Acct 110 Midterm Exam 1 2025

Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Financial Accounting Standards Board, or the FASB. - Correct Answer-True The SEC sets international financial reporting standards. - Correct Answer-False The fundamental qualitative characteristics are Relevance and Faithful Representation. - Correct Answer-True Information that is material must be separately disclosed in the financial statements. - Correct Answer-True Another name for the continuity assumption is the going-concern assumption - Correct Answer-True Under current accounting rules, the carrying value of a building can be increased to its fair value. - Correct Answer-False Accounting is moving in the direction of reporting more and more assets and liabilities at their fair values. - Correct Answer-True Since we live in a global economy, all countries have adopted the same accounting standards for business transactions. - Correct Answer-False Cost is a verifiable measure that is relatively free from bias. - Correct Answer-True The Financial Accounting Standards Board is responsible for establishing... - Correct Answer-Generally Accepted Accounting Principles The acronym GAAP stands for: - Correct Answer-Generally Accepted Accounting Principles _________Means that the accounting information for a company must be prepared in such a way as to be capable of being compared with information from other companies in the same period and consistent with similar information for that company in previous periods. - Correct Answer-Comparability Which of the following is a correct statement about GAA and IFRS? - Correct Answer The FASB and IASB are working towards convergence of standards. Accounting Accounting To be useful, accounting information must have the fundamental qualitative characteristics of: - Correct Answer-Relevance and Faithful Representation All of the following are true statements about the entity assumption EXEPT for: - Correct Answer-The entity assumption ensures that the business will continue indefinitely. Verifiability means that the information: - Correct Answer-must be capable of being checked for accuracy. When preparing accounting information, understand that: - Correct Answer-the cost of disclosure should not exceed the expected benefits to the users. The accounting assumption that states that the business, rather that its owners, is the reporting unit is the: - Correct Answer-entity assumption The stable-monetary-unit assumption: - Correct Answer-enables accountants to ignore the effect of inflation in the accounting records. Historical cost - Correct Answer-is a verifiable measure that is relatively free from bias. The principle stating that assets acquired by the business should be recorded at their actual cost on the date of purchase is the ... - Correct Answer-historical cost principle. The relevant measure of the value of the assets of a company tat is going out of business is the... - Correct Answer-current fair market value. The CEO of ABC Company owns a vacation home in Hawaii. ABC owns a factory in Detroit where they are headquartered. Which of these properties is considered and asset of the business? - Correct Answer-Only the factory in Detroit. A construction company paid $80,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $90,000. When the balance sheet was prepared, the value of the equipment was $83,000. At what amount should the equipment be recorded in the records of the company? - Correct Answer-$80,000 An important fact to remember when studying GAAP and IFRS is : - Correct Answer newly issued U.S. accounting standards have conformed U.S. practices to IFRS. If a company prepared is financial statements three years after the end of their accounting period, they have violated the qualitative characteristic of: - Correct Answer Timeliness The rules for recording accounting transactions include all of the following EXCEPT: - Correct Answer-Both sides of the accounting equation must be affected. Accounting Accounting When services are performed on account... - Correct Answer-accounts receivable is increased. When a business purchases land on account... - Correct Answer-both assets and liabilities are increased. Which of the following transactions will increase Stockholders' Equity? - Correct Answer-The company issues common stock to new shareholders. A company performed services for a customer for cash. This transaction increased assets and... - Correct Answer-increased revenues. Company Z sells land for the same amount it paid for it three years ago. When the company records this transaction: - Correct Answer-one asset is increased and another asset is decreased. When a company incurs additional debt, which type of account is increased? - Correct Answer-Liability account The double-entry accounting process... - Correct Answer-Both A and B A) Requires that every transaction affect at least two accounts. B) Mandates that the dollar sum of the debits equal that of the credits for each transaction. The Chart of Accounts is: - Correct Answer-a listing of all accounts used to record the business transactions. When a company receives an electric bill, but does not pay it immediately, it should: - Correct Answer-A) credit Accounts Payable. Revenue: - Correct Answer-D) is the increase in stockholders' equity as a result of providing a good or service. Revenue recognition: - Correct Answer-for the retail industry is similar under GAAP and IFRS On December 15, 2012, a company receives an order from a customer for services to be performed on December 28, 2012. Due to a backlog of orders, the company does not perform the services until January 3, 2013. The customer pays for the services on January 6 2013. The revenue principle requires the revenue to be recorded by the company on: - Correct Answer-January 3, 2013 The revenue principle governs two things: - Correct Answer-When to record revenue and the amount of revenue to record. Accounting Accounting A company using accrual accounting pays $12,000 for a television advertising campaign in November, 2012. Commercials will run evenly in November, December, and January. How much expense will be reported on an income statement prepared for the year ended Dec 31, 2012 - Correct Answer-$12,000/ 3= $4,000 per month $4,000 * 2= $8,000 Adjusting entries are: - Correct Answer-prepared at the end of the accounting period to update certain accounts. The following accounts are up-to-date and need no adjustment at the end of the period: - Correct Answer-Cash, dividends and common stock....adj. journal entries usually begin with an expense. Adjusting entries: - Correct Answer-Are made before th