ACG 3100: Financial Reporting and Accounting Principles Practice Questions and Answers

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ACG 3100: Financial Reporting and Accounting Principles PracticeQuestions and AnswersACG 3100Correct Answers1.Which of the following is NOT normally an objective of financial reporting?a.To provide information about an entity's assets andclaims against those assetsb.To provide information that is useful in assessing an entity's sources and uses of cashc.To provide information that is useful in lending and investing decisionsd.To provide information about an entity's liquidation value2.As independent (or external) auditors, CPAs are primarily responsible fora.preparing financial statements in conformity with GAAP.b.certifying the accuracy of financial statements.c.expressing an opinion as to the fairness offinancial statements.d.filing financial statements with the SEC.3.The assumed continuation of a business entity in the absence of evidence to the contrary is an exampleof the accounting concept ofa.accrual.b.consistency.c.comparability.d.going concern.4.According to the FASB's conceptual framework, the process of reporting an item in the financialstatements of an entity isa.realization.b.recognition.c.matching.d.allocation.5.Generally acceptedaccounting principlesa.are accounting adaptations based on the laws of economic science.b.derive their credibility and authority from legal rulings and court precedents.c.derive their credibility and authority from the federal government through the financialreporting section of the SEC.d.derive their credibility and authority from general recognition and acceptance by theaccounting profession.6.On June 30, a company paid $3,600 for insurance premiums for the current year and debited theamount to Prepaid Insurance. At December 31, the bookkeeper forgot to record the amountexpired. The omission has the following effect on the financial statements prepared December 31:a.overstates owners' equity.b.overstates assets.c.understates net income.d.overstates both owners’ equity and assets.7.Which of the following criteria must be met before an event should be recorded for accountingpurposes?a.The event must be an arm's-length transaction.b.The event must berepeatable in a future period.c.The event must be measurable in financial terms.d.The event must be disclosed in the reported footnotes.8.Adjusting entries normally involvea.real accounts only.b.nominal accounts only.c.real andnominal accounts.d.liability accounts only.9.If an inventory account is understated at year end, the effect will be to overstate thea.net purchases.b.gross margin.c.cost of goods available for sale.d.cost of goods sold.

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