1) Which of the following is an advantage of cash basis accounting vs. accrual basis accounting?

Multiple Choice

a. It provides a better indication of the entitys long-run cash-generating ability.

b. It usually provides less volatile year-to-year operating results.

c. It usually leads to better adherence to the matching principle.

d. It provides a more accurate representation of cash generated in a specific period.

2) Which of the following statements is true regarding the FASB Accounting Standards Codification (ASC)?

Multiple Choice

a. Only the FASB may issue pronouncements which lead to changes in the ASC.

b. Only the FASB and the SEC may issue pronouncements which lead to changes in the ASC.

c. Only the SEC may issue pronouncements which lead to changes in the ASC.

d. The FASB, the FAF, and the SEC may issue pronouncements which lead to changes in the ASC.

3.) Which of the following statements is least likely to be found as part of an entitys financial statement note disclosures?

Multiple Choice

a. Historically, the Company has found that only 56% of such coupons are redeemed; this historical redemption percentage is used in estimating the remaining coupon-related liability at the balance sheet date.

b. We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents.

c. Our Company consolidates all entities that we control by ownership of a majority voting interest.

d. Shipping and handling costs related to the movement of finished goods from manufacturing locations to our sales distribution centers are included in the line item cost of goods sold in our consolidated statements of income.

4) On April 1, 2018, Lenzner Company sold an item of inventory to a customer at a price resulting in gross profit to Lenzner. Which of the following statements is true regarding the effect of this transaction on the companys current ratio and quick ratio?

Multiple Choice

a. The current ratio increases and the quick ratio stays the same.

b. The current ratio stays the same and the quick ratio increases.

c. Both the current ratio and the quick ratio increase.

d. Both the current ratio and the quick ratio stay the same.