ACG 3100 Fundamentals of Financial Accounting: Concepts and Principles

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ACG 3100Fundamentalsof Financial Accounting: Concepts and PrinciplesACG 3100SOLUTION TO MULTIPLE QUESTION PROBLEM1.Which of the following is NOT normally an objective of financial reporting?a.To provide information about anentity's assets and claims 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 of financial statements.d.filing financial statements with the SEC.3.The assumed continuation of a business entity in the absence of evidence to the contraryis an example of 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 thefinancial statements of an entity isa.realization.b.recognition.c.matching.d.allocation.5.Generally accepted accounting 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 anddebited the amount to Prepaid Insurance. At December 31, the bookkeeper forgot to recordthe amount expired. The omission has the following effect on the financial statementsprepared 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

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