Accounting 2 Mid-Term Review

Lucy has been a Certified Public Accountant for 5 years. One of Lucy’s clients is a public company whose stock is offered on the New York Stock Exchange. During her audit of the company, Lucy discovers that several of the assets on the financial statements are deliberately misstated. Which governing body should Lucy advise of the finding?

• FASB

• GAAP

• AICPA

• SEC

Mary Little, CPA, is preparing the financial statements of ABC Corporation. Mary makes sure that information capable of making a difference in a user’s decision-making is included in the financial statements. Which quality of accounting information has been followed?

• Relevance

• Reliability

• Comparability

• Consistency

During the preparation of the Toys4U Company’s financial statement, one of the accountants has to decide between two alternative methods of valuing Inventory. He decides to choose the method that reports the highest amount. Which constraint did the accountant follow?

• Cost Effectiveness Constraint

• Materiality Constraint

• Conservatism Constraint

• Recognition Constraint

Thomason Corporation is based in the United States. When preparing its financial statements, the corporation failed to include the purchase of a new tractor-trailer truck in the general ledger, which was made on December 31st. What concept is Thomason Corporation violating?

• Measurement Concept

• Recognition Concept

• Reality Concept

• Materiality Concept

Donna Jones is the president and primary stockholder of Jones Enterprises. She keeps her personal income and her business income in the same checking account. Which of the following assumptions is she violating?

• Business Entity Assumption

• Going Concern Assumption

• Monetary Unit Assumption

• Time Period Assumption

Petersmith Corporation purchased a used work van for its business for $10,000. After doing some minor body work and repainting, the owner estimated that he could sell the van for $15,000. Therefore, the owner changed the Van amount on the balance from $10,000 to $20,000. Which principle did he violate?

• Cost Principle

• Full Disclosure Principle

• Revenue Recognition Principle

• Matching Principle

Jerry Attric, a stock holder of XYZ Corporation, has just received a set of financials. While looking at these financials, he sees the words Assets, Liabilities, and Stockholders’ Equity on a sheet. Which financial statement is Stan viewing?

• Balance Sheet

• Income Statement

• Statement of Cash Flows

• Statement of Retained Earnings

Jones CPA Firm received a request from AAA Credit for copies of Amy Johnson’s federal tax return. Jones CPA Firm sent a copy of the tax return to AAA Credit without asking Ms. Johnson. Which specific rule of conduct is Jones CPA Firm violating?

• Acts Discreditable

• Confidential client inforomation

• Contingent Fees

• Independence

Nancy Smith, CPA has only prepared financial reports in her business. She has been asked to prepare a federal tax return for Michael Brown. Smith refuses to accept the engagement based on her experiences. Which general standard is being followed?

• Due professional care

• Planning and supervision

• Professional competence

• Sufficient relevant data

Betty’s Bookkeeping Service posted a sign that stated “Members of the AICPA”. The owner, Betty Wilson, has studied to take the CPA exam but has not yet taken it. Which specific rule of conduct did Betty’s Bookkeeping violate?

• Advertising and other forms of solicitation

• Commission and referral fees

• Contingent fees

• Form of organization and name