ACCO 310 MCQ Review For Midterm exam (Financial Reporting I) actual questions with answers key Concordia University

ACCO 310 MCQ Review For Midterm exam (Financial Reporting I) actual questions with answers key Concordia University Question 1 Select the Best Answer 1. Generally accepted accounting principles A) are fundamental truths or axioms that can be derived from laws of nature. B) derive their authority from legal court proceedings. C) derive their credibility and authority from general recognition and acceptance by the accounting profession. D) have been specified in detail in the CICA conceptual framework. 2. A local business man owns several different companies. His accountant prepares separate annual financial statements for each of these businesses. This is an application of which of the following principles: A) Full disclosure B) Periodicity C) Economic entity D) Matching 3. Some events are not recorded in the accounting information system because A) the amounts are not material. B) the service has not been provided yet although the cash has been received. C) the problems measuring them are too complex. D) all of these. 4. What is included in 'cash and cash equivalents'? A) Guaranteed Investment Certificate maturing in 181 days. B) Four-month term deposits. C) U.S. cash on hand. D) Guaranteed Investment Certificate maturing in 125 days. 5. The occurrence which most likely would have no effect on 2021 net income (assuming that all amounts involved are material) is the A) sale in 2021 of an office building contributed by a stockholder in 1997. B) collection in 2021 of a receivable from a customer whose account was written off in 2020 by a charge to the allowance account. C) settlement based on litigation in 2021 of previously unrecognized damages from a serious accident which occurred in 2018. D) worthlessness determined in 2021 of stock purchased on a speculative basis in 2007. 6. Which statement best explains 'net realizable value'? A) The amount required to re-manufacture an item of inventory. B) The amount that can be obtained from the sale of inventory less selling costs. C) The amount it would cost to repurchase an item of inventory. D) The lowest amount that can be obtained from the sale of inventory. Use the following to answer questions 7-8: Poole Company paid or collected during 2020 the following items: Insurance premiums paid $ 12,400 Interest collected 25,900 Salaries paid 125,200 The following balances have been excerpted from Poole's balance sheets: December 31, 2020 December 31, 2019 Prepaid insurance $ 1,200 $ 1,500 Interest receivable 3,700 2,900 Salaries payable 12,300 10,600 7. The insurance expense on the income statement for 2020 was A) $9,700. B) $12,100. C) $12,700. D) $15,100. 8. The salary expense on the income statement for 2020 was A) $102,300. B) $123,500. C) $126,900. D) $148,100. 9. On December 1, 2021, SuperTech sold 100 locks for laptop computers at $50 each with a 90-day unconditional right of return. Since this is a new product for SuperTech, it has no past history regarding estimated returns. Which of the following is true regarding SuperTech's December 31, 2021 financial statements? A) Sales of $5,000 should only be recognized in 2022 when the return privilege expires. B) Sales of $5,000 should be recognized in 2021 as long as there is a reserve for returns. C) Sales of $5,000 should be recognized in 2021, with future costs accrued as an estimated liability. D) Sales should only be recognized as the related cash is collected. 10. A product and service are bundled together and sold to customers for $175. The fair values of the product and service are $150 and $50 respectively. Under the fair value method, how much would be allocated to the product? A) $131.25 B) $87.50 C) $150.00 D) $100.00 11. Monetary assets are defined as assets that are convertible to A) known amounts of cash. B) cash within one operating cycle. C) cash within twelve months. D) cash within three months 12. The shareholders' equity section is usually divided into what four parts? A) Preferred stock, common stock, treasury stock, contributed surplus B) Preferred stock, common stock, retained earnings, other comprehensive income C) Capital shares, contributed surplus, retained earnings, accumulated other comprehensive income D) Capital stock, appropriated retained earnings, unappropriated retained earnings, contributed surplus 13. A cash flow statement that is prepared under the indirect method adds and subtracts certain items to the base number. How would decreases in unearned revenues be shown? They would be shown as A) a deduction from net income B) an addition to net income C) a deduction from sales D) an addition to sales 14. On January 1, 2020, Kapp Co. leased a building to Duerr Corp. for a ten-year term at an annual rental of $80,000. At inception of the lease, Kapp received $320,000 covering the first two years' rent of $160,000 and a security deposit of $160,000. This deposit will not be returned to Duerr upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $320,000 should be shown as a current and long-term liability in Kapp's December 31, 2020 balance sheet? Current Liability Long-term Liability A) $0 $320,000 B) $80,000 $160,000 C) $160,000 $160,000 D) $160,000 $80,000 15. On Victor Ltd's statement of cash flows (indirect method) for calendar 2022, cash flows from operating activities were reported at $77,000. The statement included the following items: depreciation on plant assets of $30,000; impairment of goodwill of $5,000; and cash dividends paid of $36,000. Victor follows ASPE. Based only on the information given above, Victor's net income for 2022 was A) $ 6,000. B) $42,000. C) $77,000. D) $78,000. 16. During 2022, Hugo Corporation, which uses the allowance method of accounting for doubtful accounts, recorded bad debts expense of $10,000. As well, the corporation wrote off uncollectible accounts receivable of $4,000. As a result of these transactions, their cash flows from operating activities would be calculated (indirect method) by adjusting net income with a A) $10,000 increase. B) $4,000 increase. C) $6,000 increase. D) $6,000 decrease. 17. Valjean Corp sold some of its plant assets during calendar 2022 for $21,000 cash. The original cost of the assets was $150,000, and the accumulated depreciation to the date of sale was $140,000. This transaction should be shown on Valjean's 2022 statement of cash flows (indirect method) as a(n) A) deduction from net income of $11,000 and a $10,000 cash inflow from financing activities. B) addition to net income of $11,000 and a $21,000 cash inflow from investing activities. C) deduction from net income of $11,000 and a $21,000 cash inflow from investing activities. D) addition to net income of $21,000.