ACCT 301 FINAL EXAM QUESTIONS WITH VERIFIED
ANSWERS
The assumption that in the absence of contrary information a business entity will
continue indefinitely is the - Answers - Going concern
When a seller offers a right of return, which of the following is true - Answers - Sales are
shown net of estimated returns in the income statement
Accounting for a change in the estimated service life of equipment - Answers - is
handled prospectively
Earnings quality refers to - Answers - the ability of reported earnings to predict a
company's future earnings
The allocation base of an asset refers to which of the following - Answers - Assets initial
capitalized cost minus residual value
The allowance for uncollectible accounts is a - Answers - Contra asset account
Changes in estimates are accounted for using which approach - Answers - Prospective
An omission in the notes that is so serious that even a qualified opinion is not justified
results in - Answers - Adverse
Which of the following has the statutory authority to set accounting standards in the US
- Answers - SEC
For companies using FIFO or average cost, inventory is valued at: - Answers - Lower of
cost or net realizable value
Liquidity refers to - Answers - the ease with which an asset is converted to cash
Permanent accounts do not include - Answers - Interest expense
Accruals occur when cash flows - Answers - Occur after revenue or expense
recognition
For a typical manufacturing company, the most common critical point for recognizing
revenue is the date: - Answers - The product is delivered
In a periodic inventory system, the cost of purchases is debited to - Answers -
Purchases
, The use of LIFO in accounting for a firm's inventory - Answers - Usually provides a
better match of expenses with revenues
Steps for recognizing revenue - Answers -
Which of the following would not require the company to account for the change
retrospectively - Answers - From FIFO to LIFO
You want to buy a car for $10,000 and need to know the monthly payments, which table
should be used? - Answers - PV of an annuity due of $1
In periods when costs are rising, LIFO liquidations - Answers - Distort the net income
A company's estimate of merchandise that will be returned by customers should be: -
Answers - Included in inventory at an amount equal to the cost of the merchandise
Accounts receivable are normally reported at the - Answers - Expected amount to be
received
Disclosure notes would not include - Answers - Data to adjust the financial statements
so that they are not misleading
Compensating balances represent - Answers - Cash in a bank account that can't be
spent
COGS is given by - Answers - Net purchases + beg inv - end inv
A subsequent event for an entity with a Dec 31, 2021, year-end would not include -
Answers - A change in the estimated useful lives of equipment in Jan 2022
Popson Inc. incurred a material loss that was unusual in character. This loss should be
reported as: - Answers - A line item within income from continuing operations
Which is considered a performance obligation - Answers - Extended warranties on
electronic products
Accounting Equation - Answers - Assets = Liabilities + Equity
Assets - Answers - Owned
Liabilities - Answers - Owes to a third party
Equity - Answers - Owners rights to assets
Assets include - Answers - Cash
ANSWERS
The assumption that in the absence of contrary information a business entity will
continue indefinitely is the - Answers - Going concern
When a seller offers a right of return, which of the following is true - Answers - Sales are
shown net of estimated returns in the income statement
Accounting for a change in the estimated service life of equipment - Answers - is
handled prospectively
Earnings quality refers to - Answers - the ability of reported earnings to predict a
company's future earnings
The allocation base of an asset refers to which of the following - Answers - Assets initial
capitalized cost minus residual value
The allowance for uncollectible accounts is a - Answers - Contra asset account
Changes in estimates are accounted for using which approach - Answers - Prospective
An omission in the notes that is so serious that even a qualified opinion is not justified
results in - Answers - Adverse
Which of the following has the statutory authority to set accounting standards in the US
- Answers - SEC
For companies using FIFO or average cost, inventory is valued at: - Answers - Lower of
cost or net realizable value
Liquidity refers to - Answers - the ease with which an asset is converted to cash
Permanent accounts do not include - Answers - Interest expense
Accruals occur when cash flows - Answers - Occur after revenue or expense
recognition
For a typical manufacturing company, the most common critical point for recognizing
revenue is the date: - Answers - The product is delivered
In a periodic inventory system, the cost of purchases is debited to - Answers -
Purchases
, The use of LIFO in accounting for a firm's inventory - Answers - Usually provides a
better match of expenses with revenues
Steps for recognizing revenue - Answers -
Which of the following would not require the company to account for the change
retrospectively - Answers - From FIFO to LIFO
You want to buy a car for $10,000 and need to know the monthly payments, which table
should be used? - Answers - PV of an annuity due of $1
In periods when costs are rising, LIFO liquidations - Answers - Distort the net income
A company's estimate of merchandise that will be returned by customers should be: -
Answers - Included in inventory at an amount equal to the cost of the merchandise
Accounts receivable are normally reported at the - Answers - Expected amount to be
received
Disclosure notes would not include - Answers - Data to adjust the financial statements
so that they are not misleading
Compensating balances represent - Answers - Cash in a bank account that can't be
spent
COGS is given by - Answers - Net purchases + beg inv - end inv
A subsequent event for an entity with a Dec 31, 2021, year-end would not include -
Answers - A change in the estimated useful lives of equipment in Jan 2022
Popson Inc. incurred a material loss that was unusual in character. This loss should be
reported as: - Answers - A line item within income from continuing operations
Which is considered a performance obligation - Answers - Extended warranties on
electronic products
Accounting Equation - Answers - Assets = Liabilities + Equity
Assets - Answers - Owned
Liabilities - Answers - Owes to a third party
Equity - Answers - Owners rights to assets
Assets include - Answers - Cash
