Chapter 1

1. Charging off equipment that cost less than $20 would be an example of the application of:

a.	going concern.
b.	cost.
c.	matching.
d.	materiality.
e.	realization.

2. The going concern assumption:

a.	is applicable to all financial statements.
b.	primarily involves periodic income measurement.
c.	allows for the statements to be prepared under generally accepted accounting principles.
d.	requires that accounting procedures be the same from period to period.
e.	none of the answers are correct.

3. Understating assets and revenues is justified based on:

a.	realization assumption.
b.	matching.
c.	consistency.
d.	realization.
e.	None of the answers are correct.

4. The assumption that enables us to prepare periodic statements between the time that a business commences operations and the time it goes out of business is:

a.	time period.
b.	business entity.
c.	historical cost.
d.	transaction.
e.	None of the answers are correct.

5. Valuing assets at their liquidation values is not consistent with:

a.	conservatism.
b.	materiality.
c.	going concern.
d.	time period.
e.	None of the answers are correct.

6. The business being separate and distinct from the owners is an integral part of the:

a.	time period assumption.
b.	going concern assumption.
c.	business entity assumption.
d.	realization assumption.
e.	None of the answers are correct.

7. The principle that assumes the reader of the financial statements is not interested in the liquidation values is:

a.	conservatism.
b.	matching.
c.	time period.
d.	realization.
e.	None of the answers are correct.

8. An accounting period that ends when operations are at a low ebb is:

a.	a calendar year.
b.	a fiscal year.
c.	the natural business year.
d.	an operating year.
e.	None of the answers are correct.

9. The accounting principle that assumes that inflation will not take place or will be immaterial is:

a.	monetary unit.
b.	historical cost.
c.	realization.
d.	going concern.
e.	None of the answers are correct.

10. Valuing inventory at the lower of cost or market is an application of the:

a.	time period assumption.
b.	realization principle.
c.	going concern principle.
d.	conservatism principle.
e.	None of the answers are correct.

Chapter2

1. At the end of the fiscal year, an adjusting entry is made that increases both interest expense and interest payable. This entry is an application for which accounting principle?

a.	Full disclosure
b.	Materiality
c.	Matching
d.	Going concern
e.	Realization

2. Who is responsible for the preparation and integrity of financial statements?

a.	A cost accountant
b.	Management
c.	An auditor
d.	A bookkeeper
e.	The FASB

3. Which of the following is not an objective of the SEC's integrated disclosure system?

a.	To coordinate the Form 10-K requirements with those of the annual report
b.	To lessen the impact of the FASB
c.	To expand the management discussion of liquidity, capital resources, and results of operations
d.	To improve the quality of disclosure
e.	To standardize information requirements

4. Which of the following is not a type of audit opinion?

a.	Unqualified opinion
b.	Qualified opinion
c.	Adverse opinion
d.	Clean opinion
e.	Disclaimer of opinion

5. Which of the following statements is not true?

a.	A qualified opinion or an adverse opinion may bring into question the reliability of the financial statements.
b.	A disclaimer of opinion indicates that one should not look to the auditor's report as an indication of the reliability of the statements.
c.	In some cases, outside accountants are associated with financial statements when they have performed less than an audit.
d.	A review is substantially less in scope than an examination in accordance with generally accepted auditing statements.
e.	The accountant's report expresses an opinion on reviewed financial statements.

6. In addition to the balance sheet, the income statement, and the statement of cash flows, a complete set of financial statements must include:

a.	an auditor's opinion.
b.	a ten-year summary of operations.
c.	a note disclosure of such items as accounting policies.
d.	historical common-size (percentage) summaries.
e.	a list of corporate officers.

7. Which of the following statements is not correct concerning summary annual reports?

a.	A summary annual report omits much of the financial information included in an annual report.
b.	When a company issues a summary annual report, the proxy materials it sends to shareholders must include a set of fully audited statements and other required financial disclosures.
c.	A summary annual report generally has more nonfinancial pages than financial pages.
d.	A summary annual report is adequate for reasonable analysis.
e.	The concept of a summary annual report was approved by the Securities and Exchange Commission.

8. Which of the following is not a true statement relating to the Treadway Commission?

a.	The Treadway Commission is the popular name for the National Commission on Fraudulent Reporting.
b.	The Treadway Commission has released reports detailing internal control systems.
c.	Managements Report on Internal Control over Financial Reporting and the independent public accounting from report to the shareholders and board of directors often refer to criteria established on internal control by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
d.	The Treadway Commission has issued a number of recommendations for the prevention of fraud on financial reports, ethics, and effective internal controls.
e.	The Treadway Commission is a voluntary-sector organization formed to support the Sarbones-Oxley Act.

9. Which of these statements is not true?

a.	Transactions must be recorded in a journal.
b.	All transactions could be recorded in the general journal.
c.	Companies use a number of special journals to record most transactions.
d.	Special journals are designed to improve record- keeping efficiency.
e.	The form of the journals are the same from industry to industry.

10. Which of these statements is not true?

a.	Asset, liability, and stockholders' equity accounts are referred to as permanent accounts.
b.	Revenue, expense, and dividend accounts are described as temporary accounts.
c.	Temporary accounts are closed at the end of the period to retained earnings.
d.	The balance sheet will not balance until the temporary accounts are closed to retained earnings.
e.	With double-entry, each transaction is recorded twice.