Test Bank For Intermediate
Accounting
Chapter 1: Financial Accounting and Accounting Standards
Which of the following is the primary objective of financial reporting?
a) To provide information about the financial position, performance, and changes in
financial position of an entity.
b) To ensure that companies are following the rules and regulations.
c) To provide information about the historical cost of an entity’s assets.
d) To report the financial activities to the Internal Revenue Service.
Answer: a) To provide information about the financial position, performance, and
changes in financial position of an entity.
Which of the following bodies is primarily responsible for establishing Generally
Accepted Accounting Principles (GAAP) in the United States?
a) American Institute of Certified Public Accountants (AICPA)
b) Financial Accounting Standards Board (FASB)
c) Securities and Exchange Commission (SEC)
d) International Accounting Standards Board (IASB)
Answer: b) Financial Accounting Standards Board (FASB)
Chapter 2: Conceptual Framework for Financial Reporting
What is the primary purpose of the conceptual framework in accounting?
a) To ensure consistency in financial reporting.
b) To solve specific accounting problems.
c) To provide a foundation for standard-setting.
d) To establish the rules for financial reporting.
Answer: c) To provide a foundation for standard-setting.
,Which of the following is an example of a fundamental qualitative characteristic of
useful financial information?
a) Comparability
b) Timeliness
c) Relevance
d) Understandability
Answer: c) Relevance
Chapter 3: The Accounting Information System
Which of the following is NOT a component of the accounting information system?
a) Source documents
b) General ledger
c) Trial balance
d) Financial statements
Answer: d) Financial statements
Which of the following statements is true regarding the double-entry accounting
system?
a) It ensures that the accounting equation remains in balance.
b) It records each transaction in one account.
c) It eliminates the need for a trial balance.
d) It only records transactions that affect income.
Answer: a) It ensures that the accounting equation remains in balance.
Chapter 4: Income Statement and Related Information
Which of the following is included in other comprehensive income?
a) Gain on the sale of equipment
b) Unrealized gains and losses on available-for-sale securities
,c) Interest revenue
d) Dividend income
Answer: b) Unrealized gains and losses on available-for-sale securities
Which of the following items is typically not reported on the income statement?
a) Revenues
b) Gains
c) Dividends declared
d) Expenses
Answer: c) Dividends declared
Chapter 5: Balance Sheet and Statement of Cash Flows
Which of the following is a current asset?
a) Accounts payable
b) Equipment
c) Prepaid insurance
d) Bonds payable
Answer: c) Prepaid insurance
Which section of the statement of cash flows includes cash receipts from sales of
goods and services?
a) Operating activities
b) Investing activities
c) Financing activities
d) Non-cash investing and financing activities
Answer: a) Operating activities
Chapter 6: Accounting and the Time Value of Money
, What is the future value of $1,000 invested today at an annual interest rate of 5%
compounded annually for 3 years?
a) $1,150.00
b) $1,157.63
c) $1,276.28
d) $1,628.89
Answer: b) $1,157.63
Which of the following best describes an annuity?
a) A series of equal payments made at regular intervals.
b) A lump sum payment made at the end of a period.
c) A loan that is paid off in equal installments.
d) An investment that grows at a fixed rate.
Answer: a) A series of equal payments made at regular intervals.
Chapter 7: Cash and Receivables
Which of the following is included in the definition of cash?
a) Post-dated checks
b) Money orders
c) Certificates of deposit
d) Accounts receivable
Answer: b) Money orders
What is the appropriate accounting treatment for a company's receivables that are
expected to be uncollectible?
a) Write off the receivables when they become uncollectible.
b) Estimate and record an allowance for doubtful accounts.
c) Do not recognize uncollectible receivables until they are confirmed as bad debts.
Accounting
Chapter 1: Financial Accounting and Accounting Standards
Which of the following is the primary objective of financial reporting?
a) To provide information about the financial position, performance, and changes in
financial position of an entity.
b) To ensure that companies are following the rules and regulations.
c) To provide information about the historical cost of an entity’s assets.
d) To report the financial activities to the Internal Revenue Service.
Answer: a) To provide information about the financial position, performance, and
changes in financial position of an entity.
Which of the following bodies is primarily responsible for establishing Generally
Accepted Accounting Principles (GAAP) in the United States?
a) American Institute of Certified Public Accountants (AICPA)
b) Financial Accounting Standards Board (FASB)
c) Securities and Exchange Commission (SEC)
d) International Accounting Standards Board (IASB)
Answer: b) Financial Accounting Standards Board (FASB)
Chapter 2: Conceptual Framework for Financial Reporting
What is the primary purpose of the conceptual framework in accounting?
a) To ensure consistency in financial reporting.
b) To solve specific accounting problems.
c) To provide a foundation for standard-setting.
d) To establish the rules for financial reporting.
Answer: c) To provide a foundation for standard-setting.
,Which of the following is an example of a fundamental qualitative characteristic of
useful financial information?
a) Comparability
b) Timeliness
c) Relevance
d) Understandability
Answer: c) Relevance
Chapter 3: The Accounting Information System
Which of the following is NOT a component of the accounting information system?
a) Source documents
b) General ledger
c) Trial balance
d) Financial statements
Answer: d) Financial statements
Which of the following statements is true regarding the double-entry accounting
system?
a) It ensures that the accounting equation remains in balance.
b) It records each transaction in one account.
c) It eliminates the need for a trial balance.
d) It only records transactions that affect income.
Answer: a) It ensures that the accounting equation remains in balance.
Chapter 4: Income Statement and Related Information
Which of the following is included in other comprehensive income?
a) Gain on the sale of equipment
b) Unrealized gains and losses on available-for-sale securities
,c) Interest revenue
d) Dividend income
Answer: b) Unrealized gains and losses on available-for-sale securities
Which of the following items is typically not reported on the income statement?
a) Revenues
b) Gains
c) Dividends declared
d) Expenses
Answer: c) Dividends declared
Chapter 5: Balance Sheet and Statement of Cash Flows
Which of the following is a current asset?
a) Accounts payable
b) Equipment
c) Prepaid insurance
d) Bonds payable
Answer: c) Prepaid insurance
Which section of the statement of cash flows includes cash receipts from sales of
goods and services?
a) Operating activities
b) Investing activities
c) Financing activities
d) Non-cash investing and financing activities
Answer: a) Operating activities
Chapter 6: Accounting and the Time Value of Money
, What is the future value of $1,000 invested today at an annual interest rate of 5%
compounded annually for 3 years?
a) $1,150.00
b) $1,157.63
c) $1,276.28
d) $1,628.89
Answer: b) $1,157.63
Which of the following best describes an annuity?
a) A series of equal payments made at regular intervals.
b) A lump sum payment made at the end of a period.
c) A loan that is paid off in equal installments.
d) An investment that grows at a fixed rate.
Answer: a) A series of equal payments made at regular intervals.
Chapter 7: Cash and Receivables
Which of the following is included in the definition of cash?
a) Post-dated checks
b) Money orders
c) Certificates of deposit
d) Accounts receivable
Answer: b) Money orders
What is the appropriate accounting treatment for a company's receivables that are
expected to be uncollectible?
a) Write off the receivables when they become uncollectible.
b) Estimate and record an allowance for doubtful accounts.
c) Do not recognize uncollectible receivables until they are confirmed as bad debts.
