Practice Quiz

CLEP Financial Accounting Exam Prep - Question List

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11. The going concern concept is defined as:
  1. An accountant showing due diligence throughout the accounting cycle.
  2. An owner showing interest and concern for his business.
  3. An accounting concept in which preparing financial statements on a regular basis ensures that the company is in good standing.
  4. An accounting concept that assumes the business is not shutting down in the foreseeable future.
  5. An accounting concept in which the business will have regular audits.
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12. Doug’s Doohickeys sells hardware. His sales have finally reached $1,000,000 annually after years of hard work. Now his accountant has discovered a mistake-Doug misclassified a $2 expense several months ago. His accountant decides to ignore it. What accounting concept does he use to justify this?
  1. The going concern concept
  2. The materiality concept
  3. The money measurement concept
  4. The matching concept
  5. The time is money concept
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13. Jim’s Jeans makes stylish denim products for senior citizens. Jim’s Jeans begins the year with $20,000 in inventory. Jim purchases his inventory from a supplier in Europe and during the year he purchased $85,000 in goods. With the success of his Granny Glam line, Jim was quite happy with $150,000 in sales for the year, and he sees a 50% gross profit on the selling price. What was the balance of his inventory account at year end?
  1. $120,000
  2. $10,000
  3. $45,000
  4. $30,000
  5. $65,000
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14. If it’s assumed that over a time period prices are rising, which inventory identification method would result in a lower tax bill for a company, assuming all other inputs are equal?
  1. FIFO
  2. LIFO
  3. There would be no difference in the tax.
  4. There is not enough information to make a determination.
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15. If a company carries a mortgage that has a variable interest rate, which of the following financial statements will be affected if the interest rate rises?
  1. The balance sheet
  2. The income statement
  3. The statement of retained earnings
  4. The statement of cash flows
  5. All of the above
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