AICPA Financial Accounting and Reporting

Question 1

Which accounting principle requires that expenses be matched with the revenues they help to generate?

Accepted Answer

Matching Principle

Answer

Revenue Recognition Principle

Answer

Cost Principle

Answer

Consistency Principle

Question 2

Which of the following is an example of an intangible asset?

Accepted Answer

Patent

Answer

Accounts Receivable

Answer

Inventory

Answer

Equipment

Question 3

Under which accounting framework are lease payments classified as either operating or capital leases, depending on specific criteria?

Accepted Answer

Generally Accepted Accounting Principles (GAAP)

Answer

International Financial Reporting Standards (IFRS)

Answer

Statement of Financial Accounting Standards (SFAS)

Answer

Governmental Accounting Standards Board (GASB)

Question 4

What is the correct treatment for a contingent liability that is reasonably possible but not probable?

Accepted Answer

Disclose the liability in the footnotes of the financial statements

Answer

Recognize the liability in the financial statements

Answer

Ignore the liability as it is not material

Answer

Include it as a separate line item on the balance sheet

Question 5

Which of the following statements is true regarding the valuation of inventory using the lower of cost or market (LCM) rule?

Accepted Answer

Market value is the replacement cost of inventory, limited by net realizable value and net realizable value less a normal profit margin.

Answer

Market value refers to the original cost of the inventory.

Answer

The LCM rule is applied to the entire inventory as a whole.

Answer

The LCM rule requires that inventory be valued at the higher of cost or market.