QUESTION 1

1. Octopus Incs auditor believes that the revenue recognition of Octopuss long-term contracts to be in violation of the new US GAAP standards. However, the amount of revenue that Octopus receives from long-term contracts are deemed to be an immaterial amount. What type of comment letter is the most likely outcome of Octopuss audit?

   		Unqualified
   		Qualified
   		Disclaimer
   		Adverse

1 points

QUESTION 2

1. Which of the following is not an outcome associated with having high quality accounting information in an economy?

   		Bank interest rates are higher.
   		Stocks are priced lower.
   		Government taxation are more efficient.
   		Shareholder lawsuits are less frequent.

1 points

QUESTION 3

1. Which of the following is a governmental regulatory body?

   		SEC
   		FASB
   		PCAOB
   		IFRS

1 points

QUESTION 4

1. Al Pacacino Corporation had revenues of $204,000 in its first year of operations. The company has not collected on $20,000 of its sales and still owes $25,000 on $126,000 of merchandise it purchased. The company had no inventory on hand at the end of the year. The company paid $15,000 in salaries (out of $21,000 accrued). Owners invested $20,000 in the business and $20,000 was borrowed on a five-year note. The company paid $2,100 in interest (same as the amount owed for the year). Assume no income tax expense.

   Compute net income for the first year for Al Pacacino Corporation.

2 points

QUESTION 5

1. The events associated with a recent sale from Valor & Co. are as follows:

   1) June 21st: Sales Associate meets client at a convention. Client verbally orders 100,000 widgets.

   2) June 23rd: Formal purchase order from client received. Client set up for credit terms.

   3) June 30th: Client informed of delays in production - widgets will be shipped middle of July.

   4) July 1st: Payment received from client for the widgets.

   5) July 10th: Widgets shipped to client and arrives at client warehouse on the same day.

   6) July 30th: Sales commission is paid to sales associated in cash.

   Select from numbers 1 through 6 to fill in the blanks below. You may choose to use different numbers for each blank or the same number for both blanks.

   Badis & Co. should recognize the revenue associated with the sale of the widgets on the same day as

   Badis & Co. should recognize the sales commission expense on the same day as

1 points

QUESTION 6

1. In 2019, Squid Inc experienced the following business activities:

   1. Delivered $30,000 of service revenue on credit.
   2. Incurred $10,000 of expenses on credit.
   3. Collected $35,000 of accounts receivable ($28,000 for services fulfilled in 2019, and $7,000 for sales fulfilled in 2018).
   4. Paid off $10,000 of accounts payable for expenses incurred in 2019

   Under Cash-basis accounting, Squid Inc's net income is $

   Under Accruals-basis accounting, Squid Inc's net income is $

1 points

QUESTION 7

1. A firm prepares financial statements in a manner that allows investors to compare its financial statements with previous financial statements, thus charting a trend for the firm. The concept demonstrated is:

   		Completeness
   		Comparability
   		Verifiability
   		Consistency

1 points

QUESTION 8

1. Four different competent accountants independently agree on the amount and method of reporting an economic event. The concept demonstrated is:

   		Verifiability
   		Comparability
   		Completeness
   		Reliability

1 points

QUESTION 9

1. Nashorn Inc. purchased a piece of land using $250,000 cash. During the purchase, an assessment was done and it was discovered that large tracts of the land is polluted and would require $100,000 of rehabilitation work to be conducted prior to use. Therefore, Nashorn Inc. records a $100,000 loss on purchase and records the land at $350,000 on their balance sheet.

   Which of the following accounting principles was violated?

   		No accounting principles were violated. Nashorn's financial statements are prepared in accordance with US GAAP.
   		Conservatism
   		Historical cost
   		Expense recognition