Cau Hei 1 are secondary qualities of accounting information that make it useful for decision making a Relevance and reliability b Materiality and compara c Full disclosure and relevance d Consistency and comparability The correct answer is: Consistency and comparability Cau Héi 2 10-K reports are ity a the quarterly reports to stockholders. b quarterly filings made by a company with the SEC. « annual filings made by a company with SEC. 4. filings made by a company with SEC when a company changes its auditors. ‘The correct answer is: annual filings made by a company with SEC. Cau Héi 3 Accounting income consists of all the following components except: a. realized component. b. transitory component. c. permanent component. d. value irrelevant component. ‘The correct answer is: realized component. Cau Hei 4 Accounting standards are: a the state-of-the-art presentation of the science of accounting. b. the result of a political process among groups with diverse interests. c standards measuring the quality of safeguarding assets. d. presentation standards mandated by the Securities and Exchange Commission, The correct answer is: the result of a political process among groups with diverse interests. Cau Héi 5 Accrual income is a better predictor of future cash flows than current cash flows. a, FALSE. b. ‘TRUE, c nacomersoaisen Ey studocu Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)NONE OF THEM d. A Gamp; B. The correct answer is: TRUE. Cau Héi 6 All of the following are basic approaches to valuation except a. cost approach. income approach. © market approach, book value approach. The correct answer is: book value approach. Cau H6i 7 By using earnings management, managers always try to increase income. a TRUE b. A&: B c FALSE. d. NONE OF THEM. The correct answer is: FALSE, Cau Héi 8 Byfort Company reports the following in its financial statement: 2005 2006 Accounts receivable, net $ 34,289 $ 29,678 Net sales* 360,007 $450,000 *All sales are on credit. How much did the company collect in cash from customers during 2006? a $445,389 b. $484,289 c $488,900 d. $454,611 The correct answer is: $454,611 Cau Hdi 9 Economic income includes: a. neither recurring nor nonrecurring components. b. recurring components only. “ Downloaded by NGAN D??NG THANH (nganduong.31231024404@stuch.ed.vn)nonrecurring components only. d both recurring and nonrecurring components, The correct answer is: both recurring and nonrecurring components. Cau Héi 10 Economic income measures change in, a shareholder value. b. net cash flows. “. liability value d. asset value. The correct answer is: asset value. Cau Hoéi 11 External auditors provide "reasonable", as opposed to "absolute" assurance that the financial statements provide no material misstatement. a, ABamp; B. b, TRUE, . FALSE. d NONE OF THEM The correct answer is: TRUE Cau Héi 12 FASB stands for Financial Accounting Service Bureau, and is a sub-division of the Securities and Exchange Commission (SEC). a AGamp: B. b. TRUE. . FALSE d. NONE OF THEM The correct answer is: FALSE. Cau Hdi 13 Financial accounting data has some inherent limitations to investors. Which of the following is a limitation?I. Not all economic events are easily quantifiable.lI. Many accounting entries rely heavily on estimates.Il. Historical costs do not accurately reflect the true value of firms.IV. Inflation can distort analysis of accounting data a 1M, and v b. 1, Mand i © Ill, and iV d. 111, and Vv necomersoaisen Ey studocu Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)‘The correct answer Cau Héi 14 For a going concern, company value can be expressed by: a, multiplying permanent income by the market value per share b, Hl, and IV dividing permanent income by the cost of capital c multiplying permanent income by the cost of capital, d dividing permanent income by the market value per share. The correct answer is: dividing permanent income by the cost of capital Cau Hdi 15 GAAP stands for General American Accounting Principles, and must be adhered to by publicly traded companies when preparing their financial statements. a AG&: B. b FALSE. c NONE OF THEM. d. TRUE. The correct answer is: FALSE, Cau Hdi 16 Byfort Company reports the following in its financial statements: 2005 2006 Accounts receivable, net $34,289 $_29.678 Net sales* | $360,007 $450,000 *All sales are on credit. How much sales would have been reported by the company in 2006 if Byfort used cash accounting and not accrual accounting? a $488,900 b. $484,289 c. $445,389 d. $454,611 The correct answer is: $454,611 Cau Héi 17 If a company fails to record a material amount of depreciation in a previous year, this is considered a an accounting error. b. a change in accounting principle. ‘ Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)an unusual item. d a change in estimate. The correct answer is: an accounting error. Cau Héi 18 Net income is usually higher than free cash flows. a TRUE. b. AGamp; B. c FALSE. d. NONE OF THEM. The correct answer is: TRUE. Cau Héi 19 Relevance, one of the desirable qualities of accounting information, implies: a. the capacity of information should be based on five-year average historical data the capacity of information to affect a decision « the capacity of information should be based on market expectations. d. that all companies should use same valuation methods such as LIFO and FIFO, The correct answer is: the capacity of information to affect a decision, Cau Hdi 20 SFAS 157 defines fair value as the: a entry price, b exchange price. c. net asset value. d. real value. The correct answer is: exchange price. Cau Héi 21 SFAS prescribes that information about the level of inputs used for determining fair values must be reported in the: a. balance sheet. b. MD&A. « director's letter. d footnotes. The correct answer is: footnotes. Cau Héi 22 nacomersoaisen Ey studocu Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)The management of Finner Company believes that "the statement of cash flows is not a very useful statement" and does not include it with the company’s financial statements. As a result the auditor's opinion should be: a. clean. b. qualified. ¢. unqualified. d disclaimed The correct answer is: qualified Cau Héi 23 The matching principle requires that: a a proportion of each dollar collected will be assumed to be a recovery of cost. b. revenues earned and expenses incurred in generating those revenues should be reported in the same income statement. ¢ Non-operating gains and losses should be netted against each other. d assets will be matched to the liabilities incurred to purchase them. ‘The correct answer is: revenues earned and expenses incurred in generating those revenues should be reported in the same income statement. Cau Héi 24 The primary responsibility for fair and accurate financial reporting rests with the a. SEC. b. auditors. ¢ shareholders. d. management. ‘The correct answer is: management. Cau Hdi 25, To determine a company's sustainable earning power, an analyst needs to first determine the recurring component of the current period's accounting income by excluding nonrecurring components of accounting income, Such adjusted earnings are often referred to as: a core earnings. b. basic earnings. «. transitory earnings d. operating earnings. The correct answer is: core earnings. Cau Héi 26 Under accrual accounting, a company will recognize expenses as they are paid Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)a. NONE OF THEM b. TRUE. «. FALSE, 4. A & B. The correct answer is: FALSE. Cau Hoi 27 Under cash accounting, a company must recognize revenues in financial statements when the revenues are earned or realized. a. NONE OF THEM b. TRUE, < FALSE. d. A amp: B The correct answer Cau Hai 28 Under GAAP accounting, a company has the choice of using cash or accrual accounting in preparing its financial statements. : FALSE. a, NONE OF THEM. b. FALSE. c A& B. d, TRUE. The correct answer is: FALSE Cau Hoi 29 Voluntary disclosure by managers is becoming an increasingly important source of information. Which of the following is least likely to be a reason for this increased disclosure? a To manage investors! expectations b. To communicate information to investors “ To respond to increased demands by labor unions d. Protection under Safe Harbor Rules The correct answer is: To respond to increased demands by labor unions Cau Hdi 30 When analyzing financial statements, it is important to recognize that accounting distortions can arise. Accounting distortions are those things that cause deviations in accounting information from the underlying economics. Which of the following statements is not correct? a necomersoaisen Ey studocu Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)Accounting distortions can arise as management may deliberately manipulate financial statements b. Accounting distortions arise if the stock market is not efficient. c Accounting distortions can affect the quality of earnings. 4 Accounting distortions arise often through application of (correct) accounting principles. The correct answer is: Accounting distortions arise if the stock market is not efficient Cau Héi 31 Which of the following information would not be filed with the SEC by a publicly traded company? a Tax return b. Prospectus “ 10-K report d. Proxy statement ‘The correct answer Cau Hdi 32 Which of the following is a change in accounting principle?I. A change from LIFO to FIFO Il. A change in estimated salvage value of depreciable asset III. A change from an accelerated depreciation method to straight-line depreciation IV. Recording depreciation for the first time on machinery purchased five years ago a. land il b. 1M, and iv < ‘ax return and Ill d 111, Ml, and 1 The correct answer is: | and Ill Cau Hoi 33 Which of the following is a change in an accounting estimate? a fuera Wand c A change from straight-line depreciation to declining balance methodll. A change in estimated salvage value of depreciable assetill. A change in estimated useful life of an assetlV. Recording depreciation for the first time on machinery purchased five years ago d. KUM, and IV e 1, MH, and IV Fhe coenct snowmen Cau Hdi 34 Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)Which of the following is an example of judgments made in the accounting reporting process?1. Useful life of machineryll. Allowance for doubtful accountsll Obsolescence of assetslV. Interest payment on bonds a. Ill and tl b. Wand tl <. land Il d 1, I, Ill, and IV The correct answer is: |, Il, and Il Cau Héi 35 Which of the following is considered part of GAAP? a. Internal Revenue Services (IRS) b. International Financial Reporting Standards (IFRS) “. International Accounting Standards (IAS) d. Statements of Financial Accounting Standards (SFAS) The correct answer is: Statements of Financial Accounting Standards (SFAS) Cau Hdi 36 Which of the following is incorrect? When using the 10-Q, the analyst should be aware that the usefulness of the quarterly financial statements might be affected by: a. the use of cash accounting b. adjustments made in the final quarter of the year. “ the increased use of estimates. d seasonality, The correct answer is: the use of cash accounting. Cau Héi 37 Which of the following is not a source of industry information? a ‘Standard and Poor's b. Cash budget c Value line d. Trade journals The correct answer Cau Hai 38 Which of the following is not considered a monitoring mechanism? a. Top level management b. ‘ash budget necomersoaisen Ey studocu Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)‘The Securities and Exchange Commission (SEC) ¢. The board of director's audit committee d. The external auditors ‘The correct answer is: Top level management Cau Hdi 39 Which of the following is required to be filed with the SEC, if a company changes its auditors? a S1 b. ek « 10-9 d. 10-K The correct answer is: 8-K Cau Héi 40 Which of the following statements about accruals is true? a. Accruals are less reliable than cash flows. b. All accrual accounting adjustments are value irrelevant. ¢ Accrual income is less relevant than cash flow. d. Accruals cannot be manipulated. ‘The correct answer is: Accruals are less reliable than cash flows. Cau Hdi 41 Which of the following statements about cash flows is true? a All cash flows are value relevant. b. Cash flows can be manipulated. « Only current cash flows are relevant for valuation d. Cash flows are less reliable than accruals The correct answer is: Cash flows can be manipulated. Cau Héi 42 Which of the following statements about directors of a company is true? a. Directors only get paid if the company increases its profitability that year. b. Directors are shareholders’ representatives, c Directors are elected by management of a company. d All directors of a company are senior managers in that company. The correct answer is: Directors are shareholders' representatives Cau Hoi 43, Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)Which of the following statements is incorrect? a Annual statements submitted to the SEC (10-k) must be prepared using GAAP. b. Under GAAP, all assets are marked to market each accounting period, c Under GAAP, statements are prepared using accrual accounting. d Under GAAP, it is necessary to make certain estimates. The correct answer is: Under GAAP, all assets are marked to market each accounting period Cau Héi 44 Which of the following would affect the comparability of accounting information for a given company from one accounting period to the next? a Vand it b. c. il, and iv d. Ill, and e Change in accounting principlesll. Disposition of segment of businesslll. Restructuring expenseslV. Change in auditors Frecorreetenswertssttrtir Cau Hoi 45, Which of the following would affect the comparison of financial statements across two different firms?I. Different accounting principlesll. Different sizes of the companieslll. Different reporting periodslV. Different industries a. 1, Ml, and iv b. Il, and iv < Vand d land Il The correct answer is: |, I, Ill, and IV Cau Hoi 46 Which of the following would require the filing of Form 8-K?I. Major acquisition I Audited financial statements Ill. Bankruptcy IV. Change in management control a. land Il b. iLand IV < 1, Ill, and IV d. 1, and iv The correct answer Cau Hi 47 1, ML, and IV necomersoaisen Ey studocu Downloaded by NGAN D?2NG THANH (nganduong.31231024494@stush edu.vn)Which one of the following is not an example of a red flag to one should be aware of when evaluating earnings quality? a. Reported earnings consistently higher than operating cash flows b. Net income this year is higher than net income from last year « Qualified audit report d. Frequent or unexplained changes in accounting policies The correct answer is: Net income this year is higher than net income from last year Downloaded by NGAN D?2NG THANH (nganduong.31231024494@st uch edu.vn)