholders equity
The following information in millions of dollars is available for all brands for a recent
year: sales revenue $8940, net income $189, preferred dividends zero dollars, and
weighted average common shares outstanding 300 million. Compute the earnings per
share. - Answer- $.63
Net Income Equation Cash Basis - Answer- Net Income = Revenues - Expenses
Earnings Per Share (EPS) - Answer- net income - preferred dividends / weighted
average common shares outstanding
Match each of the fundamental and enhancing qualitative characteristics of financial
information
, Accounting information cannot be selected, prepared or presented to favor one set of
interest users over another - Answer- Neutrality: fundamental faithful representation
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information must be available to decision-makers before it loses its ability to
influence their decisions - Answer- Timeliness: enhancing
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information is prepared on the assumption that users have a reasonable
understanding of accounting and general business and economic conditions - Answer-
Understandability: enhancing
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information includes everything that it needs to; nothing important is omitted.
This is an important component of faithful representation. - Answer- Completeness:
fundamental faithful representation
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information helps users make predictions about the outcome of pass,
present, and future future events - Answer- Predictive value: fundamental relevance
Match each of the fundamental and enhancing qualitative characteristics of financial
information
Accounting information about accompany can be confirmed by two or more independent
users to be a faithful representation - Answer- Verifiability: enhancing
Which fundamental or enhancing quality states that accounting has few inaccuracies? -
Answer- Free from material error: fundamental faithful representation
Which fundamental or enhancing qualitative characteristic states that accounting
information provides a basis to evaluate a previously made decision? - Answer-
Confirmatory value: fundamental relevance
Indicate to which business activity each item relates
Cash received from customers - Answer- Operating activity
Indicate to which business activity each item relates
Cash paid to stockholders (dividends) - Answer- Financing activity
Indicate to which business activity each item relates
Cash received from issuing new common stock - Answer- Financing activity
