Financial Accounting Theory Test| Real Based Questions with Correct
Answers| Graded A+| Updated for a perfect score
The term revenue recognition conventionally refers to
a. The process of identifying transactions to be recorded as revenue in an
accounting period.
b. The process of measuring & relating revenue & expenses of a business for an
accounting period
c. The earning process that gives rise to revenue realization.
d. The process of identifying those transactions that result in an inflow of assets
from customers. - Correct Answer ✅💯Answer d
A change in accounting principle requires that the cumulative effect of the
change for prior periods be shown as an adjustment to:
a. Beginning retained earnings of the earliest period presented
b. Comprehensive income for the earliest period presented
c. Stockholders' equity of the period in which the change occurred
d. Net income of the period in which the change occurred - Correct Answer
✅💯Answer a
A measure of a company's profitability is the
a. Current ratio
b. Current cash debt coverage ratio c. Return on assets ratio
d. Debt to total assets ratio - Correct Answer ✅💯Answer c
A prior period adjustment should be reflected, net of applicable income taxes, in
the financial statements of a business entity in the
a. Retained earnings statement after net income but before dividends
b. Retained earnings statement as an adjustment of the opening balance c.
Income statement after income from continuing operations
d. Income statement as part of income from continuing operations - Correct
Answer ✅💯Answer b
According to FASB ASC 606, a transaction price for multiple performance
obligations should be allocated a. Based on selling price from the company's
competitors b. Based on what the company could sell the goods for on a
, standalone basis c. Based on forecasted cost of satisfying performance
obligation d. Based on total transaction price less residual value - Correct
Answer ✅💯Answer b
Arid Lands, Inc. is engaged in extensive exploration for water in the Caprock
Desert. If upon discovery of water the corporation does not recognize any
revenue from water sales until the sales exceed the costs of exploration, the
basis of revenue recognition being employed is the
a. Production basis
b. Cash (or collection) basis
c. Sales (or accrual) basis
d. Sunk cost (or cost recovery) basis - Correct Answer ✅💯Answer d
Conventionally accountants measure income
a. By applying a value added concept
b. By using a transactions approach c. As a change in the value of owners'
equity
d. As a change in the purchasing power of owners' equity - Correct Answer
✅💯Answer b
Determining periodic earnings and financial position depends on measuring
economic resources and obligations and changes in them as these changes
occur. This explanation pertains to
a. Disclosure
b. Accrual accounting
c. Materiality
d. The matching concept - Correct Answer ✅💯Answer b
If year one sales equal $800,000, year two equal $840,000 and year three equal
$896,000 the percentage to be assigned for year two in a sales trend analysis,
with year 1 as the base year, is
a. 100%
b. 89%
c. 105%
d. 112% - Correct Answer ✅💯Answer c
Answers| Graded A+| Updated for a perfect score
The term revenue recognition conventionally refers to
a. The process of identifying transactions to be recorded as revenue in an
accounting period.
b. The process of measuring & relating revenue & expenses of a business for an
accounting period
c. The earning process that gives rise to revenue realization.
d. The process of identifying those transactions that result in an inflow of assets
from customers. - Correct Answer ✅💯Answer d
A change in accounting principle requires that the cumulative effect of the
change for prior periods be shown as an adjustment to:
a. Beginning retained earnings of the earliest period presented
b. Comprehensive income for the earliest period presented
c. Stockholders' equity of the period in which the change occurred
d. Net income of the period in which the change occurred - Correct Answer
✅💯Answer a
A measure of a company's profitability is the
a. Current ratio
b. Current cash debt coverage ratio c. Return on assets ratio
d. Debt to total assets ratio - Correct Answer ✅💯Answer c
A prior period adjustment should be reflected, net of applicable income taxes, in
the financial statements of a business entity in the
a. Retained earnings statement after net income but before dividends
b. Retained earnings statement as an adjustment of the opening balance c.
Income statement after income from continuing operations
d. Income statement as part of income from continuing operations - Correct
Answer ✅💯Answer b
According to FASB ASC 606, a transaction price for multiple performance
obligations should be allocated a. Based on selling price from the company's
competitors b. Based on what the company could sell the goods for on a
, standalone basis c. Based on forecasted cost of satisfying performance
obligation d. Based on total transaction price less residual value - Correct
Answer ✅💯Answer b
Arid Lands, Inc. is engaged in extensive exploration for water in the Caprock
Desert. If upon discovery of water the corporation does not recognize any
revenue from water sales until the sales exceed the costs of exploration, the
basis of revenue recognition being employed is the
a. Production basis
b. Cash (or collection) basis
c. Sales (or accrual) basis
d. Sunk cost (or cost recovery) basis - Correct Answer ✅💯Answer d
Conventionally accountants measure income
a. By applying a value added concept
b. By using a transactions approach c. As a change in the value of owners'
equity
d. As a change in the purchasing power of owners' equity - Correct Answer
✅💯Answer b
Determining periodic earnings and financial position depends on measuring
economic resources and obligations and changes in them as these changes
occur. This explanation pertains to
a. Disclosure
b. Accrual accounting
c. Materiality
d. The matching concept - Correct Answer ✅💯Answer b
If year one sales equal $800,000, year two equal $840,000 and year three equal
$896,000 the percentage to be assigned for year two in a sales trend analysis,
with year 1 as the base year, is
a. 100%
b. 89%
c. 105%
d. 112% - Correct Answer ✅💯Answer c
