Multiple Choice Questions
1. APB Opinion No. 22, “Disclosure of Accounting Policies”
a. Requires a description of every accounting policy followed by a reporting entity
b. Provides a specific listing of all types of accounting policies that must be disclosed
c. Requires disclosure of the format for the statement of cash flows
d. Requires a description of all significant accounting policies to be included as an integral part of the financial statements
2. Which of the following contingencies should generally be accrued on the balance sheet when the occurrence of the contingent event is reasonably possible and its amount can be reasonably estimated?
Gain Contingency Loss Contingency
a. Yes ......... Yes
b. Yes ......... No
c. No ......... Yes
d. No ......... No
3. A donated fixed asset (from a governmental unit) for which the fair value has been determined should be recorded as a debit to fixed assets and a credit to
a. Unrealized capital
b. Retained earnings
c. Deferred income
d. Other income
4. On October 2, 2005, a company borrowed cash and signed a 3-year interest-bearing note on which both the principal and interest are payable on October 2, 2008. At
December 31, 2007 the accrued interest should
a. Be reported on the balance sheet as a current liability
b. Be reported on the balance sheet as a noncurrent liability
c. Be reported on the balance sheet as part of long-term notes payable
d. Not be reported on the balance sheet as a liability
5. Financial statements that are expressed assuming a stable monetary unit are
a. General-price-level financial statements
b. Historical-dollar financial statements
c. Current-value financial statements
d. Fair-value financial statements
6. Rent revenue collected one month in advance should be accounted for as
a. Revenue in the month collected
b. A current liability
c. A separate item in stockholders’ equity
d. An accrued liability
7. Which of the following should be disclosed in the Summary of Significant Accounting Policies?
a. Rent expense amount
b. Maturity dates of long-term debt
c. Methods of amortizing intangibles
d. Composition of plant assets
8. A company receives an advance payment for special-order goods to be manufactured and delivered within six months. The advance payment should be reported on the company’s balance sheet as a
a. Deferred charge
b. Contra-asset account
c. Current liability
d. Noncurrent liability
9. The FASB has identified five alternatives for measuring balance sheet elements. Which of the following alternatives may be used?
Net Realizable Value Present Value
a. No ......... No
b. No ......... Yes
c. Yes ......... No
d. Yes ......... Yes
10. The balance sheet provides information about each of the following items, except
a. Operating capability of entity
b. Results of entity’s operations
c. Entity’s liquidity
d. Financial flexibility of entity