Select the best answer for each of the following and write the letter corresponding to your answer in the answer sheet provided.
1. Documents that comprise GAAP include all of the following, except
a. FASB technical bulletins.
b. AICPA accounting research bulletins.
c. Statements of financial accounting concepts.
d. FASB standards.
2. Which of the following provides a consensus on how to account for new and unusual financial transactions?
a. Securities and Exchange Commission.
b. Emerging issues task force.
c. Committee on Accounting Procedure.
d. Accounting Principles Board.
3. The fundamental qualitative characteristic of faithful presentation has the components of
a. Predictive value and confirmatory value.
b. Comparability, consistency, andconfirmatory value.
c. Understandability, predictive value, and reliability.
d. Completeness, neutrality, and freedom from error.
4. According to the FASB conceptual framework, which of the following is an enhancing quality that relates to both relevance and faithful presentation?
a. Confirmatory value.
b. Predictive value.
c. Verifiability.
d. Freedom from error.
5. A&E Corporation paid one year's rent in advance on 8/1/2012 and charged the entire amount to Rent Expense. The adjusting entry made by A&E on 12/31/2012 would
a. Debit Rent Revenue
b. Credit Prepaid Rent
c. Be subsequently reversed
d. Credit a liability account
6. A&O Corporation received cash on September 1, 2012 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2012 adjusting entry would
a. debit Unearned Rent.
b. credit Cash.
c. credit Rent Revenue.
d. credita liability account.
7. Which of the following events will appear in the cash flows from investing activities section of the statement of cash flows?
a. Cash paid as dividends.
b. Cash received by issuing company's own common stock.
c. Cash received as repayment for funds loaned to other companies.
d. Cash purchase of treasury stock.
8. Making and collecting loans and disposing of property, plant, and equipment are
a. operating activities.
b. investing activities.
c. financing activities.
d. liquidity activities.
9. What is the normal journal entry when writing-off an account as uncollectible under the allowance method?
a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.
10. In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for
a. operating activities.
b. borrowing activities.
c. lending activities.
d. financing activities.