1. GAAP stands for:
(a) governmental auditing and accounting practices.
(b) generally accepted attest principles.
(c) government audit and attest policies.
(d) generally accepted accounting principles.
2. Accounting standard-setters use the following process in establishing accounting standards:
(a) Research, exposure draft, discussion paper, standard.
(b) Discussion paper, research, exposure draft, standard.
(c) Research, preliminary views, discussion paper, standard.
(d) Research, discussion paper, exposure draft, standard.
3. GAAP is comprised of:
(a) FASB standards, interpretations, and concepts statements.
(b) FASB financial standards.
(c) FASB standards, interpretations, EITF consensuses, and accounting rules issued by FASB prede- cessor organizations.
(d) any accounting guidance included in the FASB Codification.
4. The authoritative status of the conceptual framework is as follows.
(a) It is used when there is no standard or interpretation related to the reporting issues under consideration.
(b) It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue.
(c) It takes precedence over all other authoritative literature.
(d) It has no authoritative status.
5. The objective of financial reporting places most emphasis on:
(a) reporting to capital providers.
(b) reporting on stewardship.
(c) providing specific guidance related to specific needs.
(d) providing information to individuals who are experts in the field.
6. General-purpose financial statements are prepared primarily for:
(a) internal users.
(b) external users.
(c) auditors.
(d) government regulators.
7. Economic consequences of accounting standard-setting means:
(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.
(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.
(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.
(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.
8. The expectations gap is:
(a) what financial information management provides and what users want.
(b) what the public thinks accountants should do and what accountants think they can do.
(c) what the governmental agencies want from standard-setting and what the standard-setters provide.
(d) what the users of financial statements want from the government and what is provided.
(Elements of Financial Statements) Ten interrelated elements that are most directly related to mea- suring the performance and financial status of an enterprise are provided below.
•Assets
•Distributions to owners
•Expenses
•Liabilities
•Comprehensive income
•Gains
•Equity
•Revenues
•Losses
•Investments by owners
Identify the element or elements associated with the 12 items below.
(a) Arises from peripheral or incidental transactions.
(b) Obligation to transfer resources arising from a past transaction.
(c) Increases ownership interest.
(d) Declares and pays cash dividends to owners.
(e) Increases in net assets in a period from nonowner sources.
(f) Items characterized by service potential or future economic benefit.
(g) Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners.
(h) Arisesfromincomestatementactivitiesthatconstitutetheentity'songoingmajororcentraloperations.
(i) Residual interest in the assets of the enterprise after deducting its liabilities.
(Transaction Analysis-Service Company) Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.
EXERCISES
April 2 Invested $32,000 cash and equipment valued at $14,000 in the business
2 Hired a secretary-receptionist at a salary of $290 per week payable monthly
3 Purchased supplies on account $700. (Debit an asset account.)
7 Paid office rent of $600 for the month.
11 Completed a tax assignment and billed client $1,100 for services rendered. (Use Service Revenue account.)
12 Received $3,200 advance on a management consulting engagement.
17 Received cash of $2,300 for services completed for Ferengi Co.
21 Paid insurance expense $110.
30 Paid secretary-receptionist $1,160 for the month.
30 A count of supplies indicated that $120 of supplies had been used
30. Purchased a new computer for $6,100 with personal funds. (The computer will be used exclusively for business purposes.)
Instructions: Journalize the transactions in the general journal. (Omit explanations.)
(Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.
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Debit
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Credit
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Prepaid Insurance
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$ 3,600
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Supplies
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$ 2,800
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Equipment
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$ 25,000
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Accumulated Depreciation-Equipment
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$ 8,400
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Notes Payable
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$20,000
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Unearned Rent Revenue
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$9,300
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Rent Revenue
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$60,000
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Interest Expense
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-0-
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Salaries and Wages Expenses
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$14,000
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An analysis of the accounts shows the following.
1. The equipment depreciates $250 per month.
2. One-third of the unearned rent was recognized as revenue during the quarter.
3. Interest of $500 is accrued on the notes payable.
4. Supplies on hand total $850. 5. Insurance expires at the rate of $300 per month