1. Which of the following is not an external user of annual report information?
a. Creditors
b. Board of directors
c. Regulators
d. Shareholders
2. Which of the following is not a form of business?
a. Corporation
b. Joint venture
c. Sole proprietorship
d. Joint partnership
3. Which of the following is not a characteristic of a corporation?
a. Separate legal entity
b. Shareholders elect board of directors
c. Shareholders manage day-to-day operations
d. Regulated by government
4. Which of the following is not an area of specialized accounting?
a. Managerial accounting
b. Financial accounting
c. Security accounting
d. Cost accounting
5. Which of the following is not done by accountants?
a. Identify what information should be recorded
b. Prepare corporate financial statements
c. Ensure that information is both reliable and relevant to users
d. Ensure that the corporation's accounting system accurately collects and
records information
Use the following information for questions 1 – 3.
During a recent week, Alma and Associates received $5,000 from clients for services
valued at $15,000. The balance is to be received within 30 days.
1. The effect on the income statement equation for this transaction would be:
a. + $15,000 revenue = + $5,000 cash + $10,000 accounts receivable
b. + $10,000 net income = + $10,000 assets
c. + $5,000 revenue = + $5,000 cash
d. + $10,000 revenue = + $10,000 accounts receivable
2. The effect on the balance sheet equation for this transaction would be:
a. + $5,000 cash = – $10,000 accounts payable + $15,000 retained earnings
b. + $5,000 cash – $15,000 accounts receivable = $10,000 retained earnings
c. + $5,000 cash + $10,000 accounts receivable = + $15,000 retained earnings
d. + $5,000 cash = + $5,000 retained earnings
3. The effect on the cash flow equation for this transaction would be:
a.
b.
c.
d.
+ $5,000 cash + $10,000 accounts receivable = $15,000 revenue
+ $5,000 cash – $10,000 accounts receivable = $5,000 revenue
+ $5,000 cash = – $10,000 accounts payable + $5,000 revenue
+ $5,000 cash = – $10,000 accounts receivable + $15,000 revenue
4. Amounts owed to a firm by its customers are called:
a. Accounts liable
b. Accounts receivable
c. Accounts payable
d. Accounts renewable
5. Which of the following represents the cost of goods sold?
a. Beginning inventory + ending inventory – purchases
b. Beginning inventory + purchases – ending inventory
c. Purchases + ending inventory – beginning inventory
d. Purchases – beginning inventory – ending inventory
1. Which of the following types of accounts appear on the balance sheet?
a. Permanent accounts
b. Nominal accounts
c. Revenue accounts
d. Temporary accounts
2.
Which of the following types of accounts appear on the income statement?
a. Permanent accounts
b. Real accounts
c. Temporary accounts
d. Equity accounts
3. Which of the following types of accounts would not be part of the closing entry
process?
a. Income statement accounts
b. Permanent accounts
c. Temporary accounts
d. Dividends declared accounts
4. In what order are accounts typically listed in the chart of accounts?
a. Assets, shareholders' equity, liabilities, revenues, and expenses
b. Revenues, expenses, assets, liabilities, and shareholders' equity
c. Revenues, expenses, shareholders' equity, liabilities, and assets
d. Assets, liabilities, shareholders' equity, revenues, and expenses
5. Which of the following is the first step in the accounting cycle?
a. Recognize that a transaction has occurred
b. Prepare a source document
c. Initialize the accounts
d. Journalize a transaction
1. Which of the following impacts the return to shareholders on their investment
in a firm?
a. Issuance of more shares
b. Payment of a dividend
c. Earning revenues
d. Repurchase of shares
2. Which of the following is not a part of the cash-to-cash cycle?
a. Acquiring raw materials
b. Production activity
c. Administrative activity
d. Selling activity
3. Which of the following is the correct sequence in the cash-to-cash cycle for a
manufacturing company?
a. Cash, raw materials acquisition, production, sales
b. Production, selling, warranty service, product delivery
c. Raw materials acquisition, warranty service, production, sales
d. Sales, warranty service, sales, collection
4. Which of the following would not be a cost incurred in the acquisition of the
raw materials component of the cash-to-cash cycle for a service-oriented
company?
a. Equipment
b. Labour
c. Property
d. Raw materials
5. Which of the following cash-to-cash cycle sequences would be most appropriate
for a building contractor?
a. Raw materials acquisition, production, selling activity, delivery of product
b. Selling activity, raw materials acquisition, production, delivery of product
c. Collection, raw materials acquisition, production, delivery of product
d. Production, selling activity, collection, delivery of product
1. Which of the following is not a fundamental cause of cash flow difficulties in
many start-up companies?
a. High growth rates in sales
b. Significant lead/lag relationships in cash inflows and outflows
c. Undercapitalization
d. Loss of customers due to restrictive credit policies
2. Which of the following would qualify as a cash equivalent?
a. Treasury bills
b. Commercial paper
c. Money market funds
d. All of these
3. Which of the following would cause an outflow of cash?
a. Issuing common shares to retire long-term debt
b. Payment of a dividend to the shareholders
c. Incurring a loss on the sale of a capital asset
d. Recognizing amortization expense
4. Which of the following would cause an inflow of cash?
a. Sale of inventory for cash
b. Incurring a gain on the sale of an investment
c. Issuing common shares to acquire capital assets
d. Purchase of a temporary investment
5. Which of the following is not classified as an operating activity?
a. Interest received on investments
b. Dividends paid to shareholders
c. Interest paid on debt
d. Dividends received on investments
1. Reporting the effects of inflation on the financial results of corporations is:
a. Mandatory for all firms
b. Required for firms exceeding a minimum level of assets
c. Not currently reported
d. Not an issue that has ever been addressed in Canada
2. Under GAAP, cash is reported at its:
a. Purchasing power
b. Time value
c. Price level index
d. Face value
3. The underlying assumption that requires that domestic currency be measured
at its face value is the:
a. Cost assumption
b. Unit-of-measure assumption
c. Monetary unit assumption
d. Purchasing power assumption
4. Foreign currency held by a Canadian corporation is disclosed on the financial
statements using the exchange rate that existed on the date of the:
a. Financial statements
b. Purchase of the currency
c. Change in the exchange rate
d. Intended use of the currency
Use the following information for questions 5 – 6:
During the current year Ortiz Industries purchased 24,000 French Francs on June
1. The company still held the Francs on December 31, the company's year end.
Exchange rates during the year were:
Jan. 1
4.5 Francs/Cdn $1
June 1
4.8 Francs/Cdn $1
Dec. 31
5.0 Francs/Cdn $1
5. The gain or loss experienced during the year in terms of Francs is:
a. 200 Francs loss
b. -0- Francs
c. 333 Francs gain
d. 533 Francs loss
1.
Net realizable value is also known as the:
a. Replacement cost
b. Wholesale price
c. Exit price
d. Input price
2. Under a pure replacement cost valuation system, the income statement shows:
a. Realized gain or losses only
b. Both unrealized and realized gains or losses
c. Unrealized gains or losses only
d. Both holding and realized gain or losses
3. No profit is recognized when an inventory item is sold under a(n):
a. Net realizable value system
b. Replacement cost system
c. Purchasing power system
d. Acquisition cost system
4. Gains and losses are recognized at the time of acquisition under a(n):
a. Replacement cost system
b. Acquisition cost system
c. Purchasing power system
d. Net present value system
5. Which of the following should be included in the cost of inventory?
a. The cost of keeping the inventory records
b. Amortization on the inventory warehouse
c. Freight cost on the items purchased
d. Receiving and inspection costs
1. The unexpensed portion of an amortizable asset is called:
a. Accumulated amortization
b. Net realizable value
c. Net book value
d. Net present value
2. Which of the following valuation methods recognizes a gain or loss on the date
of an amortizable asset's acquisition?
a. Net present value
b. Net market value
c. Replacement cost
d. Historical cost
3. GAAP requires that property, plant, and equipment be valued at its:
a. Historical cost
b. Replacement cost
c. Net realizable value
d. Present value
4. Accounting for amortizable assets is governed by the:
a. Revenue and cost principles
b. Revenue and matching principles
c. Matching and going-concern principles
d. Cost and matching principles
5. Which of the following would not be classified as property, plant, and
equipment?
a. Buildings in current use
b. Land purchased for future expansion
c. Machinery
d. Tools used in production
1. Which of the following is not a characteristic of a liability according to Section
1000 of the CICA Handbook?
a. There is a probable future sacrifice of resources
b. There is a known recipient of the liability
c. The obligation cannot be avoided
d. The event giving rise to the liability has already occurred
2. Which of the following is an example of a mutually unexecuted contract?
a. Purchase commitment
b. Bonds payable
c. Loan guarantee
d. Sale of accounts receivable with recourse
3. Which of the following would not be recorded?
a. Partially executed contracts
b. Estimated warranty costs
c. Mutually unexecuted contracts
d. Deferred taxes
4. Which of the following would be recorded?
a. Purchase commitments
b. Partially executed contracts
c. Contingent gains
d. A reasonably possible contingent liability
5. Accounts payable are recorded on the books at their:
a. Present value
b. Net amount
c. Net realizable value
d. Gross amount
1. Which of the following is backed only by a company's general credit
worthiness?
a. Collateral trust bond
b. Convertible bond
c. Debenture bond
d. Coupon bond
2. The distinction between senior and subordinated is associated with:
a. General debenture bonds
b. Mortgage bonds
c. Collateral trust bonds
d. Commercial bonds
3. Which of the following is not a synonym for a bond discount rate?
a. Market rate
b. Yield rate
c. Coupon rate
d. Effective rate
4. The proceeds from the sale of a bond are equal to:
a. The face value of the bond
b. The face value of the bond plus the interest to be paid
c. The maturity value of the bond plus the interest to be paid
d. The present value of the principal and interest to be paid
5. Which of the following is backed by shares and bonds of other companies?
a. Collateral trust bond
b. Debenture bond
c. Mortgage bond
d. Convertible bond
1. Most large businesses in Canada take what form?
a. Corporation
b. Limited partnership
c. Partnership
d. Sole proprietorship
2. Which form of organization generates the most revenue?
a.
b.
c.
d.
Corporation
Limited partnership
Partnership
Sole proprietorship
3. Which form of organization is a separate legal entity?
a. Corporation
b. Limited partnership
c. Partnership
d. Sole proprietorship
4. Which form of organization is a taxable entity?
a. Corporation
b. Limited partnership
c. Partnership
d. Sole proprietorship
5. Which form of organization has both limited and unlimited liability?
a. Corporation
b. Limited partnership
c. Partnership
d. Sole proprietorship
1. On a common size income statement, all items are shown as:
a. Percentages of income
b. Dollar amounts
c. Percentages of sales revenue
d. Percentages of gross profit
2. On a common size balance sheet, all assets are shown as:
a. Dollar amounts
b. Percentages of total assets
c. Percentages of cash
d. Percentages of current assets
3. Time-series analysis involves examining a company's financial data:
a. Across time periods
b. With other companies in the same industry
c. Across account classifications
d. With other companies in different industries
4. Cross-sectional analysis involves examining a company's financial data:
a. Across account classifications
b. As percentages of net sales or total assets
c. With other companies
d. Across time periods
5. Ratio analysis is based on:
a. Retroactive data
b. Retrospective data
c. Problematic data
d. Prospective data