FINANCIAL-ACCOUNTING-AND-REPORTING Online Practice Questions and Answers

During a period when an enterprise is under the direction of a particular management, its financial statements will directly provide information about:

A. Both enterprise performance and management performance.

B. Management performance but not directly provide information about enterprise performance.

C. Enterprise performance but not directly provide information about management performance.

D. Neither enterprise performance nor management performance.

The cumulative effect of a change in accounting estimate should be shown separately: A. On the income statement above income from continuing operations.

B. On the income statement after income from continuing operations and before extraordinary items.

C. On the retained earnings statement as an adjustment to the beginning balance.

D. It should not be recorded separately on any financial statement.

In which of the following situations should a company report a prior-period adjustment?

A. A change in the estimated useful lives of fixed assets purchased in prior years.

B. The correction of a mathematical error in the calculation of prior years' depreciation.

C. A switch from the straight-line to double-declining balance method of depreciation.

D. The scrapping of an asset prior to the end of its expected useful life.

APB Opinion No. 28, Interim Financial Reporting, concluded that interim financial reporting should be viewed primarily in which of the following ways?

A. As useful only if activity is spread evenly throughout the year.

B. As if the interim period were an annual accounting period.

C. As reporting for an integral part of an annual period.

D. As reporting under a comprehensive basis of accounting other than GAAP.

Which of the following qualifies as an operating segment?

A. Corporate headquarters, which oversees $1 billion in sales for the entire company.

B. North American segment, whose assets are 12% of the company's assets of all segments, and management reports to the chief operating officer.

C. South American segment, whose results of operations are reported directly to the chief operating officer, and has 5% of the company's assets, 9% of revenues, and 8% of the profits.

D. Eastern Europe segment, which reports its results directly to the manager of the European division, and has 20% of the company's assets, 12% of revenues, and 11% of profits.

According to the FASB conceptual framework, which of the following is an essential characteristic of an asset?

A. The claims to an asset's benefits are legally enforceable.

B. An asset is tangible.

C. An asset is obtained at a cost.

D. An asset provides future benefits.

According to the FASB conceptual framework, an entity's revenue may result from:

A. A decrease in an asset from primary operations.

B. An increase in an asset from incidental transactions.

C. An increase in a liability from incidental transactions.

D. A decrease in a liability from primary operations.

Grum Corp., a publicly-owned corporation, is subject to the requirements for segment reporting. In its income statement for the year ended December 31, 1991, Grum reported revenues of $50,000,000, operating expenses of $47,000,000, and net income of $3,000,000. Operating expenses include payroll costs of $ 15,000,000. Grum's combined identifiable assets of all industry segments at December 31, 1991, were $40,000,000. In its 1991 financial statements, Grum should disclose major customer data if sales to any single customer amount to at least:

A. $300,000

B. $1,500,000

C. $4,000,000

D. $5,000,000

Deficits accumulated during the development stage of a company should be:

A. Reported as organization costs.

B. Reported as a part of stockholders' equity.

C. Capitalized and written off in the first year of principal operations.

D. Capitalized and amortized over a five year period beginning when principal operations commence.

A statement of cash flows for a development stage enterprise:

A. Is the same as that of an established operating enterprise and, in addition, shows cumulative amounts from the enterprise's inception.

B. Shows only cumulative amounts from the enterprise's inception.

C. Is the same as that of an established operating enterprise, but does not show cumulative amounts from the enterprise's inception.

D. Is not presented.