Solution Manual
📘INTERMEDIATE ACCOUNTING
PRACTICE EXAM (ORIGINAL)
1. The main objective of financial reporting is to provide information useful for:
A. Managers only
B. Investors and creditors
C. Employees only
D. Government only
✔ Answer: B
2. Qualitative characteristic of accounting information includes:
A. Profitability
B. Relevance
C. Inventory
D. Depreciation
✔ Answer: B
3. Faithful representation means information is:
A. Biased
B. Accurate and complete
C. Hidden
D. Delayed
✔ Answer: B
4. Accounting equation is:
A. Assets = Liabilities + Equity
B. Assets = Revenue + Expenses
C. Equity = Assets − Revenue
D. Liabilities = Income − Assets
✔ Answer: A
,5. Expenses are:
A. Inflows
B. Outflows or costs incurred
C. Assets
D. Equity
✔ Answer: B
6. Revenue is recognized when:
A. Cash is received
B. Earned and realized
C. Expenses occur
D. Inventory is bought
✔ Answer: B
7. Matching principle relates to:
A. Expenses with revenues
B. Assets with liabilities
C. Cash with profit
D. Equity with debt
✔ Answer: A
8. Conservatism means:
A. Overstate income
B. Understate liabilities and assets
C. Avoid overstatement of income
D. Ignore losses
✔ Answer: C
9. IFRS stands for:
A. International Financial Reporting Standards
B. Internal Financial Rules
C. Investment Financial Reporting System
D. Income Fund Regulation System
✔ Answer: A
10. GAAP refers to:
A. Government Accounting Audit Policy
B. Generally Accepted Accounting Principles
C. Global Accounting Analysis Program
D. General Audit Accounting Policy
✔ Answer: B
, 🔹 CHAPTER: INVENTORY (11–25)
11. FIFO means:
A. Last in first out
B. First in first out
C. Fixed income fund order
D. Final inventory flow
✔ Answer: B
12. LIFO assumes:
A. Oldest inventory sold first
B. Newest inventory sold first
C. Random sale
D. No sale
✔ Answer: B
13. Inventory is recorded at:
A. Selling price
B. Lower of cost or market
C. Profit value
D. Replacement value only
✔ Answer: B
14. Cost of goods sold increases when:
A. Inventory increases
B. Sales increase
C. Expenses decrease
D. Assets decrease
✔ Answer: B
15. Weighted average cost smooths:
A. Prices
B. Sales
C. Assets
D. Liabilities
✔ Answer: A
16. Inventory shrinkage is due to:
A. Sales increase
B. Theft or loss
C. Profit increase
D. Cash increase
✔ Answer: B
📘INTERMEDIATE ACCOUNTING
PRACTICE EXAM (ORIGINAL)
1. The main objective of financial reporting is to provide information useful for:
A. Managers only
B. Investors and creditors
C. Employees only
D. Government only
✔ Answer: B
2. Qualitative characteristic of accounting information includes:
A. Profitability
B. Relevance
C. Inventory
D. Depreciation
✔ Answer: B
3. Faithful representation means information is:
A. Biased
B. Accurate and complete
C. Hidden
D. Delayed
✔ Answer: B
4. Accounting equation is:
A. Assets = Liabilities + Equity
B. Assets = Revenue + Expenses
C. Equity = Assets − Revenue
D. Liabilities = Income − Assets
✔ Answer: A
,5. Expenses are:
A. Inflows
B. Outflows or costs incurred
C. Assets
D. Equity
✔ Answer: B
6. Revenue is recognized when:
A. Cash is received
B. Earned and realized
C. Expenses occur
D. Inventory is bought
✔ Answer: B
7. Matching principle relates to:
A. Expenses with revenues
B. Assets with liabilities
C. Cash with profit
D. Equity with debt
✔ Answer: A
8. Conservatism means:
A. Overstate income
B. Understate liabilities and assets
C. Avoid overstatement of income
D. Ignore losses
✔ Answer: C
9. IFRS stands for:
A. International Financial Reporting Standards
B. Internal Financial Rules
C. Investment Financial Reporting System
D. Income Fund Regulation System
✔ Answer: A
10. GAAP refers to:
A. Government Accounting Audit Policy
B. Generally Accepted Accounting Principles
C. Global Accounting Analysis Program
D. General Audit Accounting Policy
✔ Answer: B
, 🔹 CHAPTER: INVENTORY (11–25)
11. FIFO means:
A. Last in first out
B. First in first out
C. Fixed income fund order
D. Final inventory flow
✔ Answer: B
12. LIFO assumes:
A. Oldest inventory sold first
B. Newest inventory sold first
C. Random sale
D. No sale
✔ Answer: B
13. Inventory is recorded at:
A. Selling price
B. Lower of cost or market
C. Profit value
D. Replacement value only
✔ Answer: B
14. Cost of goods sold increases when:
A. Inventory increases
B. Sales increase
C. Expenses decrease
D. Assets decrease
✔ Answer: B
15. Weighted average cost smooths:
A. Prices
B. Sales
C. Assets
D. Liabilities
✔ Answer: A
16. Inventory shrinkage is due to:
A. Sales increase
B. Theft or loss
C. Profit increase
D. Cash increase
✔ Answer: B
