Question

1. In accrual accounting, which of the following occurs when cash is collected from the customer to pay off a credit account balance?

1. The cash balance increases, raising income
2. The cash balance decreases, lowering income
3. The cash balance decreases without any impact on income
4. The cash balance increases without any impact on income

2. A corporation purchases oil futures. The company does not hold or purchase oil as an asset. If they had holding gains during the period from these futures, which of the following is the correct reporting method?

1. Report gains and offsetting hedge item gains/losses as income
2. Report gains as comprehensive income
3. Do not report these unrealized holding gains
4. Report gains as current period income

3. Place the following items in the order in which they would be listed on the balance sheet, starting with the first item that would be listed.

1. Plant building
2. Patent rights
3. Cash
4. Inventory

1. III, IV, I, II
2. III, II, I, IV
3. I, II, IV, III
4. IV, I, II, III

4. The independent auditor performs all of the following tasks in a financial statement audit EXCEPT

1. issuing an opinion as to the ongoing viability of the company.
2. checking that all accounting methods used to create the statements conform to GAAP or IFRS.
3. ensuring that all information material to assessing the company's financial position is included in the statements and disclosures.
4. examining the strengths of the organization's internal control procedures.

Answer 1

1.As the customer has paid cash to us to pay of his debt means we already sold goods/provided services previously itself.so it won't effect income.And he paid cash so cash balance will increase.

So the answer is cash balance increases with out any impact on income (d) option

2.it has to be shown as comprehensive income

3.order is fixed tangible assets, intangible assets, inventory,cash .so option (c)

4. Option (d) as it is performed by internal auditor for the company benefit