BUS-A 311 - INTERMEDIATE ACCOUNTING I | VERIFIED
ANSWERS AND QUESTIONS - MOST RECENT EDITION
2026/2027
BUS-A 311 Intermediate Accounting I
1. Q: What is the primary objective of financial reporting?
CORRECT ANSWER To provide financial information about the reporting
entity that is useful to present and potential equity investors, lenders, and
other creditors in making decisions about providing resources to the
entity.
2. Q: What are the two fundamental qualitative characteristics of useful
accounting information?
CORRECT ANSWER Relevance and Faithful Representation.
3. Q: What makes information "relevant"?
CORRECT ANSWER Information is relevant if it has predictive value,
confirmatory value, or both, and is material.
4. Q: What are the three components of faithful representation?
CORRECT ANSWER Completeness, neutrality, and freedom from error.
,5. Q: What are the four enhancing qualitative characteristics?
CORRECT ANSWER Comparability, consistency, verifiability, and
timeliness.
6. Q: What is the difference between comparability and consistency?
CORRECT ANSWER Comparability allows users to identify similarities
and differences between enterprises. Consistency means a company uses
the same accounting methods from period to period.
7. Q: What is the going concern assumption?
CORRECT ANSWER The assumption that the business entity will remain
in operation long enough to carry out its existing objectives and
commitments (at least 12 months).
8. Q: What is the monetary unit assumption?
CORRECT ANSWER Money is the common denominator of economic
activity and provides an appropriate basis for accounting measurement
and analysis. It assumes the dollar remains stable over time.
9. Q: What is the economic entity assumption?
CORRECT ANSWER Economic activity can be identified with a particular
unit of accountability (the business is separate from its owners).
10. Q: What is the periodicity (time period) assumption?
CORRECT ANSWER The economic activities of an enterprise can be
divided into artificial time periods for financial reporting purposes.
11. Q: What is the basic accounting equation under GAAP?
CORRECT ANSWER Assets = Liabilities + Stockholders' Equity.
,12. Q: What is comprehensive income?
CORRECT ANSWER The change in equity (net assets) of a business entity
during a period from transactions and other events and circumstances
from non-owner sources. It includes Net Income + Other Comprehensive
Income (OCI).
13. Q: Provide three examples of items included in Other Comprehensive
Income (OCI).
CORRECT ANSWER 1) Unrealized gains/losses on available-for-sale
securities, 2) Foreign currency translation adjustments, 3) Certain pension
liability adjustments.
14. Q: How are discontinued operations reported on the income
statement?
CORRECT ANSWER They are reported net of tax in a separate section of
the income statement, below income from continuing operations.
15. Q: What qualifies as a discontinued operation?
CORRECT ANSWER The disposal of a component of an entity that
represents a strategic shift having a major effect on the entity's operations
and financial results.
16. Q: How are unusual or infrequent items that do NOT qualify as
discontinued operations reported?
CORRECT ANSWER They are reported as a separate component of
income from continuing operations, net of tax, but they are not shown net
of tax on the face of the income statement (they are included in "Other
Revenues and Gains" or "Other Expenses and Losses").
17. Q: What is a change in accounting principle? Give an example.
, CORRECT ANSWER A change from one generally accepted accounting
principle to another generally accepted accounting principle (e.g.,
changing from FIFO to LIFO for inventory).
18. Q: How is a change in accounting principle reported?
CORRECT ANSWER Generally, the current period is reported under the
new principle, and prior periods are retrospectively adjusted (recast) to
show what the financials would have looked like under the new principle.
19. Q: What is a change in accounting estimate? Give an example.
CORRECT ANSWER A change that results from new information or
subsequent developments (e.g., changing the useful life or salvage value of
a depreciable asset).
20. Q: How is a change in accounting estimate reported?
CORRECT ANSWER Prospectively, from the current and future periods.
No prior period adjustment is made.
21. Q: What is a prior period adjustment?
CORRECT ANSWER An adjustment made to the beginning balance of
retained earnings to correct an error in the financial statements of a prior
period.
Module 2: Revenue Recognition (ASC 606)
22. Q: What is the core principle of ASC 606?
CORRECT ANSWER An entity should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
23. Q: What is Step 1 of the 5-step revenue recognition model?
ANSWERS AND QUESTIONS - MOST RECENT EDITION
2026/2027
BUS-A 311 Intermediate Accounting I
1. Q: What is the primary objective of financial reporting?
CORRECT ANSWER To provide financial information about the reporting
entity that is useful to present and potential equity investors, lenders, and
other creditors in making decisions about providing resources to the
entity.
2. Q: What are the two fundamental qualitative characteristics of useful
accounting information?
CORRECT ANSWER Relevance and Faithful Representation.
3. Q: What makes information "relevant"?
CORRECT ANSWER Information is relevant if it has predictive value,
confirmatory value, or both, and is material.
4. Q: What are the three components of faithful representation?
CORRECT ANSWER Completeness, neutrality, and freedom from error.
,5. Q: What are the four enhancing qualitative characteristics?
CORRECT ANSWER Comparability, consistency, verifiability, and
timeliness.
6. Q: What is the difference between comparability and consistency?
CORRECT ANSWER Comparability allows users to identify similarities
and differences between enterprises. Consistency means a company uses
the same accounting methods from period to period.
7. Q: What is the going concern assumption?
CORRECT ANSWER The assumption that the business entity will remain
in operation long enough to carry out its existing objectives and
commitments (at least 12 months).
8. Q: What is the monetary unit assumption?
CORRECT ANSWER Money is the common denominator of economic
activity and provides an appropriate basis for accounting measurement
and analysis. It assumes the dollar remains stable over time.
9. Q: What is the economic entity assumption?
CORRECT ANSWER Economic activity can be identified with a particular
unit of accountability (the business is separate from its owners).
10. Q: What is the periodicity (time period) assumption?
CORRECT ANSWER The economic activities of an enterprise can be
divided into artificial time periods for financial reporting purposes.
11. Q: What is the basic accounting equation under GAAP?
CORRECT ANSWER Assets = Liabilities + Stockholders' Equity.
,12. Q: What is comprehensive income?
CORRECT ANSWER The change in equity (net assets) of a business entity
during a period from transactions and other events and circumstances
from non-owner sources. It includes Net Income + Other Comprehensive
Income (OCI).
13. Q: Provide three examples of items included in Other Comprehensive
Income (OCI).
CORRECT ANSWER 1) Unrealized gains/losses on available-for-sale
securities, 2) Foreign currency translation adjustments, 3) Certain pension
liability adjustments.
14. Q: How are discontinued operations reported on the income
statement?
CORRECT ANSWER They are reported net of tax in a separate section of
the income statement, below income from continuing operations.
15. Q: What qualifies as a discontinued operation?
CORRECT ANSWER The disposal of a component of an entity that
represents a strategic shift having a major effect on the entity's operations
and financial results.
16. Q: How are unusual or infrequent items that do NOT qualify as
discontinued operations reported?
CORRECT ANSWER They are reported as a separate component of
income from continuing operations, net of tax, but they are not shown net
of tax on the face of the income statement (they are included in "Other
Revenues and Gains" or "Other Expenses and Losses").
17. Q: What is a change in accounting principle? Give an example.
, CORRECT ANSWER A change from one generally accepted accounting
principle to another generally accepted accounting principle (e.g.,
changing from FIFO to LIFO for inventory).
18. Q: How is a change in accounting principle reported?
CORRECT ANSWER Generally, the current period is reported under the
new principle, and prior periods are retrospectively adjusted (recast) to
show what the financials would have looked like under the new principle.
19. Q: What is a change in accounting estimate? Give an example.
CORRECT ANSWER A change that results from new information or
subsequent developments (e.g., changing the useful life or salvage value of
a depreciable asset).
20. Q: How is a change in accounting estimate reported?
CORRECT ANSWER Prospectively, from the current and future periods.
No prior period adjustment is made.
21. Q: What is a prior period adjustment?
CORRECT ANSWER An adjustment made to the beginning balance of
retained earnings to correct an error in the financial statements of a prior
period.
Module 2: Revenue Recognition (ASC 606)
22. Q: What is the core principle of ASC 606?
CORRECT ANSWER An entity should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.
23. Q: What is Step 1 of the 5-step revenue recognition model?
