Distinguish among Accounting Research Bulletins, Opinions of the Accounting Principles Board, and
Statements of the Financial Accounting Standards Board. (2 pts)
Accounting Research Bulletins: Between 1938 and 1959 committee on accounting procedure issued
documents on various accounting problems.
In 1973 the Accounting principles board was replaced with FASB. Before it, it was an
authoritative body of AICPA. It was created in 1959 to issue pronouncements on accounting
principles. (FASB).
FASB’s primary purpose is to establish GAAP. It is a private and not for profit organization
2.
If the going concern assumption is not made in accounting, what difference does it make in the
amounts shown in the financial statements for the following items? (2 pts)
a. Land.
It should be shown at market value if it is less than the cost.
b. Unamortized bond premium.
It will be transferred to income statement.
c. Depreciation expense on equipment.
No change
d. Merchandise inventory.
It would be shown as it is at cost or lower of market value.
e. Prepaid insurance.
It will be shown as expenses.
3.
On August 1, George Bell Company paid $8,400 in advance for 2 years' insurance coverage.
Prepare Bell's August 1 journal entry and the annual adjusting entry on December 31. (2 pts)
Aug 1 Prepaid Insurance 8400 Dr. Cash Cr. 8400
Dec 31 Insurance expenses Dr1750 Prepaid Insurance Cr1750
4.
What major types of items are reported in the retained earnings statement? (2 pts)
Profit or loss for the year
Payment of dividends.
5.
At what time is it proper to recognize income in the following cases: (4 pts)
(a) Installment sales with no reasonable basis for estimating the degree of
collectability?
When the installment is received in cash
(b) Sales for future delivery?
At the time of delivery
(c) Merchandise shipped on consignment?
At the time of shipment
(d) Profit on incomplete construction contracts?
When they are completed
(e) Subscriptions to publications?
When the period arrives for which it has been paid.
6.
Kes Company reported 2004 net income of $151,000. During 2004, accounts receivable
increased by $13,000 and accounts payable increased by $9,500. Depreciation expense was $39,000.
Prepare the cash flows from operating activities section of the statement of cash flows. (2 pts)
Net income
151000
Add depreciation
39000
Less account receivable
(13000)
Add accounts payable
9500
Net cash flow from operation
186500
7.
What is the difference between a CPA's unqualified opinion or “clean” opinion and a qualified
one? (2 pts)
If auditor feels that the financial statement give true and fair view of the financial position of the
company then his report should be unqualified otherwise his report is qualified if it true and fair view
of financial position of the company may not be withdrawn, as in the case where going concern
concept may not be applied
8.
At January 1, 2005, Cyberslider Inc. had accounts receivable of $72,000. At December 31,
2005, accounts receivable is $59,000. Sales for 2005 is $420,000. Compute Cyberslider's 2005 cash
receipts from customers. (2 pts)
72000+420000-59000 =433000
9.
Bayou Inc. will deposit $20,000 in a 12% fund at the end of each year for 8 years beginning
December 31, 2005. What amount will be in the fund immediately after the last deposit? (2 pts)
20000 x (1.12)7-1/.12 = 20000 x 10.089 = 201780 +20000= 221780 at the end of 8 th year.