Conceptual Framework

Question 1

How many years of selected financial data are required by the Securities and Exchange Commission (SEC)?

Answer 1

5 Years

Question 2

How many years of cash flow data are required by the Securities and Exchange Commission (SEC)?

Answer 2

3 Years

Question 3

How many years of income statement data are required by the Securities and Exchange Commission (SEC)?

Answer 3

3 Years

Question 4

How many years of balance sheet data are required by the Securities and Exchange Commission (SEC)?

Answer 4

2 Years

Question 5

What does the Securities and Exchange Commission (SEC) do?

Answer 5

It administers the US securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.

Question 6

What is the main purpose of the Securities and Exchange Commission (SEC)?

Answer 6

The main purpose of the SEC is to promote efficient allocation of capital by maintaining open, orderly, and fair securities markets.

Question 7

What authoritative body has jurisdiction over private not-for-profit organizations?

Answer 7

FASB

Question 8

What comprises GAAP?

Answer 8

1. FASB Accounting Standards Codification

2. SEC pronouncements

Question 9

What is the role of the Financial Accounting Foundation (FAF)?

Answer 9

The FAF exercises oversight of the Financial Accounting Standards Board (FASB), appoints the members of the FASB, and ensures funding.

Question 10

How are changes to the Financial Accounting Standards Board (FASB) Accounting Standards Codification accomplished?

Answer 10

Accounting Standards Updates (ASU).

Question 11

What year did the International Accounting Standards Board (IASB) begin taking control of standard setting?

Answer 11

April, 2001

Question 12

What is the fourth objective of the International Financial Reporting Standards (IFRS) Foundation?

Answer 12

To promote and facilitate adoption of IFRs issued by the International Accounting Standards Board (IASB), through the convergence of national accounting standards IFRS.

Question 13

Does the International Accounting Standards Board (IASB) have enforcement power over companies?

Answer 13

No, it does not have enforcement power.

Question 14

How many members does the International Accounting Standards Board (IASB) have?

Answer 14

16

Question 15

Who appoints members of the International Accounting Standards Board (IASB), International Financial Reporting Standards (IFRS) Advisory Council, and IFRS Interpretations Committee?

Answer 15

IFRS Foundation

Question 16

How long are the terms for Board Members of the International Accounting Standards Board (IASB)?

Answer 16

Five years, renewable one term.

Question 17

Describe the formula for quick or acid test ratio.

Answer 17

(Cash + short-term investments + Accounts Receivable)/Current Liabilities.

Question 18

What kinds of transactions are recorded in special journals?

Answer 18

High volume similar transactions are recorded in special journals.

Question 19

What do control accounts report?

Answer 19

The aggregate balance of several subsidiary accounts.

Question 20

What is the order of income statement presentation?

Answer 20

1. Income from Continuing Operations;
2. Income from Discontinued Operations (net of tax);
3. Extraordinary Items (net of tax);
4. Net Income.

Question 21

How are unusual or infrequent items reported?

Answer 21

They must be separately reported if material as a component of income from continuing operations.

Question 22

How are expenses classified under International Financial Reporting Standards (IFRS)?

Answer 22

by business function or nature of the expense.

Question 23

What is comprehensive income?

Answer 23

Net income + other comprehensive income items.

Question 24

Are extraordinary items allowed in International Financial Reporting Standards (IFRS)?

Answer 24

No, extraordinary items are not allowed.

Question 25

What type of account is accumulated other comprehensive income (AOCI)?

Answer 25

Owner's Equity

Question 26

What is comprehensive income?

Answer 26

Net income plus or minus unrealized gains and losses on securities available for sale, unrealized pension cost, certain unrealized gains and losses on derivatives, and foreign currency translation adjustments.

Question 27

List the required categories for the Statement of Cash Flows.

Answer 27

1. Operating Activities; 2. Investing Activities; 3. Financing Activities; 4. Effects of Foreign Currency Translation; 5. Reconciliation of net cash inflows/outflows with the reported change in cash and cash equivalents on the Balance Sheet; 6. Non-cash Investing/Financing Activities.

Question 28

What is the cash flow category for collections of principal amounts on loans made to other entities?

Answer 28

Investing

Question 29

What is the cash flow category for interest paid and received?

Answer 29

This category is Operating Activities.

Question 30

What are some examples of cash outflows classified as Investing Activities?

Answer 30

1. Purchase of long-term assets; 2. Lending to others; 3. Investment in debt and equity securities held to maturity and available for sale); 4. Purchase of productive assets (not inventory).

Question 31

What is the cash flow category for principal payments on short-term and long-term loans from suppliers made to acquire inventory for resale?

Answer 31

Operating

Question 32

Where are non-cash investing and financing activities reported?

Answer 32

They are reported on the face of the Statement of Cash Flows or as a separate disclosure.

Question 33

What is the cash flow category for loans made to other entities?

Answer 33

Investing

Question 34

What are some examples of cash inflows classified as Financing Activities?

Answer 34

1. Sale of own stock | 2. Proceeds from borrowing

Question 35

What is the cash flow category for dividends paid?

Answer 35

Financing

Question 36

What is the cash flow category for purchases of trading securities?

Answer 36

Operating

Question 37

What are some examples of cash inflows classified as Investing Activities?

Answer 37

1. Sale of long-term assets; 2. Collection of loan principal; 3. Disposal of held to maturity (HTM) and available for sale (AFS) debt and equity securities; 4. Sale of productive assets (not inventory).

Question 38

What is the cash flow category for principal payments on short-term and long-term loans (from financial institutions or dealers) made to acquire plant assets?

Answer 38

Financing

Question 39

What is the cash flow category for principal payments on short-term and long-term loans from financial institutions made to acquire inventory for resale?

Answer 39

Financing

Question 40

What are some examples of cash outflows classified as Financing Activities?

Answer 40

1. Repurchase of own stock; 2. Paying back lenders (principal only); 3. Payment of dividends.

Question 41

What is the cash flow category for purchases of securities available for sale?

Answer 41

Investing

Question 42

Using the indirect method for reporting cash flows from operations, should a decrease in inventory be added to or subtracted from accrual based net income?

Answer 42

Added to NI

Question 43

Using the indirect method for reporting cash flows from operations, should a decrease in unearned revenue be added to or subtracted from accrual based net income?

Answer 43

Subtracted from NI

Question 44

Using the indirect method for reporting cash flows from operations, should an increase in accounts payable be added to or subtracted from accrual based net income?

Answer 44

Added to NI

Question 45

Using the indirect method for reporting cash flows from operations, should an increase in accounts receivable be added to or subtracted from accrual based net income?

Answer 45

Subtracted from NI

Question 46

What is the difference between errors and irregularities?

Answer 46

Errors are unintentional, irregularities are intentional.

Question 47

List the formula for working capital.

Answer 47

Current Assets - Current Liabilities.

Question 48

List the working capital ratio formula.

Answer 48

Current Assets / Current Liabilities.

Question 49

List the cash availability or interval ratio formula.

Answer 49

(Cash + Net Receivables + Marketable Securities) / Average Daily Cash Expenditures.

Question 50

List the formula for inventory turnover.

Answer 50

Cost of Goods Sold (COGS) / Average Inventory.

Question 51

List the Accounts Receivable Turnover ratio formula.

Answer 51

Net Credit Sales / Average Net Accounts Receivable.

Question 52

List the formula for Number of Days' Sales in Accounts Receivable (AR).

Answer 52

365/ AR Turnover.

Question 53

List the formula for times preferred dividend.

Answer 53

Net Income / Annual Preferred Dividend Obligation.

Question 54

List the formula for the Acid Test or Quick Ratio.

Answer 54

(Cash + Net Receivables + Marketable Securities) / Current Liabilities.

Question 55

List the formula for number of days' supply in inventory.

Answer 55

365/ Inventory Turnover.

Question 56

List the formula for times interest earned.

Answer 56

(Net Income + Interest Expense + Income Tax Expense) / Interest Expense.

Question 57

List the return on common stockholders' equity formula.

Answer 57

Total Liabilities / Total Assets.

Question 58

List the per share common stock dividend pay out rate formula.

Answer 58

Cash Dividends per Common Share / Earnings Per Share (EPS).