ACC 300

1) Generally accepted accounting principles are:
a.  The guidelines used to resolve ethical dilemmas
b.  Established by internal revenue saervices
c.  Primarily established by Financial Accounting
Standards Board and Security Exchange Commission
d.  Truths derived from the laws of nature

2) The cost principle states that:
a.  Assets should be initially recorded at cost and
adjusted when the market value changes
b.  Activities of an entity be kept separate and distinct
from its owner
c.  Assets should be recorded at their cost
d.  Only transaction data capable of being expressed in
terms of money should be included in accounting records

3) Net income will result during a time period when:
a.  Assets exceed liabilities
b.  Assets exceed revenues
c.  Expenses exceed revenues
d.  Revenues exceed expenses

4) The financial statement that reports assets, liabilities &
stockholders equity is the:
a.  Income Statement
b.  Retained Earnings Statement
c.  Balance Sheet
d.  Statement of Cash Flows
5) Fill in the missing number
Assets Liabilities Stockholders Equity
a. 90,000 50,000
b. 45,000 85,000
c. 97,000 62,000

6) Debits
a. Increases both assets and liabilities
b. decreases both assets and liabilities
c. increases assests and decreases liabilities
d. decreases assets and increases liabilitiues

7) A revenue account:
a. is increase by debits
b. is decrease by credits
c. has a normal balance of a debit
d. is increased by credits

8) Which of the following entities prepares financial
statement rules that constitute GAAP?
a. Financial Accounting Standards Board (FASB)
b. Securities and Exchange Commission (SEC)
c. Public Company Accounting Oversight Board (PCAOB)
d. The GAAP Commission (GAAPC)

9) Dividends paid to stockholders
a. are a reduction to retained earnings
b. appear in cash flow from operations section of the
statement of cash flow
c. appear on the income statement
d. are substracted from contributed capital

10) The statement of cash flow indicates
a. the resources of a company
b. the profitability of a company
c. the liabilities of a company
d. the current year’s cash flow and the prior year’s
cash flow

11) Investors and creditors look at the balance sheet to see whether company is
a. is profitable
b. can maintain its existing product line
c. owns enough assets to pay all that it owes to creditors
d. has hads a positive cash flow from operations

12) The fllowing are few accounts of Sanchez Company. Classify each as it
would be reported on a balance sheet, using the following code:
current asset
Non current asset
current liability
Non current Liability
Stockholder equity

1 Account Receivable
2 Account Payable
3 Building
4 Cash
5 Contributed Capital
6 Land
7 Merchandise Inventory
8 Income Tax Payable
9 Notes Payable (due in three years)
10 Notes Receivable (due in six months)
11 Prepaid Rent
12 Retained Earnings
13 Wages Payable

13)  Smith Company
DECEMBER 31

Assets
Cash
Receivables (net)
Other Current Assets
Total Current Assets
Long-term investments
Plant & equipment (net)
Total Assets
Liabilities and Stockholders Equity
Current Liabilities
Long Term Debt
Common Stock
Retained Earnings
Total liabilities & stockholder equity

Smith Company
Income  Statement
Ended December 31

Sales
Cost of Sales
Operating Expense (incl income tax)
Net Income
Additional Information
Cash from operating activities
Cash used for capital expenditure
Dividend Paid
Average number of shares outstanding

A)  Compute values and ratios for 2006 and 2007
a.  Earnings per share
b.  Working Capital
c.  Current ratio
d.  Debt to total asset ratio
e.  Free cash flow

B) Based on ratios calaculated , discuss briefly the improvement or lack
thereof in the financial position & operating results from 2006 to 2007

14) Which of the following is not one of the four conditions that normally must be met for
revenue to be recognized acording to revenue principle for accrual basis accounting?
a.  The price is fixed or determinable
b.  Cash already has been collected
c.   Services have been performed
d.   Evidence of an arrangement for customer payment exist

15) The matching principle controls
a.  Where on income statement expense should be presented
b.  How costs are alloctaed between cost of goods sold & general and admin expenses
c.  The ordering of current assets and current liabilities on the balance sheet
d.  When costs are recognized as expense on income statement

16) Match each definition with its related term by entering the appropriate letter in space
provided

1.  Expenses  A.   Record expenses when incurred in earning revenue
2.  Matching Principle  B.  A liability account used to record the obligation to provide
future services or return cash that has been received before
revenues have been earned
3. Revenue Principle  C.  Cost that results when a company sacrifices resources to generate revenue
4. Cash Basis  D.  Record revenues when certain criteria are met (delivery of goods or service
Accounting  has occurred, the price is fixed, there is evidence of an arragement for payment
and collection is reasonablly assured)
5.  Unearned Revenue  E.  Record revenues when received and expenses when paid
6.  Accrual Baiss  F,  An asset account used to record the benefits obtained when cash is paid
Accounting  before expenses are incurred

7.  Prepaid Expenses  G.  Record revenues when earned and expenses when incurred

17) Internal controls is used in business to enhance the accuracy and reliability of its accounting records
and to:
a.   Safeguard assets
b.   Prevent fraud
c.   Produce correct financial statements
d.   Deter employee dishonesty

18) The principles of internal control do not include:
a.   Establishment of responsibility
b.   Documentation procedurres
c.  Financial performance measaures
d,  Independent internal verification

19) Sarbanes-Oxley Act of 2002 addresses
a.  Internal controls of a publicly traded company
b.  Requires certification of financial  statements by top management of company
c.  Requires independent auditors attest to level of internal controls
d.  Establish the Public Companies accounting Oversight Board
e.  All of the above

20) Accounting governing bodies do not include:
a.  Securities Exchange Commission
b.  Public Companies Accounting Oversight Board
c.  American Institute of Certified Public accountants
d.  Governmental accounting Standard Board
e.  International Accounting Rules Board

21) Global accounting standards apply to all Us corporation
a.  FALSE
b.  TRUE

22) US GAAP applies to:
a.  Only not -for-profit organization
b.  Public companies residing and doing business in the U.S.
c.  All foreign companies doing business in Canada or Mexico
d.  All European companies doing business in Canada or Mexico
e.  All global companies who sell on Internet to the U.S.

23) Characteristics of a global corporation include:
a.  Foreign exchange consideration
b.  Tax implications
c.  Operations in more than one country
d.  Several compliance responsibilities
e.   All of the above

24) Defined difference between accrual and cash accounting

25) Go to the Course-Material forum  and provide solution to  problem E1-13A
(Quick Service Company) for parts #1 and part#2

26) Using the annual report of Landry’s Restaurants, please answer the following:
(see PDF file in the Course-Material forum)
A)  Income Statement  What are the components of this statement?

Using net icome from 2001 to 2003, is the
company improving?

What is the average number of common shares
outstanding in 2002?

B) Balance Sheet  What are the components of this statement?

What are the cash equivalents in 2003?

What are the inventories in 2002?

C) Cash Flow  What are the components of this statement?
Cash Flow from operating Activities
Cash Flow from Investing Activities
Cash Flow from financing Activities
What is the net cash provided by operating activities
in 2003?

What is the cash used ininvesting activities in 2003?

D)  MD&A  Explain this section
What is the message conveyed?
What were the recent accounting pronouncements discussed?
What is the impact of inflation?

E) Notes  Explain this section
Are there any lawsuits pending? List
What is policy on revenue recognition?
Where there any acquisitions made? List

F) Auditors Report  Explain this section
Who is Landry’s external auditor?
Under what basis was the audited condicted?
Is thisa “clean audit?
yes (last para of Auditor’s report)